- Crises often inspire entrepreneurs to create new businesses — Airbnb, Beyond Meat, and Venmo were born in the recession. However, launching a company during an economic downturn typically forces founders to start up on a budget and save whatever they can.
- There are several ways to start your business without having to break the bank, as long as you have a great idea and a good amount of dedication.
- Here are some tax tips and suggestions, from service businesses to affiliate marketing from real Quora users with business experience.
- Visit Business Insider’s homepage for more stories.
Crises often inspire entrepreneurs to create new businesses â€”Airbnb, Beyond Meat, and Venmo were born in the recession. However, launching a company during an economic downturn typically forces founders to start up on a budget and save whatever they can.
Quora users with business experience were asked the question: “Is it possible to start a business with little to no money? How?”
As these answers show, it’s possible to save money when starting a new business, but that doesn’t replace a great idea and more drive than the competition. Additionally, making smart tax decisions at the beginning of the process can save money in the future.
Here are 6 tax tips and 11 Quora users’ answers on starting a business while saving money.
Start smart with tax preparation — here are 6 tips.
One of the easiest ways to prevent excess spending when starting a business is by making informed tax decisions. The first step is determining where in the US you’re starting the company – different states have various tax rules for startups.
Founders must also choose how they want to structure the business. That factor dictates the income tax return a business taxpayer must file. The most common structures are sole proprietorship, partnership, corporation, S corporation, and a limited liability company, according to the IRS.
The next step is picking a tax year, which is the annual accounting period for reporting income, expenses, and keeping records. There are two options: A calendar year, which runs from January 1 to December 31, and a fiscal year, which ends on the last day of any month except for December.
Paperwork is also vital. Entrepreneurs should apply for an employer identification number (also known as an EIN) – most businesses need an EIN, according to the IRS. Meanwhile, founders should ensure that the company’s mailing address, location, and responsible party are up to date.
They should also have employees fill out important documents like form I-9 – which identifies an employee’s identity and work authorization – and the employee’s withholding certificate W-4.
Lastly, don’t forget to pay your taxes. There are 5 general types of business taxes that entrepreneurs must pay, including income tax, estimated taxes, self-employment tax, employment tax, and excise tax. To determine what you owe, founders must look at their employees, business structure, and goods or services. Consult a tax specialist or the IRS website if you’re unsure.
If you start out with little money, outperform other businesses.
Quora user Wade Myers had several examples he had encountered over the years of entrepreneurs building lucrative businesses with next to no money. Here’s one:
“An entrepreneur that had lost everything in a previous failed venture, bounced back and with a spirit of humility and cheerful diligence moved to a new city with literally no money, and bought a few pool cleaning supplies. He went on to build a pool cleaning route and sold it for over $US50,000 just ten weeks later. He told me he didn’t even have enough money for a direct mailing campaign, so he just went door-to-door to build his customer base. He then kept doing that over and over again, realising that he was really good at building a route of customers and that there were plenty of existing pool cleaning companies that were not that good at growing that would happily buy a route from him. He could build and sell about four routes per year.”
If your business works harder than its competitors, profit will find its way into your hands. In every story Myers described, the entrepreneurs had little money to start with, worked harder than their competitors, and didn’t wait for customers to come to them.
Start a service business.
Quora user Simon Cave explains that service businesses are easy to start because they don’t require manufacturing a product. Chances are, you already have the skills that others need. He offers possible services:
- If you know how to write => create content for clients
- If you know how to code => create programs/software/websites for clients
- If you know another language => offer translation services
- If you have an accounting degree => offer accounting services
- If you are knowledgeable about social media => offer community management services
If you don’t have money, at least have time.
Quora user Aljaž Fajmut learned the value of time when he founded his startup, Nightwatch. While building the app, he faced delays, bugs, and disagreements with people on his team. If he had saved a little more and taken his time, he would have had a safety net. He writes:
“Time really is key… you will face setbacks and delays just like all tech companies do. And you need to be prepared for them. If you don’t have a lot of cash, at least have enough time to save yourself when something goes wrong.”
His startup was ultimately successful, but Fajmut would have appreciated having this lesson in his arsenal before launching his business.
Carry out market research.
Quora user Lily Booker believes in the power of service businesses as well. But without the proper research, your business could have no niche in the market. Make sure to check if there’s a venture out there like yours, and if there is, make sure your business does something the competitor can’t. She writes:
“Firstly, to start a business requires your time and a lot of determination to succeed. Most people think that money is the key to start a business, but if you have a good business idea and have done your market research right, you may actually succeed with little to no money.
In order to succeed as an entrepreneur, you need to be willing to make tough decisions and make a lot of sacrifices. Most people will encourage you to start a services business if you don’t have the capital because they don’t require a lot of money. But as I said above, a good business idea and a market research that shows your potential target market can attract a lot of investors to your business.”
Follow a “sell first, build later” approach.
Quora user Gunjeet Singh writes:
“You can easily start a business with zero capital. How? Don’t spend money on anything. This is not a joke. Avoid spending money on anything and everything. You will be surprised at how much you can grow your business without spending.”
Singh goes on to explain a hypothetical business selling shoes. Instead of spending three months paying someone to make a website full of random bugs, create a Facebook page and find a free logo generator. According to Singh, your business doesn’t need to look like a million-dollar venture until you make some money selling your product or service.
Try affiliate marketing.
Quora user Sachin Kaushal explains the benefits of affiliate marketing:
“Affiliate marketing: Becoming an affiliate for another company’s product is an extremely lucrative way of helping a company that believes in its product but is struggling to sell it. You can get a kick-back/commission for every sale you make for them.
You don’t even have to advertise!
If you connect a business with a famous influencer/celebrity who can promote their product, you can be the middle man and generate income for yourself without having to do anything.
But even then, promoting other people’s products requires no investment from you and is an easy way to benefit both parties. All you have to do is market & advertise for them.
I would start off by going to popular company websites such as Amazon, who allow you to be an affiliate for other peoples’ products. Or even email/message small businesses and simply tell them you have the expertise to increase their revenue.”
Don’t worry too much about resources.
Quora user Bhaskar Dutta explains that resources aren’t nearly as important as ideas. In an Indian business school, students were given 1,000 rupees and tasked with multiplying the money in two hours. Then 10-minute slots were assigned to each group to present once the two hours were up. Most students came up with conventional methods (opening a market stall to sell drinks, or reselling gift items at double the price in tourist-filled districts). Dutta writes:
“But the teams that followed the typical path were not the ones who could bring back good returns. The teams that made most of the money didn’t use the 1000 rupees at all. They realised that this small money is distracting and a worthless resource.”
The winning team sold their 10-minute presentation slot to an outside company willing to pay to advertise themselves instead.
If your business is sure to make money, and doesn’t cost much to get off the ground, you can worry about investments to grow your business later.
Create demand by having a social media presence.
Entrepreneur and best-selling author Gary Vaynerchuk writes about the need for getting the word out for your small business on social media:
“Don’t stress out over the semantics of whether people want you and your business – you don’t have the money or the need to hire a full team yet. Create demand, then take those dollars to hire people and then your clients will have the same expertise you provided, delivered through your employees.
You’re probably now asking, ‘What about ads and promotions?’ I think Google search is great. I think Facebook is great for branding, but first start making content. You need to be blogging on Medium about your thoughts on the industry and your thoughts on culture and your thoughts on today’s society over and over again. Video form, written form, audio form, it’s all about the content.”
Try the drop-ship method.
Quora user Daniel Briones gives a breakdown of how this approach to small business works:
“Drop shipping is another name for price arbitrage; a fancy term that means you find low-cost products and sell them at a higher price. With a drop-shipping business you don’t need cash or storage space. You just need to set up your store, list your products, and focus on marketing and selling.”
Briones’s five-step method consists of: 1) Finding your niche, 2) finding a drop-ship supplier, 3) getting a sales tax ID, 4) choosing a selling platform, and 5) promoting your store. He includes several tips in his answer as well, like starting a referral program. He adds: “Referral discounts are the classic marketing tactics to promote your online store and help you reach new customers fast!”
Make bold initial moves.
Quora user Tom Nault discusses the advantages of having no money, including the bold moves you can make to get a business up and running. This includes buying up a failed one:
“My answer will surprise you, but if you have no money, it means that you can take on risks others can’t. This means you can make bold initial moves that others can’t. This is an asset.
Next, other people’s mistakes can be your equity in a business. Strange statement, but there are a lot of failed companies who got there because of blatantly horrible management or some narrow-minded notion. Often those companies can be taken over for nothing. Sometimes you can buy them with nothing more than a debt assumption from the old business, especially if creditors don’t want the business to go away.”
Have a great idea from the get-go.
Quora user Alexandra Isenegger gives several suggestions in her answer, but they all centre around having an idea. The rest comes later. She writes:
“I can’t tell you what business to start, because the business you decide to start should be within your skill set, but also (and very importantly) it must be something you are passionate about. You are going to talk about it THOUSANDS of times, over and over again. So be wise.”
Isenegger then asks a series of questions, including:
- What is your intended customer base? It is harder to target a broad and general audience – try to establish a niche customer base which needs your products and/or services.
- What problem does your service/product solve? Identifying a problem and providing a solution is the heart of every innovative idea.
- How can you add value to the product and customer experience? Your customers need to gain benefit from purchasing your goods/services.
- What are the most unusual characteristics of your business which will give you competitive advantage on the market? Establishing yourself in the market means you need some advantage over your competitors to attract their customers or new ones.
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