Want to become an entrepreneur but don’t have a lot of money to invest, or quit your job and execute on your idea? That is a common problem that many people just like you face on their journey to become an entrepreneur.
7 Steps to Become an Entrepreneur with Little to No Money
If you are ready to break down those barriers, find business ideas that are low cost, and that fit your skill range, we can have you running a business without worrying about where you will get the money. We are going to walk through finding your resources that will make your business idea work. Then how you can find a problem and solve that problem with your available resources, strengths, and skills. Finally, you’ll learn how to raise the money you need to execute your business idea.
Table of Contents
Follow closely.
Step 1: Account for Your Resources
As an aspiring or established entrepreneur, you are going to need to take account of your resources. Resources available to you range from personal skills, strengths, time capacity, team, personal resources, connections from your network, and access to capital.
Money
To assess your access to capital, start by looking at how much you have to invest.
To start any formal business (after you’ve validated the idea and gotten your first paying customers), you’ll need to register and have a business license. Depending on where you are, this can cost up to a couple hundred dollars.
This is the bare minimum amount of money you’ll need once there’s clear demand for your solution.
If you don’t have that, I’d suggest going to friends and family and seeing if there are any odd jobs you can do to help, pick up another side business to fuel this greater idea, or you can see if your network is open to buying equity in your business opportunity.
These connections are critical to establish for the success of your business. Do you have a wealthy uncle or do your friends know a Venture Capitalist that you can get 60 seconds from?
Take note of things like this, because they can make or break your business idea down the road. Since you don’t have much investment capital, knowing where you’ll get cash is critical, because cash is king.
Strengths & Skills
Finding your skills and strengths can be tricky, and there are many paid and free ways to assess your strengths and skills. It’s incredibly important your strengths and weaknesses, because without this knowledge, you won’t know what type of co-founder you will need or team to fill your weaknesses.
Ultimately, your strengths will determine the value you can bring to the marketplace, and we will be going over that in more depth in step 4.
Passions
You will also want to make sure you know what you are passionate about, and write that down. Since you will be starting a business with low capital investment, you will need to put more of your own time as the investment into the business to make it grow. This may mean working on things for months before you see profits rolling in, and it can be discouraging if there is no money yet and you are not passionate.
Many small businesses fail in the first five years because the founders lack passion for the idea, and do not make money quick enough. Causing them to abandon or get bored with the business.
Time
Another resource you’ll need to assess is your time capacity. Do you have a full-time job that you want or need to keep while you run your business? If so, this will significantly affect how you run and conduct business. Make sure you know if you have one hour a day or 16 hours a day to work on your business idea.
For example, someone with a job starts a business where they need to attend to phone calls and in-person meetings during regular office hours. This obviously would not work, and you would have to go back to the business idea drawing board.
Team
Do you have access to team members or the ability to find people to join you? This will be huge when you need to have a key resource for your business idea. Perhaps you are interested in the tech industry but do not have programming skills. A co-founder with these skills would greatly benefit your company in the long run. An alternative would be to hire a VP of Development that would play an integral role in your software business.
Personal Resources
Lastly is your personal resources. Can you use your current home as a temporary office? What about a computer at home that you have access to? How about a local library? Many of them these days are equipped with great computers with photo and video editing software.
As an example throughout this post, I am going to say that I have the following skills, strengths, and resources.
- Money: $350 to invest in a business
- Skills: Writing, Video Editing, Video Filming, Graphic Design
- Strengths: Analytical, Listener, Learner.
- Passions: Artificial Intelligence, Online Marketing
- Team: Access to a developer if apps are needed, and a lawyer for some pro-bono consulting work.
- Time: Full-time Job, only 3-5 hours a day to work on the business.
Once you know all these things about yourself, you can move onto step 2.
Step 2: Defining the Industry For Your Idea
Since you will not have a significant amount of personal capital and resources at your disposal, we will need to eliminate industries that will suck you dry of money.
Heavily regulated industries will be areas you will want to avoid as they have high startup costs in regards to human and financial capital investments. The financial industry is a great example of this. No one can open up a brokerage firm without certain approvals and reserve bank accounts in place (sometimes upwards of $500,000 in reserves held).
Sectors and areas of business you should look to:
The Technology Industry
Although it can require a lot of money and resources to build a highly profitable tech company. Not everyone takes this route, and it can be quite easy to build an application that solves a problem, if you have the skills to execute.
Online Businesses/ E-Commerce
The online business and e-commerce space is hot right now! Not only are the larger companies like Amazon making a killer profit, but there are many new “one-person-show” e-commerce stores that are doing millions in sales. If you don’t believe me, you can check out this awesome interview.
Professional Services/ Consulting
Professional and consulting services is a low-cost sector because it is generally associated with a knowledge-based business. Meaning, you sell your knowledge you have on certain subjects. For example, a management consultant sells their expertise and ability to help a company grow or solve an existing problem they have using their tools and techniques.
Construction
Construction can be a low-cost area if you get into the right field. For example, starting an electrician company would only require hiring an electrician and getting them the transportation and materials to do the job. If you can get clients beforehand, you won’t need to shell out a lot of cash upfront for wages and vehicles.
Education
Similar to professional and consulting services, the education sector is a knowledge-based business that has low barriers to entry. Education businesses can be very successful if they are run in-person, but they can also generate huge profits through the online business model approach. The reason I mention it separately is because the huge potential for teaching people in-person still exists. People love the face to face interaction, and it can add a lot of value for live questions and help during the lesson. Partly why universities are so successful today.
Entertainment
The entertainment industry is ripe for entry with little or no money if you want to become an entrepreneur. It wasn’t always like this, but with the technological disruptions from the internet and sites like YouTube and Instagram have created very engaging entertainment platforms. It is quite easy for anyone to use their phone or a friends camera to make videos. Spending some time with editing software and lighting can make you look pro, for a cheap business model.
Step 3: Problem Discovery
All business ideas revolve around problems and solving them. It is crucial your business idea solves a problem. There are too many cases when someone creates something, only for it to never solve an actual problem.
Once you have chosen the industry you want to think of your business idea for, it is time to discover all the problems in that industry. To do that, you conduct both primary and secondary research in the chosen industry, to see what problems exist.
Primary Research
Primary research is the type of research done by yourself. This may involve calling businesses to survey them about the problems they face. It could also involve organizing a group of shoppers who interact with an industry to find the customers problems.
A lot of people who want to become an entrepreneur skip this, and they usually end up becoming a statistic like the rest of the failed businesses, unfortunately. Getting first-hand opinions of the public can actually create business ideas in itself with the feedback provided. These opinions can ultimately lead you to avoid some of the largest problems that plaque entrepreneurs.
Some general questions you can ask a business are:
What are the largest problems you are facing right now?
Why and how do these problems affect you?
How would you want these problems solved?
Would you be willing to pay someone to solve these problems and if so, how much?
Do you think this is a problem other businesses like yours face?
General questions you can ask the customers are:
What is your favourite thing about this current product/service?
What do you have about this product/service?
Would you ever switch from using this product/ service and if so, why?
What could be improved upon by the current product/ service?
Secondary Research
The secondary research is the stuff you can find on the internet, in books, and other mediums that other people have sourced and published. Secondary research can comprise a large portion of the overall research, but it needs to be taken with a grain of salt. For example, if you come across a problem that someone is writing about, make sure they are not generalizing their personal problem to represent a large group, this could be misleading.
The news is a great place to find problems related to your desired industry, and many time, news sites have sections in business and the related industry. Again, with the fake news circulating lately, use credible news sources such as:
For this example, I am going to be targeting the Technology Industry. Given how in step 1, I defined my passion as Artificial Intelligence, I wanted to dive deeper into that niche and how to think of how I can add value to the market.
Having performed some preliminary secondary research on this industry, there is a lot of problems and concerns about communicating the technology offerings effectively and efficiently. Many solutions come across as too complex, and intimidating to implement the enterprise solutions. The development phases are typically different than traditional software implementations. Finding credible and reputable data sources is also a challenging task for firms, because the AI is only as good as the data it is fed.
Step 4: Think of Solutions to these Problems
This is where we need to get creative to solve some of the problems we found in our chosen industry.
The Value You Can Bring
You can start by asking yourself these questions:
What value can I bring to the market that will solve this problem?
How to potential clients/ customers want this problem solved?
The value you can bring to the market is an essential assessment. Most likely, you won’t have the money to hire the best of the best and execute. You will most likely have to do a lot of the everyday business operations yourself, so it is best to discover your strengths and skills, so we can incorporate those into the business idea. As touched on earlier in Step 1, this is very important because if you don’t have the money to hire someone to do the key work, and you don’t have the skills yourself, you cannot execute on the business idea and become an entrepreneur.
Need some help finding your strengths and skills? No worries, we already got you covered with this post, read this in-depth piece.
However, sometimes the solution will come easily to you. In the problem discovery phase, the potential client may define a solution for you. For example, a startup, Keycafe, did a significant amount of surveying in the beginning and found exactly what customers preferred, and implemented that. In this case, the Airbnb owners liked the idea of dropping off and picking up their keys at a café shop, instead of hiring someone to always be there to deliver the keys for guests.
Other solution tricks
If the solution doesn’t come as easy to you, try the following:
Change the Rules
Being an entrepreneur is all about challenging the status quo. Doing this will also help you come up with a wild solution. Remember, just because something is being done a certain way now, does not mean that there is a better way to do it going forward.
For example, Cirque du Soleil redefined the image and culture of circus performances. Back in the day, people began to get bored of the current circus shows, and their strict appeal as cheap entertainment for kids. Over the years this appeal grew dull and the circus business overall took a massive hit.
However, Cirque du Soleil saw this problem as a way to reposition their business idea to create more value for people in a different way. They charge high ticket prices for adult shows, however, the shows are much more spectacular than its competitors and now they dominate the circus entertainment market.
A famous and world-renowned investor, Peter Thiel, highly promotes this theory of changing the game. He only invests in companies that do this because it creates a point where they aren’t competing against anyone because no one can compete on their scale. Companies like Uber and Airbnb have done this and gained strong first mover advantage in several markets, and have since dominated.
Get the Bad Ideas Out
Sometimes all you need to get the good ideas flowing is to write and say every idea, even if it is bad. It can be funny how the bad ideas actually will sprout meaningful connections that will end up being the great solution you run with.
Search Abroad
Another way to find solutions is to look to other countries to see if people implemented solutions to the same problem faced in different countries. Amazing businesses have sprouted by seeing what other solutions are offered worldwide, and then implementing them at home. A couple examples illustrate this…
Vitamin companies started selling fish oil tablets after discovering Eskimos had an extremely low incidence of heart attack despite eating a fatty diet.
The Kit Kat bar, which was the idea of an employee, was originally launched in London and the South East in 1935. It was then brought to the U.S. where Hershey’s began to sell it in 1969.
These examples prove that great ideas from abroad can create successful business ideas in your home country.
By the end of your solution discovery journey, you should have about 5 to 10 solutions to the problems you had earlier. If you don’t have that many yet, don’t move forward to Step 4.
Here are five solutions I came up with to the problem I had, relating to the value I can bring to the market.
1) Copywriting for the AI Industry – Helping AI companies properly craft their message online/ offline to increase brand awareness or sales. Tailored to the AI industry as a niche perspective.
2) Video/ Content Creation for the AI Industry – Create content, both written and video form for AI companies to engage their existing and potential customers.
3) Enterprise AI Implementation Consultant – With the strength of analytics, helping companies find reputable, credible, and reliable data will help them implement their AI solutions and have real results.
4) Online Chatbot Agency – Many businesses are starting to use Chatbots to engage with their audiences. A Chatbot agency would cater to these needs and help them implement these AI resources.
5) Data Broker – Buy and sell relevant data from customers and companies that will help others drive meaningful insights for their AI platforms.
Step 5: Narrow Down Your Business Idea
Although we will be narrowing down your business idea from the group of 5 or 10 that you had, it is important to have this variety so you can truly evaluate what one you want to choose.
Here are a couple techniques to narrow down your idea:
Think of the Day to Day
Look at the business idea solutions you developed in step 4, picture a day in the life of the types of tasks you will be doing and the interactions you will be having. Different business solutions will have different day-to-day tasks. For example, the data broker solution may involve talking to a lot of different companies throughout the day, and negotiating on prices for data packages. If you are not one who likes to put themselves out there and negotiate, then this may not be the best solution for you to execute on.
Risk/ Reward Analysis
If you are going to become an entrepreneur, you will need to get great at assessing risk and reward. The risk can be the number of resources and time you need to invest in the solution, and the reward will be the money and value you get from clients/ customers in return.
With each solution, write down the major costs and major revenue streams associated with each. This can help eliminate business ideas that do not have strong revenue streams, or ideas that are too high cost for our lower-end budget.
Will the solution take too much of your time? Since criteria I defined in the example was only 3-5 hours, having a business idea that needs execution during regular business hours may not be a great idea. Running with our example, creating lots of video and content at scale may be too time consuming as a business idea.
Business Model Canvas
The Business Model Canvas is one of the best tools to use to narrow down your business idea, and one of the most extensive tools out there that you can use for free. It is a key tool because it will assess all the important aspects of the business idea. As well, it will help you to understand if it is one you want and can execute on. It will also determine how much effort you will need to put in for the next steps, raising money.
Here is a quick overview of each section in the Business Model Canvas.
Problem
This is the proposed problem you are solving. Since we took the steps initially to define and find a problem to solve, and confirm that problem among the groups affected, this one should already be known.
Solution
The solution is the thing that will solve the problem. Again, this should be familiar to you as there were some exercises we could do to come up with solutions to the problem at hand.
Key Resources
Key resources are the tools, people, skills, money, and software for example that your business idea needs to succeed. For example, a Stem Cell Research company cannot perform unless it has access to some great talent that is able to run analysis in a scientific matter.
Unique Value Proposition
Being different in such a crowded world is important. There is a lot of competition out there, so having a unique value offering that resonates with your customer segments will drive strong brand awareness and company value.
Unfair Advantage
The unfair advantage is what makes it hard for competitors to enter the market or take you down. Such things like patents, barriers to entry in a market, new technological innovations, exclusive rights, these are all things that can allow you to have an unfair advantage over the competition.
Channels
How will you get the products or services to the customer? How will they become aware of your business? These are the types of questions you will answer when it comes to determining the channels you must operate in to access your customer segments.
Customer Segments
May sound straightforward, the customer segments are the markets of people you are targeting. These groups can range from women in their 30’s with children or firefighters, for example. When determining your customer segments, you will want to know things like demographic, psychographic, sociographic, and geographic data about your customer segment to ultimately understand them.
Cost Structure
This section determines how much costs your company will incur, and what will be some of the largest expenditures is an excellent thing to know. It can also determine if you will succeed or fail. If you find that the costs are too high for that business idea, and you don’t want to raise money to meet those demands, it is a great way to quickly know when it’s time to move on.
Revenue Stream
This is another key segment that can make or break your business idea. The revenue streams will determine where you will make your money, what your margins will be, lifetime value of a customer, and other important areas. Sometimes business ideas have multiple revenue streams, and it can be fun to pick and choose which one to rule-out, however, other business ideas do not have many options and this can kill the idea too.
Assessing each of these pieces should give you a strong overview of the idea. If at first glance, you are missing key resources, or ability to execute on key activities, you may want to go back to step 4 and assess other solutions to the problem at hand. However, if you are happy with your own ability to execute on the idea, gather essential resources, and operate with a strong revenue stream against costs, then it can be a great confirmation tool as well.
The next step in the Business Model Canvas assessment is to build assumptions and test them in the market. Each area of the canvas that we covered will have assumptions that need to be in place in order for your idea to be successful. For example, with your cost structure for the data broker business idea we previously thought of, we assume that we can buy data at a reasonable price, apply a markup, and still hold value for people to buy. This is an assumption we would need to test. By getting quotes from certain companies that sell data to third parties, and seeing where you can sell that data, and find their willingness to pay, then you can confirm your assumptions.
The great part about testing your business idea assumptions is that it allows you to pivot or change your idea quickly, without investing a significant amount of money into the idea (assuming your assumptions were correct). This skill of testing the assumptions to your business model is a key aspect of anyone becoming an entrepreneur.
Step 6: Finding the Money
The next step after you have tested your assumptions (and confirmed them, otherwise you should go back to step 4 and choose a different solution) is to raise money. If you are reading this, you most likely have little money to invest in a business, thus, raising some money may be essential.
Friends & Family
The first avenue for raising money should be from friends and family. This is a common source of initial seed money for companies because you already know this network and there is initial trust already built. You can give a lot in return for your friends/ family investments by giving them equity stakes in your business for a cash injection. This makes the deal fairer, because if they loan you money and your business fails, your friends may not stay your friends.
However, I do caution that you should only get your friends and family to invest in the venture if they can afford to lose their investment. It is unfortunate when someone convinces their parents to invest in their business, they take a second mortgage on their home, and the business flops. There are many stories of this.
To avoid these downfalls and still reap the benefits of raising money from friends and family, limit their investment so their risk exposure is limited. Another rule is to not aggressively ask people for money, they may get turned off quite quickly.
Crowdfunding
Crowdfunding is using a website like Kickstarter to raise money for your business. If you are not familiar with crowdfunding, it involves raising money from a bunch of people from anywhere in the world, usually in smaller increments. A gesture or product is usually given to the “backer” in return for their contribution. These can usually range from a shout-out in the credits of the book, or a product that they are helping fund, such as a new and innovative wine diffuser.
This can be a great route to go if you have a cool consumer based product or technology that you have already built a prototype for. It is quite a bit of work if you want to execute a successful campaign, but people have raised hundreds of thousands of dollars in products by using this method.
Investors
The second option is to seek investment from investors. There is a lot of other great podcasts and resources you can learn from if you are looking for in-depth knowledge on raising money from investors, but in general, here are a few things you need to do.
The first step is to show that the idea would be successful if executed. This involves preparing and testing the Business Model Canvas assumptions. If any assumptions were not confirmed, you will need to find new ways to execute and show investors that this will be successful. This also involves creating a Minimum Viable Product that should have at least a few customers.
Investors will also want to see that you have financial projections that are based on strong data that you have tested. For example, these financial projections will show the costs, revenues, and profits of the business for the next few years, as well as analyzing key metrics. Your financial projections will need to be reinforced by business development plans, marketing plans, operational plans, and leadership plans.
The business development plan goes into details about how you will reach your customers when you will reach them, how they will pay you, and how you can scale the customer acquisition process.
The scalability will be a very important aspect of your business development plan if you are looking for investor money. Building scalability into your business idea means that you can reach that exponential growth curve. This involves developing systems and mechanisms that will help you grow. For instance, if you acquire a customer, they would get a code they could give to their friend for them to join and receive a credit for some value. This is a popular virality tactic that many companies include in their business development plans.
The marketing plans will go hand-in-hand with the business development plans, and how your business will create awareness for your brand. To get more specific this will involve going in-depth to the your value proposition messaging, the channels you will reach your customers on, and you will need to develop strong persona’s (demographic, psycho-graphic, geographical, socio-graphic data points for your ideal customer) for each customer segment you are targeting and how your channels line up with each segment.
Initial Coin Offering
Lastly, one of the more popular routes these days is to raise money using an Initial Coin Offering. This has become a very popular method to raise money for new projects or startup companies, that they make up a majority of the cryptocurrency offerings out there.
Step 7 – Become an Entrepreneur
The only thing now is to execute. If you have made it this far, you can definitely run through these steps and get your business up and running. Even if you don’t have any money, you will become an entrepreneur in no time.
Whether you want to think of a large-scale business idea raise money, or start small, you now have the tools to do both.
