Gurbaksh Chahal | Starting Your Business on a Shoestring Budget
Start small. Think Big.
When you’re getting a business off the ground you should certainly have big dreams. No-one ever got anywhere by thinking and acting small-time. Have a clear vision and set your sights high.
Thinking small, however, is equally essential when it comes to your business overhead and operating expenses. It’s entirely possible to start an enterprise on a shoestring budget and build it into a multi-million or even billion dollar business. But successful entrepreneurs don’t become successful by squandering what limited funds they have.
The business world is full of industrious leaders who didn’t allow lack of funding to stop them from building mega-empires.
Back in 1965 when he was 17 years old, Fred DeLuca, for instance, used a $1,000 loan from a friend to open up a sandwich store. Pete’s Super Submarines–named after Peter Buck, the benevolent friend–was almost toast before it opened because the local authority insisted that a $550 sink be installed. A second loan of $1,000 saved the day—and the sandwich store. Today there are more than 40,000 of them in over 100 countries and they’re known as Subway.
Anita Roddick managed to get a $6,800 bank loan in 1977 to open a single skincare specialty shop and saved money by mixing ingredients at home helped by her daughters. With a frugal mindset and a green pioneering spirit she encouraged customers to return empty bottles to be refilled. It kept costs down and it kept waste out of landfills. In 2006 The Body Shop was purchased by L’Oreal for over $1 billion.
In the world of high tech, of course, the Steve Jobs story is the classic. He was given away for adoption at birth by his biological parents. A college drop-out because he couldn’t afford the fees, he slept on the floor in friends’ dorm rooms, returned Coke bottles for money, and got free meals at the Hare Krishna temple. He started Apple Computer in the garage of his parents’ home.
Larry Ellison, reportedly the fifth-wealthiest person in the world, with a fortune of $48 billion, was also given up for adoption, and also dropped out of college. He co-founded the forerunner of Oracle with two partners and a total investment of $2,000–$1,200 out of his own pocket.
And one more example: When he was nine years old John Paul DeJoria, the son of Italian and Greek immigrants, had to sell newspapers to help support his family. He lived in a foster home, joined a street gang and went through a succession of jobs. With a loan of $700 he launched the Paul Mitchell line of hair care products whose success around the globe has made him a billionaire.
DeLuca, Roddick, Jobs, Ellison and DeJoria are extreme examples of entrepreneurs who started with a shoestring budget and enjoyed phenomenal success. But the message is clear for anyone with a vision and ambition: You don’t need hundreds of thousands of dollars from venture capitalists, and all the restrictions that go along with it.
Here are some lessons from their experiences as well as my own.
Keep Lean and Mean
Think long and hard before taking on all of the expense that office space incurs. Many startup businesses, especially tech-related, can operate from your home or garage. When you’re a startup do you really need fancy office space that you can ill afford? Most business can be conducted by email and phone. In my case I worked out of the bedroom I shared with my brother.
Wear Different Hats
In the early days you have to juggle all kinds of responsibilities. You might have to be the CEO, the CFO, and the COO. You handle sales and marketing. You handle public relations. If there’s anything to go in the mail—you’re the shipping department, too. Work without an army of people. One of the benefits is that you’ll be forced to gain an understanding of all of the other functions which will be invaluable when you are a multi-million dollar enterprise with hundreds of employees.
Perception is Reality
Nobody needs to know how small you are. You don’t have to announce to the world that you’re working out of your bedroom. Nobody needs to know that you’re a 16-year-old kid (which I was when I started out). Sound professional and more importantly deliver the goods as promised. That’s what really counts.
The Right Kind of Business
Obviously, whatever business you launch needs to be something for which you have a passion. But be clear-headed: make sure that there really is a demand for whatever it is you have to offer. Operating on a shoestring means there’s not much margin for trial and error. If you’re operating on a shoestring it’s ideal if you don’t have to invest in inventory. Warehousing products to resell can burn through your cash real fast.
The day will arrive when office space and employees becomes a necessity. Stay frugal. You don’t need to start with 10,000 sq ft in a gleaming skyscraper. You don’t need high-end executive furniture. Search out a low budget but decent building; and you can pick up good quality secondhand furniture and equipment at bargain prices. I started with 1,200 sq ft, which was enough room for half a dozen people and I bought run-of-the-mill stuff from various places and cheap cabinets from Office Depot. I wasn’t out to impress anyone.
Managing Cash Flow
When you’re first up and running you’ll be lucky to be able to take much of a salary. Try to keep it that way. Avoid the temptation to take your first big check and indulge in a shopping expedition. It’s your business and you’ll need to plow most of the profits back into sustaining the growth of your business.
Of course, even if you have tons of money, it’s no guarantee of success. The tech industry, in particular, is littered with well-capitalized companies that kicked the bucket. So, don’t be put off from striving to achieve your dreams because of lack of funding. Have confidence in your journey. Go for it. Put 110 percent effort into it. Take calculated risks—and you will be a winner.
Chairman & CEO, ProcureNet | Founder, Chahal Foundation | 3 Exits $400MM+ | 4X Entrepreneur | Author | Guest Lecturer |Hong Kong | Bay Area
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