Is it possible to start a business with little to no money? How?

So, I’m driving behind a commercial pickup truck that had this sign on the back:

“Not responsible for broken windows”

On the back of the truck’s cab, it had this sign:

“ Stay back 100 feet. Not responsible for broken windows.”

Really, bro? It seems a little unrealistic to think that you can pile a bunch of stuff in the bed of a truck and not be responsible when items fly out the back and hit a car window….

 

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In the same way, it may be a little unrealistic to think that you can start a business with little or no money- but it happens all the time. I highly recommend the How I Built This podcast, because most of the business founders interviewed started their businesses with little or no money.

So how does that happen?

The Four Noble Truths

A basic tenant of Buddhism is the four noble truths, and I think there are four truths that are needed to start a business- particularly a business with limited funding. Here’s what I mean:

  • Solve a customer problem: You have to solve a problem for customers, since problem solving is a big motivator for all consumers. Think about your own life and problems you’d like to solve. Assume, for example, that you’re a serious bike rider, and changing a flat tire on the road is a real hassle. Sometime your bike pump doesn’t work well, or the tire tube tears as you pump up the tire. You develop a tire tube that inflates with the push of a button on the tube.

 

  • Perform market research: Next, do some research to see how customers react to your proposed solution. Maybe you produce 100 of your bike tire tubes (not highly expensive) and hand them out to serious bike riders- on the condition that they give you honest, specific feedback. Did your product work? Is it a better solution than other tire tubes? Would the rider use your product again? How much would they be willing to pay? That’s useful market research.

 

  • Figure out your costs, price, and profit margin: Here’s where many business ideas fail: customers want the solution, but they’re not willing to pay enough to make your business idea profitable. If, for example, it costs $10 to produce your tire tube, but bike riders are only willing to pay $11 for your product, a 10% profit margin ($1 profit on a $10 sale) may not be enough to launch a business.

 

  • Estimate the size of the market: Even if you can solve a problem and generate a reasonable profit, the market for your product may not be large enough to justify starting a business. For this example, let’s assume that the serious bike rider population is 1 million riders. If you could capture 10% of the market, that would be 100,000 riders. Digging deeper, if each customer bought three tubes a year, that would be sales of 300,000 units. Assuming a sale price of $15, that would translate into a $4.5 million business in annual sales. Is that a big enough business? The answer depends on your product’s profit margin, among other things.

 

Ideally, you should run every business idea through these four noble truths. Who knows- you might just find a viable business idea that won’t require a huge amount of capital.

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Don’t forget hobbies

Many- in fact most- business ideas are developed by people that have a personal interest in the solving the problem. You’re a bike rider, and you’re tired of the hassle of changing a flat (I’ve been there…). So, consider your hobbies and personal interests- you may just find a business idea.

Ken Boyd

Author: Cost Accounting for Dummies, Accounting All-In-One for Dummies, The CPA Exam for Dummies and 1,001 Accounting Questions for Dummies

Co-Founder: accountinged.com

(email) ken@stltest.net

(website and blog) http://www.accountingaccidentally.com/

(you tube channel) kenboydstl

This post was originally posted on my Quora page. This post is for educational purposes only.

Image: Bullseye, Jeff Turner (CC by 2.0)

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