How to Start a Business Without Much Knowledge or Capital

Consider personal services opportunities. Perhaps the lowest start-up costs of all are in the realm of consulting. A consultant sells their experience and skill in the form of advice and analysis to other businesses. Typically the businesses that might need the consultant's experience and skills don't need a person to fill that role on a permanent basis. If you have a skill or an area of expertise but don’t have a lot of money to start something up, sell that expertise.

• In order to get work as a consultant, you will need to offer unique or special skills needed by others.
• For example, you could be a manufacturer's representative, represent other service providers, or another consulting type based on your skills and experience.
• You can get started in consulting for very little money. Print up some business cards and get a website. You can do all of your initial marketing through networking, making appearances at conventions, trade shows, and conferences.

Start with a service-based business. If your ambition is to sell a product but you don’t have the start-up capital and are having trouble accessing it, think about starting a service-based business and transitioning over to a product-based business. Look for low cost, low skill opportunities.

• If you have the inclination to sell a product, it means that you probably have expertise in that area. If you want to sell pies, for example, you probably know how to bake. Therefore, use your expertise to accumulate start-up capital.
• The baker in this example could take over pastry duties for a catering company while he accumulates the capital to open his own shop.

Identify retail opportunities. If you have any hobbies or skills related to manufacturing or buying and reselling goods, you can easily turn this into a business. You can start online by making or buying goods to sell on sites like eBay, Amazon, and Etsy. Doing so is simple and only requires you to come up with products, store them, and ship to buyers. You can also open a retail store for the same purpose.

• Alternately, you can easily offer a service by opening a restaurant or similar business if you are skilled in a certain area.
• For example, someone skilled at making innovative grilled cheese sandwiches might open a food truck to serve them.

Become a services contractor. Transferring from employee to a contract worker status provides a taste of self-employment and running a business. Consider working for your existing employer and offering part-time with services such as house-sitting, computer repair, pet walking, or another tasks that requires little expertise. If your ambition is only to run a business—any business—there are many that you can start for very little capital. Even if you have more specific ambitions to sell a particular product or service, you can at least gain experience running a low cost startup.

Define your business product or service. Your first step should be to identify a potential product or service that you can offer for sale. Defining a successful product or service will require a lot of thought, research, and brainstorming. You can start by brainstorming a problem that you have in your life, or that you've others have, that doesn't have a clear or easy solution. Identifying this type of need is how many successful companies were founded.

• For example, Google was founded as an easier way for people to search for information online.
• You can also start with an innovation on an existing product or service that makes it more affordable, easier to use, or otherwise better in some way.
• In the end, your product or service should be something you are passionate about offering to customers.

Articulate your competitive advantage over other market players. Now that you’ve learned some things about the marketplace and how much you will need to get going, you need to articulate your competitive advantage over other players in the market. In other words, what it is that the consumer can get from you that they can’t get somewhere else.

• If you don't have a competitive advantage, the likelihood of success is significantly reduced. Your business's advantage might be low cost, better quality, convenience, broader selections, customization, location, or customer service, for example.
• This is vitally important, but it’s different for each business. One company's competitive advantage might be quality, another's might be cachet, while another's might be low prices. Sometimes they are very concrete advantages--Tesla is an innovator in electric cars--while others are purely abstract--Coke is The Real Thing. You have to decide what it is you’re going to do better than anyone else, because once you have, you get a better idea of what the true size of your market is.
• Take Walmart and Target for example. They both offer very similar concepts—the one stop shop—but they execute in different ways. Walmart stands on the perception of having the lowest price. That’s their competitive advantage. Target keeps price in mind, but what they do different from their competitors is to offer an atmosphere that’s modern, sleek, stylish, and clean. The market for stylish is always going to be a little smaller than the market for cheap, but Target’s strategy is to make up for it in higher margins.

Analyze the potential markets for your business and estimate their size. The first step to solve your problem of lack of knowledge is to think about the contours of your market. Make an effort to answer the following questions:

• Try starting your research by studying potential competing companies or by looking up industry information that is publicly available. Make observations of businesses in your area, specifically what they sell or provide and the demographics of their customers.
• Who wants to buy your product or service? This is the most basic question of all. Is the user of the product or service the same person who pays for it? Is it something that they need or is it something that they want? Do they need to have a relationship with you in order for you to make money?
• What is the total size of the market? The size of the market dictates your ability to get funding and where you can get it from. The total market for health-services is far larger than the market for hydraulic presses. If you’re trying to get a new kind of hydraulic press to market, your approach needs to be narrower.
• Finally, how does the market for your product or service behave? Is demand constant over time, like the market for toilet paper, or does it fluctuate, like the market for candy canes? Do people generally only buy the product or service once or seldom, like appliances, or do they buy them regularly, like dry cleaning?

Select the optimum sales channel. There are all kinds of ways to reach a consumer. You need to think about how you can most easily allow the consumer to buy from you. One of the cheapest ways to sell goods to a consumer is through online stores, but that type of platform doesn’t work for all kinds of businesses, especially service-based businesses. You might need to consider a brick-and-mortar store or even taking your product directly to the customer.

• Outside of online sales, you can offer products or services through competitive bidding, a retail storefront, or through multiple different channels.
• Unless you have invented something truly unique, someone is probably already selling something that is at least similar to what you want to sell. Think about how they get their goods to market, then think about how you can do it better.
• For years, groceries were bought at stores where all of the items were located behind the counter. You asked the grocer for what you wanted, and he got it for you. It was tedious and time consuming, but when packaging was primitive and everything came in large bulk containers, it made sense.
• When packaging advanced, the supermarket was invented. It disrupted and destroyed the old model for doing business. Moral of the story: sometimes the way you reach the consumer is through innovation.

Project your financial results. Your next step is to figure out how your business will be funded and how it will make money. Determining start-up costs is not an easy thing to do, but it’s necessary that you do it well, because it’s how you’re going to get the right amount of funding. Ask yourself what you would need to have to go into business tomorrow—materials, personnel, facilities—anything you might need. Tally it up. Now ask whether that’s enough to make you self-sustaining.

• For example, to start an auto lot, you’ll need a lot, an office to work out of, office supplies, inventory, car washing supplies, signage, etc. To be self-sustaining, you’re going to have to pay for all of those things, in addition to your own residence and personal expenses. You’ll have to sell some cars to do that. So you also need to determine how many cars you’re going to have to sell at what prices to keep the business going from month to month.
• After finding startup costs, you'll need to forecast revenues, sales, and profits. You'll need to make pro forma financial statements (statements based on sales forecasts) month by month first two years, and then quarterly for the next five years. Financial projections are a way of quantifying the results of a business idea.
• For more on sales forecasting, see how to forecast sales before starting a business.

Develop and write your business plan. There are all kinds of sources on writing a business plan, including this excellent resource: Write a Business Plan. But the general outline consists of a general company description, a description of the products and services you sell, a marketing plan, an operational plan, the management and organization of the company, and a financial plan. Be sure to develop hard numbers on startup cost, market saturation, customer base, staffing needs, and logistical concerns.

• This document should be detailed but readable, and you should anticipate creating a plan that is 20-40 pages long.
• At minimum, your plan should include elements of production or acquisition of products and services to sell, your marketing and sales plans, and financial information.
• Your business plan is a map explaining how you will accomplish the objective of creating a viable business with your product or service.

Summarize key elements of your business plan. You know what you want to sell, how you want to sell it, who you want to sell it to, how much it will cost to get going, and what you’re going to do better than anyone else. Now what you have to do is to turn it into a sales pitch.

• That’s right, before you can sell your actual products and services, you have to sell investors and consumers on you and your idea. Concentrate on boiling down your idea into something that you can get across in 45-90 seconds. People call this the “elevator pitch,” but it’s not so much about elevators as it is about learning to grab people’s attention in a world that is constantly competing for it.
• There is no such thing as a one-size-fits-all sales pitch. Maximize your strengths that appeal to the person you're pitching, while obscuring the weaknesses that would repel them. You'll need to know those strengths well enough to talk about them compellingly for five seconds or five hours, depending on what the situation calls for. In addition, you need to develop the emotional intelligence to know what will be convincing to any particular person.

Sell personal assets. If you don’t need much to start your business, you can always consider liquidating your assets at the flea market or on Ebay. There are a host of businesses that can be started for less than $100, such as scrap metal dealing, errand services, tax prep, cleaning services, and making soap. So if your financial goal is modest, you can get a long way toward reaching it just by selling your stuff.

Partner with family and friends. A common source of startup funding for small business is contributions from friends and family. These sources offer flexible repayment terms and can give you lower interest rates than any other source. However, you'll need to get in writing whether the money is an investment (for equity), a loan to be repaid, or a gift so that you can avoid confusion when it comes time to repay the money.

• Ideally, you should structure the loan/gift/investment with a legal contract drawn up and inspected by a lawyer that lays out terms and a repayment schedule.

Consider crowdfunding. If you’ve got a great idea for a business but are struggling to find funding, you might want to consider a crowdfunding platform, because it minimizes each donor’s commitment while also allowing them to get in on the “next big thing.” There are three types of crowdfunding that are especially relevant for a prospective entrepreneur.

• Rewards crowdfunding is probably what a lot of people think of when they think of crowdfunding. In a rewards crowdfunding scenario, the donors get rewards for donating. A media project might give donors a complimentary CD or DVD, t-shirt, or other promotional items, for example. Different donation levels get correspondingly different rewards.
• Equity crowdfunding is when the donor gets equity in the company. While a lot of entrepreneurs might not want to cede that level of control over to a donor, it can be a great way to get funding without taking out a great deal of debt.
• Lending crowdfunding is debt-based crowdfunding. Interest rates and length of the loan are usually predetermined, and the life of these campaigns is usually shorter than other campaigns.

Utilize a Regulation D offering. In order for a business to raise money by selling equity (shares of stock) or debt securities (bonds), they usually have to register with the Securities and Exchange Commission (SEC). Registration is usually prohibitively expensive for small businesses. However, Regulation D allows these small businesses to sell securities under certain conditions.

• As an exception to regular SEC policy, Regulation D filings are somewhat complicated. It is advisable that you hire an experienced financial attorney to take you through the filing process.
• There is a certain risk in offering investment to strangers. These people might have a significant amount of control over your business decisions if they own a large amount of equity. You'll have to make sure your goals for the business are aligned before signing them on.

Pursue venture capital help. Venture capital (VC) firms invest in small businesses in exchange for equity. Many times, this is done through incubators and accelerators. Incubators can be another great way for a likely entrepreneur to get a start. Incubators are organizations sponsored by governments, nonprofits, or investors that allow startups to pool resources. Accelerators are similar to incubators, except that they offer more hands-on assistance for the participants.

• A startup associated with an incubator may be taken more seriously than one that isn’t.
• Incubators can provide access to capital, shared work resources, co-working spaces, advice from other entrepreneurs, and opportunity for the cross pollination of ideas. See if any incubators are active in your area by searching the International Business Innovation Association’s directory.
• Should you be selected to join an accelerator, you can expect to attend trainings, seminars with seasoned entrepreneurs, guidance from a mentor, and perhaps even seed-funding.
• Accelerators can be a great opportunity for the start-up. Many accelerators even offer participants the chance to pitch investors at the end of the program.

Apply for loans. It’s the most conventional way to go about funding a business startup, and there’s a reason for that: banks have a lot of money and everyone knows it. You can expect, however, that banks will typically be the most conservative investors, so you’ll need to have the details of your business plan nailed down before you apply.

• The best option for a small business in many cases is to apply for a Small Business Administration (SBA) loan. These are loans backed by the government that small businesses can more easily qualify for and repay.
• Remember, though, that loans are not like equity investments and must be repaid.
• You can find a guide to applying for a small business loan at Get a Small Business Loan, but be aware that banks typically look at the strength of the idea, credit-worthiness of the applicant, market saturation, and the perceived abilities of the entrepreneur to run the business.