Monday, 22 November 2010

How to build a business on sweat equity

I like to bust myths in business; one is which you *must* have funding to make your business idea happen. Here's a post I've just written for 'How To Build A Business On Sweat Equity':

Legend has it that the TV show 'Dragon's Den' is an accurate reflection of what business and enterprise is all about. A bunch of people parade their business ideas in front of the Dragons to raise funding and thereby lose control of their business.

Is that what business is really all about for most of us? Because for starters, it's a myth that you must have money to start a business. You don't. You just need a damn good idea - and a few other things, like paying customers - but not necessarily stacks of cash.

Okay, if you have a bunch of expert web developers to hire, prototypes to manufacture and warehouse space to lease then you may well need start-up funding. But for the rest of us - especially for the ‘I have an idea’ generation - you might find smarter ways to take your business to market without first raising money.

So lock away the company cheque book and embrace the spirit of ‘bootstrapping’. Bootstrapping is about building a business with little or no money. Many businesses, even Silicon Valley technology giants, started life this way in garages rather than plush office suites. You can start your business in the shed or spare room and then scale up once you have the revenues to support expansion. From the guy selling organic sausages to the woman making lingerie, the home-made model is how many successful entrepreneurs started out.

So here are six tips to launch a business without funding:

1.    DITCH THE OFFICE. Starting from co-working spaces, coffee shops, spare rooms and garages means you not only save on office costs but also those associated overheads from electricity to furniture. So ask yourself, do you *really* need an office?
2.    HAVE A LEAN TEAM. If you don't need hordes of people on the payroll, utilise freelancers, friends, and favours to keep those costs down.
3.    USE FREE TOOLS. Take advantage of free web-based tools like Google Docs to run your office systems without investing in pricey software licences.
4.    MULTI-TASK. You’ll need to be multi-dimensional. Whether it's writing copy for a brochure, learning how to code a website or making deliveries to customers, there's stacks of things you can do yourself. You’ll just have to work harder.
5.    EMBRACE NO-FRILLS. Do you need to attend that expensive conference, can you book cheap train tickets in advance to visit that customer, and do you really need that fancy letterhead? Be ruthless!
6.    ACT SMART. Do deals with suppliers, designers and manufacturers to have them share the risk with you. Cut great deals on the basis that you’ll reward their loyalty and service once you have customers in through the door.

If you create a business that doesn't require start-up costs, not only will your business be leaner but the skills you'll learn in financial prudence will stay with you as you scale up the operation.

But remember, no-one said starting a business was going to be easy: this is about investing huge amounts of 'sweat equity' to pull it off.

So building a business without funding will inevitably require more work; but on the upside, if you haven’t had to dilute your shareholding to secure investment, you’ll retain the freedom to be in control of your idea. And if your business is going to be a mega success, retaining control might be one of the best decisions you’ll ever make.

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