Yaro Blog

How To Start A Business On A Budget

Business Building on a BudgetWhen I first started a “real” business I was already in a position of positive cash flow, but it wasn’t because I had inherited money or because my parents had funded my business project, it was because of two reasons…

  1. I had successfully generated a few hundred dollars a month from hobby projects – these were not things I considered real businesses, just websites I loved to work on that made a trickle of money.
  2. I had a casual job.

I was 19 when I first became interested in computers (before that it was all about console gaming) and by my early twenties I was capable of putting together a website. My sites were not well designed, but functional, just text wrapped inside a few tables and basic graphics. My beginner training was with the free hosting service Geocities, so just getting text and pictures to appear were you want them to on a page was a challenge.

What I did have during this period was ample time, and that was definitely my biggest advantage. I lived at home, had minimal expenses and was attending university. As many college students understand, your university days can be very flexible depending on how good your work ethic is, and my work ethic was not directed at my textbooks or assignments, it was focused on the Internet.

After a few years playing around online, I settled on a few projects long enough that I made money. As people who have read my business timeline know, my first “cash cow” website was MTGParadise.com. I used the income from this site, plus money from my casual job at a computer helpdesk at my university, to fund my next business, BetterEdit.

During this period I started several other businesses, including an English school called Aussie Tutor, and plenty of different website projects, all of which failed in a traditional sense – they cost more money than they made. I never borrowed money to fund any projects, I used my energy and creativity, income from my job and the steadily increasing cash flow from my website and went from project to project.

You Must Have Something You Can Leverage

If you are considering starting a business you have two resources you can leverage –

  1. Time
  2. Money

If you have money but no time, you use that money to hire people. Contractors and employees use their time to get things done for your business in exchange for cash.

If you have time and no money, then you go to work to build cash flow off the sweat of your back. Nothing happens without cash flow, so your primary concern at the beginning is to generate money using your labor.

If you are considering starting a business you must have access to at least one of these resources. If you don’t, you have to create or free up one or both resources.

Get a casual job, do contract work, borrow money or find a partner with money it you need cash. If none of these are options, then sit down, think about what you need to make your business generate cash, and start putting it all together using your spare time.

If you have no time and no money and you have obligations that cannot be met without using every ounce of your income and time, then you my friend, are stuck!

No one, in my opinion, is really stuck and if you think you are, it’s because you are too afraid to change. You can reduce expenses in many ways and get creative with how you use your time. Most people can free up time and money resources, if they learn how to control the elements that reduce them.

If you need help in this area, start with my Interview with Tim Ferriss of The 4-Hour Workweek.

I’m going to assume you can generate a little extra cash and a little extra time to work on your business. Nothing to extravagant, just a few hours a day and a few hundred dollars a month, that’s all you need to begin. Let’s look at how you can build a business using limited time and money.

Early Cash Flow Generation

When you start a business the greatest challenge is cash flow generation and that usually ties into a customer acquisition issue. It’s not difficult to set up a website, a phone line, email address and all the other back-end resources you need to create value for other people. Product creation or service provision is usually not the problem for a start-up, it’s finding and then convincing people to buy what you have that causes a new entrepreneur the most grief.

Finding customers was certainly the greatest challenge when I started BetterEdit. When the website went online we had no customers. I totally understood why that was – no one knew the site existed unless we found ways to tell them about it. It’s funny how many people start a website expecting business as soon as you hit the “on” switch. I knew from running my other sites that it takes months, even years, to drive traffic.

I immediately began the process of marketing and optimizing my website. Here’s a sample of the things I did –

  • Submitted the site to DMOZ (I also submitted it to various directories, but that is a dated practice that doesn’t really work today)
  • Found relevant websites and requested link exchanges
  • Did keyword searches and found top ranking sites that targeted my market and offered them original articles in exchange for links
  • Optimized my website internal linking structure and general SEO

Inside my Blog Profits Blueprint you will find other basic Internet marketing ideas along this line. Much of the advice I provide in the Blueprint is based on my experience during this early period in my Internet business career.

Understandably, I didn’t get many customers from the Internet during the first few months, in fact it would take about three years before direct web referrals accounted for a big chunk of customers, and that was primarily from Google search traffic. It was because of the basic things I did early on and the fact that I kept at it for years, that the site began to rank very well, though today I think I could speed up the result – I didn’t leverage my resources very well back then.

Most of the techniques I used on my site during this time are dated today and won’t bring in amazing results quickly. However, when you target a market with limited competition – and certainly not competition that understands Internet marketing – you can rise to the top given enough time. The websites I started in the early 2000s dominate search results today because of the work I did back then.

Quick SEO Tip

One of the main reasons the sites I created back then rank so well now and keep the competition at bay, is because of the age of the domains. If you are considering starting a new business and it’s something you plan to be in for a long time and organic search results are an important part of your strategy, I suggest buying an aged domain. If you can get a domain at least five years old that is a distinct advantage.

Low Cost Customer Acquisition

It was clear that search results were not going to bring business quickly, so I had to look for other ways to attract customers. Pay per click was an option, but it cost money and I didn’t know much about it, so I wasn’t going down that path just yet.

I thought like a marketer and brainstormed where my target audience was. Instead of hoping they would come to me through the Internet, I decided to go to them. I brainstormed all kinds of ideas, including billboard advertising near where my prospective customers went every day, ads inside buses – even radio! After inquiring with all of these different media it was clear – I didn’t have the money to invest in this type of advertising.

I eventually found a low cost means of marketing my business, which I continued to use for many years – poster advertising. I’ve talked a lot about using posters to market your business on this blog before, so I won’t go into detail here. In the case for my business, posters were the perfect low cost, solid return-on-investment means to attract an initial customer base, which I built on year after year.

The amount of clients I attracted did not generate a fast or substantial return, but it did provide a steadily increasing cash flow source. The drain on my resources to use this marketing method was minimal – a few hours a week of my time and a few hundred dollars for poster production. Compounding over time, with new customers joining repeat customers from previous years, meant my business grew organically, but it was a very slow growth curve. It didn’t make me rich, but it was the cash flow kickstart I needed.

In your case, you need to brainstorm ideas on how you can reach customers at low cost. If you need ideas, search around for Guerrilla Marketing advice. This form of marketing is taught in many places. I used my head and my understanding of the target market to come up with ideas. Here’s a few more you might consider –

  • Classified ads are cheap and can work for certain businesses
  • On the Internet there are countless methods that take work but cost nothing, like promotion at social networking sites, blogging, article marketing, etc
  • Handing out flyers or a letterbox drop (I did both of these)
  • Doing “stunts” in public to capture media attention

Reinvest For The Future

The need for cash flow is something that never stops, however it gets easier with each project.

A key understanding new entrepreneurs must take on board is the importance of reinvesting your earnings back into your business, or if you sell your business, the profits back into new projects.

In my case I leap frogged from one project to the next, using cash flow from previous projects to fund the next. With each new successful project I could start a new one with an even grander outlook than the previous. I had more money for staff, more money for websites and I could just do more of a better quality.

At the start I had to build websites myself, market the projects myself and work a part time job to stay afloat. I built cash flow, started another business, quit my job, sold a website and started a few more. As time progressed my access to the two key resources – money and time – increased, thus I could do more and make more money.

For most entrepreneurs this will be the path you take, unless you hit a really big idea that is super profitable, or you attract major funding so you can shoot for big outcomes early on. It suit my personality and lifestyle to progressively improve from project to project, but to make this work, I knew I had to use some of my money for reinvestment. You can’t just blow profits on living the good life as soon as you make your first sale.

If you are in a situation that forces you to work to a budget, understand that cash flow is your lifeblood, time and money are your key tools – so use them wisely, and reinvest for the future knowing that each sale is a step forward. Eventually, with ample cash flow and loads of time, you can pick and choose which projects to chase and do so on your own terms with a much bigger budget.

Good luck!

Still budgeting

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