Startups are the most rewarding, stressful, exciting, frustrating endeavors I’ve ever been involved with. After founding three startup businesses, I’ve started to accumulate some pearls of wisdom. I don’t pretend to know everything (except to my investors) but if you’ve got a question about building a startup, especially as a millennial and/or a woman, I may be able to shine a little light on the solution, or know someone who can.
This week, Daquan asks: I have no extra money. How can I start a business?
You can’t. Next question.
Only kidding, Daquan! Actually, it’s a great question because every smart entrepreneur should initially act as if they have no money, even when they do. Yes, you need capital, but not necessarily right away. Depending on the business idea, you can get pretty far with way less cash than you might think. Here’s what I’m talking about:
Choose a business model that takes little overhead but produces revenue quickly.
Look for ways to make cash quickly from your idea. One of the best ways to do that is to think in terms of a service-oriented company — one that offers services you’re already skilled at, whether it be copywriting, writing code or dog walking. That way you’re starting with a knowledge base but just a minimal financial investment. Once you start getting money in the bank, you can use the extra revenue to move forward and consider more expensive-to-make apps or other products to grow the business.
For example, let’s say you want to create an on-demand dog walking app. Instead, you could actually start this company by offering dog walking services, then graduate to a simple form through Typeform or a website where people could order up those services. That way you immediately have money coming in without shelling out a ton to create an app until you can afford it.
Test before you invest.
Time is money, and when you don’t have a lot of cash, you can’t afford to waste time or resources on faulty products or things no one wants.
The best way to test before you invest money major money is with what’s called a Minimum Viable Product (the MVP for MBAs, not the MVP of the NBA). Basically it’s the most basic iteration of your idea that you can put out there, which lets you test out whether your idea works and if it’s something people actually want.
Take the dog-walking example we discussed earlier — not only will you have money coming in by offering dog walking services and maybe a simple website, but you’ll also learn invaluable lessons being active in your market, in this case pet services. Then you can take that knowledge, experience, and revenue to invest in building the app of your dreams.
The secret here is that you will be infinitely more attractive to investors if you can come up with a revenue-generating service (dog walking) that you can then pipe directly into a future business with super-high growth potential (the app). To get technical, the lifecycle of the startup starts with “problem-solution-fit.” Find a problem, come up with a solution, then build something to fit that solution. Once you prove you have that answer, getting scaling capital becomes easier.
Some other easy, inexpensive ways to test:
1. Conduct customer discovery interviews. This is very helpful for user-testing because the process can inform the next iteration of feature development, understand and limit your scope, drive your roadmap and help you achieve product-market fit as efficiently as possible. Just make sure that you’re effectively collecting this information in order to make data-driven decisions.
2. Run ad campaigns on platforms like Google and Facebook to determine market validation and your target customer.
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3. Utilize crowdfunding websites like Kickstarter and Indiegogo. This can help you understand your market response as you will be judged by people’s interest in your product in the form of contributions to the campaigns.
4. Start a blog. I believe it can serve as a great opportunity to validate your business idea and find the right target market. Try blogging about your concept where you can gain support.
Know not all money is green.
In other words, money isn’t the only valuable capital you have. The most important thing when starting a company is to get a great team who know how to execute. How do you do that with no money? You need to sell your vision. In the early stages it can be about passion, and if your team believes in your idea, that’s valuable. And in the entrepreneurial world, your team should always be invested in your idea. You can also offer options, profit-shares or even bartering of services instead of cash. (My advice would always be to offer hard shares of stock as a last resort, but that’s a topic for another post.)
Spend wisely .
It seems obvious, but it’s totally a rookie mistake: No need to buy cool (and expensive) swag like Nalgene water bottles with your logo on them just yet. It is necessary to maintain the mindset that you must make the most out of each dollar.
Don’t outsource when you can do it yourself. Early stage entrepreneurs become very good (not great) at all kinds of things. There will be a natural urge to outsource tasks that you don’t want to do or feel that would be better done by someone else. If you can find a way to do them, you should — if you are not resourceful at this stage, there’s really no hope for you in the long run for your startup. That means use the currency of good old sweat equity — everything from doing your own filing, sales calls, and social media to walking or taking public transportation instead of a pricey Uber.
But beware: This means being willing to experience initial changes in your lifestyle. Doing this takes a conscious effort and full enrollment from all stakeholders (potential partners as well as familial loved ones). Make sure you’re all on the same page!
There are also a ton of free resources out there, so take advantage. A few of my favorites are Trello for staying organized and managing projects, Slack for internal communication,Google Docs, Drive, etc., for easy collaboration and keeping everything accessible. (And there’s probably no need to upgrade to the premium accounts! Be brutally honest about what you really need.)
And of course, this may not be what you want to hear, but as a founder, pay yourself the bare minimum early on.
There’s no guarantee that even the best idea and tons of hard work will lead to success, of course. But these tips can start you off in the right direction. And as someone who just got a new puppy, I can say that that dog walking idea is gold.