PS suddenly found himself with a great opportunity to get into the fish-wholesaling business. He had a friend who could supply him with the fresh fish on credit. And because PS was already working in a related field, he had a “built in” set of potential customers that he had a relationship with.
There was only one problem. He needed a truck to run this business … and he had no capital. Since I was the only person PS knew who might be able to loan him the money to buy a truck, he came to me.
He offered to give me half of the business in exchange for my investment. But instead of taking him up on that, I gave him a copy of my “Quick & Easy Microbusiness System” and told him to read it.
One week later, PS was in the wholesale fish-supply business – and he hadn’t given away half of his business to me. After reading my Microbusiness program, he realized that he’d been making the same mistake many people make when they are thinking of opening a small business: He was not using any of the creative financing tools that are available to entrepreneurs.
There are many businesses that require expensive capital equipment – but that doesn’t mean you can’t start your business if you don’t have the capital or credit to buy it.
According to David Worrell in Entrepreneur magazine.
“It’s important to remember that selling stock can work against you if the cost is greater than the growth you’ll realize by investing that money.”
Well then … how do you finance the start-up of a business without giving up a large percentage of your equity? There are many ways. Here are three ideas:
1. Rent the equipment.
PS was able to come up with the cash to rent a truck for one day. He made enough money that first day to pay for the rental costs and have a tidy sum left over. He did the same thing every day for a week. At the end of the week, he’d earned enough cash to make a down payment on a truck of his own.
2. Subcontract the work.
You start by acquiring the customers. Then you hire someone who has the equipment to perform the actual work. There are many businesses with large enough profit margins that allow you to do this … and still make a healthy profit. And if you’re starting a business that’s an offshoot of the kind of work you’ve been doing, you’ve already got a solid base of prospective customers to market your product or services to.
DM, for example, had a way to get some major home improvement contracting jobs, but he didn’t have the money to fund the necessary equipment and other capital requirements. So he subcontracted the work to another contractor – and earned a handsome profit without investing a nickel in overhead.
3. Finance with factoring.
Factoring offers another way to get a business up and running before you have the money to fulfill the orders. With this business model – unlike subcontracting – you can retain more control over the quality of the product/work that’s provided. Essentially, you obtain short-term financing to purchase (or manufacture) the goods/services you need.
RY secured contracts from two nursing homes to provide them with nurses. Her problem was that she would have to pay the nurses weekly … but she wouldn’t receive payment from the nursing homes for 45 days. By obtaining a loan from a factoring company, she was able to get her business going, despite having almost no start-up capital.
By using creative methods such as these to resolve your capital requirement needs, thousands of business opportunities will open up to you.
When my partners and I started a sports video production company, we weren’t in a position to buy the $30,000 worth of video and editing equipment we needed.
So we rented a camera, lights, etc. for about $100 a day, and shot our first four videos. We then paid another $200 to have them professionally edited. Today, this same company that we started for a total of $300 grosses over $1 million annually … with a high profit margin that creates a very healthy income for the partners.
If you’ve been thinking of starting your own business but have been hesitating because of limited capital, think again! I’ve proven, time and time again, that you don’t need more than $100 to start your own profitable business.
“The entrepreneur always searches for change, responds to it, and exploits it as an opportunity.”– Peter F. Drucker