Bare-Bones Startup: How to Start a Business When You're Nearly Broke

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Want to start a business but don't have VC funding or access to a business loan ? Stories of startups with million-dollar funding seem to dominate our newsfeeds, but overall venture capital volume is actually falling. Early-stage funding was down more than 40% year over year in 2023.

If you're broke but want to start a business, you're in good company. In fact, you might be better off, because starting slow allows you to validate your idea, spend time testing, and make mistakes before the risks are high.

Here's how to get started.

Choose a low-cost business idea

Not all businesses can be started on a shoestring budget. If you're looking to launch advanced tech or release a groundbreaking drug, you'll need funding from somewhere. But many businesses can be started with little to no funds. Here are a few ideas:

• Service-based businesses: Businesses like pet sitting, dog waste removal, gutter cleaning, marketing services, or tax advice don't require you to purchase stock and have limited start-up costs.
• Drop-shipping-based selling: Drop-shipping means someone else holds your stock and ships it for you when customers purchase. This requires less start-up funding.
• Digital sales: Virtual products only have to be created once and can be sold again and again. Books, worksheets, and online training can all be low-cost businesses.

Validate your business idea before investing resources

Before spending months building a business, find out if people will actually buy the product or service you want to sell. Research the search volume of the names of products or services using a marketing tool . If no one is searching for those products, they are unlikely to sell.

Customer validation interviews, where you ask prospective customers about their preferences, can also gauge interest in your offering. Look at the size of the market and potential competitors to see if your idea has legs.

Use free tools to build up an online presence

Use free tools, like social media and Google My Business, to build an online presence. Facebook, TikTok, X, and Instagram can all help you reach potential customers. Create interesting, engaging content, and look for ways to connect with your audience.

Google My Business is a free service that lets you create a profile for your business, and add your hours, location, services, and pictures. This makes it easy for potential customers to find you.

Seek alternative funding sources

If you need funding, some opportunities don't require selling parts of your business or spending time on VC funding pitches. Crowdfunding and SBA loans can provide funds you can use to build or grow your business.

Depending on your business model, pre-selling may also be an option. For example, you can both validate your business idea and get funding by offering pre-orders for a book, digital file, or innovative product. Just make sure customers know when the product will be available.

Trade services with other small businesses

Ninety-nine percent of businesses in the U.S. are small businesses, so there's a good chance there's another small business that offers a service you need and will be willing to trade.

For example, if you offer IT support, you could trade troubleshooting a computer issue for a company's extra office furniture. If you're looking for space at a co-working office, you could offer to clean the office in exchange for a place to work.

Final thoughts

Starting a small business doesn't have to be expensive. Use these ideas to keep costs low and re-invest profits in your business. If you need funding, consider taking out a business loan from a reputable lender. Just make sure to compare rates, so you don't pay more interest than necessary.

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