The first thing you need to have is a business idea. And since you want
to start a business I’m assuming you also have a
business plan. No one goes to the
battlefield unarmed.
Secondly, I’m assuming that either you already have some business
education or background. If you have neither, then that’s just too bad, because
business is littered with many challenges and risks. In this case I would
suggest that you enroll for a good business course that will teach you all the
fundamentals of business.
Arming yourself with a good business education will equip you with valuable
skills and knowledge to manage all types of business challenges such as money, staff,
selling, marketing, systems, risks and failure. The failure rate for business
startups is exceptionally high (more than 75% according to some studies). Businesseducation helps to equip you with the knowledge to manage risk and other
challenges.
This applies to all kinds of businesses whether offline or online.
I would then assume that the only resource you still don’t have is
money.
However, money is just a small part of the big business equation.
For example, do you have a
business plan?
A business plan is an important component of business and comes from a great
business idea. And a business idea is derived from a business solution to a
human problem.
Assuming that all these things are in place, then you’re asking how you
can start a business if you don’t have money.
Most people who want to go into business think that you need money to
start a business. This is a recipe for failure. Maybe you need money but this
is not where to start.
This brings us to one of the most fundamental principles about money,
but also the most difficult to understand
Money Is The Effect; Not The
Cause – Mind Is The Cause.
I will try to explain this as simply as possible.
Most people think that you need money to start a business, buy things
like food, clothes, house, car and anything you want. This is the wrong perspective
and results from the fact that most people do not understand what money really is.
MONEY IS SOMETHING USED TO
ACQUIRE VALUE.
This may sound crazy, but actually, money is not the only way to acquire
things. However, money is the most commonly known method to “acquire” goods and services, and only
one known by most people. Notice that I use the word “acquire”, instead of
“buy”.
Why do people need money?
People need money because they think that this is the only way to
acquire things. Actually what we want are the “things” themselves – not the
money. The truth is that we just want to “feel” the re-assurance of money in
our pockets or bank account.
There are many alternative
ways to acquire things…
For example, did you know that you can get food simply by working in a
restaurant? Notice I didn’t say you can “buy” food. Similarly, you can get a
car by exchanging with something of value.
Now that we’ve cleared that out of the way, let’s see how we can apply
this principle to start a business if we don’t have money.
To start a business, we need to apply another principle known as “leverage”.
The Oxford English dictionary defines leverage as:
1 the exertion of force by means of a
lever.
2 the power to influence: political
leverage.
3 Finance another term for gearing (in
sense 2).
verb [usually as adjective leveraged]
use borrowed capital for (an investment), expecting the profits made to be
greater than the interest payable.
Here, we will only focus on the third definition. We see that leverage
also means “gearing”.
From the definition, we see that there are many forms of leverage.
Money is just one form of leverage:
Business idea
Business plan
Niche market/customers
Skills + experience
Money
Property
Influence
Political connections
Other resources
ETC..
You get the picture…
This means that if money is what we don’t have, then we can ask someone
else who has it to lend us the money based on the other forms of leverage that
we have (e.g. business idea, business plan, marketing plan, marketing data,
skills and experience, passion, etc.).
This is because people don’t
invest in businesses – they invest in people.
But then the potential lender may
ask us what’s our leverage and what’s in it for them.
This is where we can pitch our proposal. We can then inform them that
we can borrow the money for a certain fixed or equity return on investment
(ROI), usually expressed as a percentage.
Potential lenders are usually people who have the money and are looking
for a great business idea to invest in.
You get the money by selling your business idea to people who have the
money, but don’t have the idea. Of course you will also have to concede a part
of your business to the people who will lend you the money.
This is what is known as “capital
gearing”.
Now that we know where to get the money, let’s explore the kind of
people who can give us the money we need.
Family, Friends and Colleagues
Family, Friends and Colleagues
First approach your soft market (family,
friends, colleagues, acquaintances, etc.) and present your business plan
clearly indicating how they will profit financially by funding your business. Your
soft market may respond out of sympathy, but make them see the seriousness of
the business and believe they own the business.
[Be warned: Your soft market will respond only
if they know you well enough and can trust you].
Contacts,
References and Acquaintances
Forward your business plan to people who are in
your contacts database and people you have references from friends, even people
who are outside your sphere of influence (your hard market). Someone along the
way will see an opportunity and buy your business idea.
You may need to show some proof about your
business potential. Good marketing language and copywriting skills will come in
handy.
Make an irresistible offer. An irresistible
offer is an offer so compelling that only a few people can refuse it.
Related Industry
or Market
Get a job in a related industry (e.g. Food
company, restaurant, etc.) and offer to work for them for free. Meanwhile
become friendly with management and float your idea secretly. Most people will think you’re very smart and
will perhaps give you a job offer. Take the job offer and finance your business
with your savings.
[This is
one of my favorite strategies].
Other Businesses
Sell your business plan to people who are
already in business. These people are more likely to appreciate the value of
your business since they already understand business, and are likely to give
you the capital you need in exchange for a high return on investment (ROI).
If you target your potential investors carefully
you’re likely to score. You should build a good network with potential
investors before contacting anyone. They usually ask for references.
Angel
Investors
Find angel investors. Angel investors are serial
entrepreneurs who are constantly looking for an investment opportunity with potential
for high returns. They tend to invest in several businesses at the same time and
will expect a high return on investment
(ROI). You can easily find out where they hang out (e.g. social media, forums
etc.).
Join these forums and begin to share good ideas.
Don’t contact people immediately or share your idea with anyone first. Soon or
later someone is likely to notice you and contact. Patience is the key.
Offer free services to analyze a company or an
investment. Build trust, confidence and reputation among the group. This will
give you the social proof you need to approach other potential investors. Be
careful. Let logic and your instincts do the talking.
Recommended Business Courses:Master Business Foundations from the Wharton Business School
