How to Start a Business With No Money
Julie Meyer's latest Entrepreneur Country Forum opened with a somewhat sombre note today, with the theme of starting up businesses with little or no investment. Attendees seemed to have little to cheer them from the podium, when guest speakers apparently underlined the paucity of available financing -â€" even when they were trying to be upbeat.
Rob Hersov, founder of internet trail-blazer Sportal and a number of other companies, both failed and successful -- and now an investor in his own right -- gave some sanguine advice to nascent companies stuck in the doldrums, "between triumph and disaster":
- Be light: take only what you really need with you. Learn on the way and be fit and ready for action, when it arrives.
- Assume there will be no wind to carry you along: Take it for granted that the money you have already secured will have to carry you through this period of inactivity.
- Be prepared for the long-haul: Hersov cited Bebo and uSwitch as companies that grew swiftly, only to shrink back down after their public offerings. Some business take as much as a decade to mature.
- There are few exits: As with seed-money, organisations have also rationalised their acquisition strategies â€" they are more risk averse. The opportunities of liquidating your asset are fewer.
- Cut costs: Have a commitment to staying lean and keep running costs flexible.
- Focus: Hersov remembers well the dotcom days when entrepreneurs secured funds, established their business and worked out their business model at some point after that. Now, no-one will look at you without one.
- Park your ego: Love your shareholders, love your customers.
- Prioritise sales over marketing: In a recession, you have to concentrate on selling.
He said: "I know lots of rich people and I love selling to them," which is fine, but not every business model targets such high value customers.
The following panel debate also threw the poor state of the investment climate into sharp relief. In some cases, quite flippantly. Hussein Kanji, consumer internet specialist, told the audience the best way for UK start-ups to secure funding was to relocate to California.
On a lighter note, he agreed with Meyer that the instruments were in place, such as cloud computing and business process outsourcing, so that businesses can now be started up on a fraction of the seed money they required 10 years ago.
Here are some of the other suggestions from Kanji, Meyer and the other panellists, Smith & Williamson Head of Capital Markets Azhic Basirov and Barclays Business MD Steven Cooper:
- Go first to family, friends and fools for money.
- For B2B companies, pass on the burden to customers by asking for pre-delivery payments.
- Move into your investors' offices.
- Finagle, barter and argue over payment terms.
- Ask for invoices to be paid early â€" If you never ask, you certainly won't get it. Don't be embarrassed about doing so.
- Transform as many fixed costs as you can into variable costs. Outsource everything you can.
- If you can't get the cash for it, don't agree to the sale. Knock on doors for your money if you have to.