Start a Company Without Going Broke
Guest columnist Dan Schawbel is managing partner of Millennial Branding.
For many entrepreneurs, the odds of raising venture capital are rare. In "The Illusions of Entrepreneurship," author Scott Shane notes that only 0.03 percent of new companies are financed by venture capital.
Bootstrapping, or the ability to sustain a company without outside funding, is sometimes the only way to build a successful company that venture capitalists are attracted to. Contrary to the popular belief that starting a company costs thousands of dollars, the average cost to start a business in America is only $325 and the average amount of time it takes to start one is a mere six days, reports Intuit.
Here are five strategies that will allow you jumpstart your new business venture without breaking the bank.
Hire virtual assistants, freelancers and interns. In order to cut costs down, you should outsource tasks that you don’t have as much time for so that you can focus on the most pressing business challenges. Use popular sites such as Elance, Freelancer.com and Urban Interns to recruit people at either no cost or a minimal cost to your business. This is more efficient than hiring industry veterans who command large salaries that you can’t afford. When selecting interns or freelancers, hire for raw talent and passion. These people will be more productive, put in more hours, and be able to teach you a few things. Hiring a freelancer is becoming easier, especially since by 2020 there will be more freelancers than employees, according to MBO Partners.
Start a service business first before offering products. It can be challenging to start selling products when you don’t have much money. With a service business, you can start doing work right away, saving money to invest in product design and execution later. For instance, if you have a software company, you can provide programming services. As you grow, you can turn that service into a product and scale it. Many of the top companies, such as 37Signals, have even done side consulting to generate enough revenue to pursue their business model.
Use social media to build a community of potential customers. Social media tools are underused by entrepreneurs. In fact, 67 percent of small business owners won’t invest in social media in 2012, reports a study from SocialStrategy1 and OfficeArrow. Instead of spending thousands of dollars to hire a PR agency, it’s more effective to use free social media tools to build a community that wants to do business with you over the long haul. Many entrepreneurs complain that it’s too much of a labor cost. The solution is to start with one tool and put all of your energy into it. Once you’ve mastered the tool and have built a following, proceed to the next tool. Remember that everyone in your company has to be part of your social media strategy, and administer your corporate profiles, if you want to be effective.
Network as much as possible. A powerful and extensive network can give you the edge in business because you can get more accomplished faster. Tap into your current network of family and friends to raise money, introduce you to key contacts and engage them as customers. Then, expand your network by going to conferences and meetups, while engaging in social networks like LinkedIn and Facebook.
Act big but behave small. Customers are looking to work with companies that already appear to be successful. If they perceive you as being small, they won't think you can handle their needs. By creating a high-end website, having personal customer service and securing a mailing address, people will be more inclined to do business with you. One of the benefits of being small is that you can give clients more attention than larger companies that prioritize clients based on revenue.
Dan Schawbel is managing partner of Millennial Branding, a full-service personal branding agency, and author of "Me 2.0: 4 Steps to Building Your Future."