How to Launch a Business Without Spending a Dime
The biggest mistake I see first time entrepreneurs make is that they spend too much money.
They rent an office or retail location, pay big incorporation fees, hire employees, and build an expensive website (just to name a few). And all before they’ve earned their first dollar!
Each month their cash reserves get lower and lower while they struggle to make sales to cover their expenses. Eventually the fledgling business dies with no cash flow, leaving the owner hurt emotionally and financially.
Luckily, it is possible (and actually quite simple) to start up a business without spending a dime. The beauty of using this method is that you can test out a new business idea quickly and with zero risk. And instead of spending time negotiating leases or dealing with employees, you can spend 100% of your time on the most important thing: making that first sale!
The first thing you’ve got to do is get past the idea of spending. Work out of your home or Starbucks on nights and weekends. Instead of hiring employees just get started with what you can do yourself, or ask friends for help. Don’t incorporate just yet, be a sole proprietorship. Don’t hire an expensive graphic artist to make your logo, stick with something simple…you get the idea.
You can spend money on all that stuff once you are bringing in revenue!
Now to actually get started, here are 10 steps you can use to launch a new business, without spending a dime. The first five are logistical. The last five are all free ways to market your business (after all, the most important step is bringing in that first sale!)
- Get an EIN at the IRS website
This one is specific to the USA, but all companies need an Employer Identification Number (EIN). You can apply for one online at the irs.gov in about 5 minutes by clicking here. List yourself as a sole proprietor for now. - Setup Your Business Financials
Get a free business checking account. This will allow you to keep your business’s money separate and track it (vitally important!). I like Washington Mutual’s free business checking. They will also give you a debit card to track your expenses (never use a credit card) which are currently zero! Then get a Paypal account and link it to your business account so you can accept payments. - Choose a domain name
The fastest ways to get eyeballs on your new business is the internet these days. Choose a domain name that is a keyword phrase your potential customers might type into a search engine. So if you are offering salsa lessons in Boston, you might choose “SalsaLessonsBoston.com”. The benefit of doing this is that you will most likely end up on the first page of Google results for that keyword phrase within a month or two. This will bring your customesr, and is much better than showing up on the first page for “John Smith’s Salsa Company” or something that no one ever searches for. - Make a simple website
The fastest way I know of to launch a website is using WordPress (wordpress.com or wordpress.org). If you don’t mind using a subdomain like “mydomain.wordpress.com” it’s free. But even if you want your own domain you can get one with WordPress pre-installed for about $70/year. Wordpress comes with over 2500 “themes” to change the look and a great back end interface to edit the pages just like you’re in Microsoft word. LifeHack.org uses WordpPress as do many other popular sites. - Set Your Prices
Most first time entrepreneurs set their prices too low. People assume low prices mean low quality, and you are worth more. Give away your product or service to the first five customers free if you’d like (it will help built buzz and you can ask them for testimonials), but after that set your price in the top 1/3 of your industry. It’s always easier to lower them than to raise them. - Start Marketing on CraigsList.com
The next five steps are all free marketing. Start by making regular posts on Craigslist.com. This is a free classified website that attracts millions of viewers. You can get some traffic to your website instantly by making some posts here, and you should continue to repost them every few days. - Start a Meetup.com Group
Meetup.com helps people with similar interests get together. If a group exists in your area with potential customers, join it. Try to be invited as a guest speaker and offer value to members of the group (don’t pitch them). Just by making friends and helping out you will start to bring in business. If a MeetUp group for your topic doesn’t exist yet, that’s even better. Start one up! You’ll be viewed as the authority in the area. - Post a Video to YouTube.com
YouTube is a video sharing website, and it gets ridiculous amounts of traffic. It’s actually easier to make a video than you think, and it doesn’t have to be professional at all. You can record one with your digital camera, make a screen recording of your computer (even a powerpoint presentation) with software like Camtasia, or purchase a $20 webcam. Teach or show something useful, and include a link to your site at the end of the video. You will get traffic! - Network
Send an email to all your friends and family (and really everyone on your contact list) telling them about the business you just started. Put a note at the end asking them to forward the note to anyone they know who might be interested (and tell them about the free offer for the first five customers). You’ll not only reach your network, but you’ll reach your network’s network (an exponential difference). You should also get people’s business cards that you meet (far more effective than giving them since few people will write you back) and offer to help them. - Write an Article and Give it Away!
Even if you aren’t a writer, you can put together a great article. Think of something your potential customers might want to know. Then write a “top ten” list (e.g. the top ten beginner salsa moves) or a “ten step” format (e.g. the then steps to learning salsa basics). Contact the owners of a dozen different websites that your potential customers might visit, and see if they’d like to use your article for free. Include a link to your website at the bottom in the “About the Author” section.
Using this simple format you can launch a new business in about a month, and hopefully make your first sale. But the best part is, even if it doesn’t work, you’ve learned a priceless lesson and risked little or no money.
Don’t spend a single red cent that isn’t absolutely required when launching a new business! See if your idea works first, and then spend AFTER you’ve made your first sale!
Brian Armstrong is the author of Breaking Free, which shows how to quit your job and start your first business! You can download three FREE chapters of the book and sign up for his FREE online course
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Comments
PennyPincher says on May 22nd, 2007 at 10:41 am
If the goal is not to spend a single cent . Do you know of a way to register you Domain for Free and to Host a website for…aside from doing the hosting yourself?
Thanksk
Marina says on May 22nd, 2007 at 10:44 am
Not to be picky but … domain names definitely cost money, and starting your own Meetup group is about $15/month.
I also would not be getting an EIN without obtaining the proper business licenses in your state/county/town. Many areas do require licenses even for a sole proprietorship, and there are hefty fines if you operate without one. (You also want the benefit of being able to write off expenses, including a % of your rent, on your taxes.)
Maybe “How to Launch a Business While Only Spending a Few Dimes” would have been better :)
Andrea says on May 22nd, 2007 at 10:57 am
Brian did say you could use a free wordpress.com blog which costs nothing and there is no reason you can’t start off selling online as an individual.
You can definitely make money online with zero startup costs but after a while you’d want your own domain name, which you can get for as little as 99 cents, and hosting, which you can get for less than $5 per month. If you can’t afford to spend that then stick with your day job!
JJ says on May 22nd, 2007 at 11:05 am
There is something else you can do before doing all of these: get a customer! This may sound odd but if you can find someone willing to pay you for your services you can use this trickle of revenue to truly start the business.
Too many times we think we need all this stuff before we start doing business. Poppycock. Find a paying customer first.
BrianArmstrong says on May 22nd, 2007 at 1:35 pm
PennyPincher: you can get a subdomain for free but you’re right a full domain will cost a little bit (money well spent I think)
Marina: you’re right about the MeetupGroup cost, I wasn’t aware of that, thanks! As far as the business license, I suppose there may be state laws I’m not aware of. In the areas I’m familiar with (California and Texas) there is really no such thing as a “business license”. You don’t need any type of special license to operate a business unless it’s in a regulated industry (firearms, food, drugs, etc). I hear people ask that sometimes “do you have a business license?” when really none is required. I think sometimes people use this when they mean the DBA you can get from the county clerks office, which isn’t required.
I’m not a lawyer so decide for yourself, but in my experience, there is no government organization in the U.S. who is organized enough or mean enough to track down and fine a sole proprietor who got an EIN 6 months ago and has done $0 in revenue. It just wouldn’t happen. There are probably thousands of those numbers which go unused and abandoned each year if I had to guess. Just get money coming in the door and worry about officially incorporating once you are making money! When they have the potential to collect taxes, that’s when the government will start to look at you.
And yes there are tax benefits to incorporating I agree. it’s a good idea to do it once you are earning money, but I don’t recommend it in the early “test out the idea” phase.
Thanks for all your comments…I think you’re def. on the right track…get that first dollar/customer/sale/etc before spending!
Even if you decide to spend a few dollars on a domain, it’s far less than most people spend.
roya says on May 22nd, 2007 at 2:36 pm
The bit about Craigslist advising to “continue to repost them every few days” completely violates the terms of use on their website. This is an extremely poor and irresponsible suggestion that just promotes spam. The email suggestion also treads into “annoying chain-mail spam” territory. I think there are ways to aggressively market your business while still maintaining some respect online.
One of the best and most effective methods is search engine optimization, particularly geared towards Google. It is currently the only source of marketing for my business (Puzzlematic) right now and works very well, but you also need to devise your business plan in such a way that it serves a small niche and few competitors do what you do.
Daryl Campbell says on May 22nd, 2007 at 5:26 pm
Good stuff Brian. I suspect many people forget about these steps (especially one and two) and go straight for the sale.
tehnyit says on May 22nd, 2007 at 7:40 pm
Good advice. Another possible free thing that you could do is just to talk to as many people as you can about your business. You know, tell your family and friends, your neighbours, the parents of your kids sport team. Anyone who would listen.
tehnyit
Alexander Kharlamov says on May 22nd, 2007 at 7:49 pm
Very helpful list, thanks!
Also, some more advanced stuff doesn’t cost TONS of money (in USA. I’m not aware of costs in other countries)
Setting up a corporation is a few hundred dollars. Dedicated hosting that can handle tons of traffic (if needed) is roughly a hundred dollars per month. And pretty much all software doesn’t cost anything – it’s open source!
The costs of doing business are so low these days, it’s incredible. I love it! :-)
Kaizer says on May 22nd, 2007 at 9:21 pm
You are contradicting yourself. THe title of the ARticle is How to Launch Business without spending a Dime. In point mentioning “simple” websites you talk of “… domain you can get one with WordPress pre-installed for about $70/year.
$70 is a truckload of dimes buddie.
BrianArmstrong says on May 22nd, 2007 at 9:53 pm
Kaizer: subdomains are free, but yes you are right…a full domain is not free.
AEL says on May 22nd, 2007 at 10:25 pm
I have to say that it really does work to do this. Provided you have to right education. I have stared my own PC repair / setup bussiness I don’t spend anything on my bussiness, all supplies I use I already have (Like my PC from school, cables I have been given, CDs I have used from CD coping jobs etc)
If a customer wants a new part, I find the lowest price, fwd them the link let them buy it and then pay me to install it and for my research time.
Though I have to say it is better to start low, and then work your way up. but their is a median price you have to find. too Low ppl will think you stuff is junk, to high and you can’t reach ppl that don’t have funds to pay you. I have had both happen. I currently work for $20s an hr.
Tim Berry says on May 22nd, 2007 at 10:49 pm
Nice work Brian, and badly needed too. The work of entrepreurship teaching and writing is way too slanted towards “raise money with investors” first as a necessary first step. I really like your post and I would reinforce what JJ says, get customers. Bootstrapping isn’t really about spending nothing, it’s about not spending more than you take in. No need to sweat those tiny fees in the comments, just get customers. And I say it as a business owner with 35 employees and 70% market share without any outside investment.
Tim Berry (blog.timberry.com)
leo says on May 22nd, 2007 at 10:56 pm
thanks for sharing the invaluable experience and tips.
Sherri Caldwell - The Rebel Housewife says on May 23rd, 2007 at 5:42 pm
Thanks for some interesting thoughts on starting a business sensibly. This article was REX’d (recommended) on http://www.FetchRex.com (Digg for non-techies). If the Meetup thing costs money, you could always start your own Yahoo Group to find/build a like-minded community for customers and/or networking — free! ;-)
Alive Worldwide says on June 5th, 2007 at 2:34 pm
These are great low-cost ideas for starting a business. Nothing is 100% free but your suggestions come very close!
Lisa says on June 6th, 2007 at 1:42 pm
I appreciated this article. You’re right, you don’t need a business permit in the state of Texas. I called and told them what I was thinking of doing (flea market sales) and they said all I needed was either a dba or ein and a sales tax permit, since I would be sole proprietor. Just thought your readers might like to know that (at least, those that live in Texas!).
Dayna says on June 8th, 2007 at 10:59 pm
Free Domain and Hosting – Type Office Live into your search engine. Provided by Microsoft, free for a templated website which includes the domain name!
Grant thorpe.com says on June 11th, 2007 at 2:22 am
A very good article, thank you. I have forwarded this to a number of people. I especially liked the links to Craigslist.com and Meetup.com which I have visited already.
BrianArmstrong says on June 11th, 2007 at 11:36 am
Thanks all, glad you enjoyed it! I will probably doing a demo of this on my website in the near future, i.e. actually starting a business in 30 days and getting the first customer, and blogging about it. You can read more at http://www.startbreakingfree.com/ as I get started.
Brian
Erich says on June 11th, 2007 at 2:12 pm
Overall this is a good article and gives someone that might not know what to do an idea of how to get out there. Like some of the other responses I don’t like the point about reposting on Craigslist every few days, it does go against their policy’s and borders on SPAM. As far as creating a simple website, that can be tough. I spent a couple hundred hours trying to figure out how to design my wife’s website http://www.katies-keepsakes.com. A good list overall of what needs to be done to start out. But it does take a while to build up that web presense.
Erich
FincherFanatic says on June 12th, 2007 at 11:41 am
Not so sure about the Craigslist part since officially it violates their terms of use to repost all the time. But anyway, big thanks for the article!
SmarterThanThis says on June 12th, 2007 at 1:32 pm
Why would you pay $70 per year for a domain? That’s as far as I got, sorry. You give one bad piece of advice, I assume the rest is bad, too. You can get a domain for under $10, and hosting is NOT the same as a domain, nor should you A) get them from the same place necessarily or B) pay by the year for hosting until you’ve tested a provider.
BrianArmstrong says on June 12th, 2007 at 11:52 pm
The $70 is for hosting and wordpress pre-installed, not just a parked domain, my apologies for the confusion.
Brian
Matt Ellsworth says on November 13th, 2007 at 4:00 pm
Nice idea. We have used a lot of these for different projects we were marketing.
Levi says on November 18th, 2007 at 3:27 pm
First, if I were part of an interest group, say Canine Ice Skating Enthusiasts of America, and someone joined the group just to try and sell me ice skates for poodles, I’d be very angry. Interest groups are not billboards. Second, I would block and ban the IP of anyone who contacted my website wanting me to market their junk to my visitors without paying me, even if it is thinly disguised as a “free article.” If it isn’t literary academic gold, it’s obviously going to be a ploy at sleazy free advertising, which is offensive to those who pay for bandwidth. Only porn ads are potentially interesting enough to get away with this. Third, no one goes to YouTube for advertising, EVER, unless the ad is unintentionally sad or offensive. The most you can hope for is to be ridiculous enough to be ridiculed mercilessly on POE TV.
Unless your product is so awesome that it practically sells itself, no responsible consumer is going to feel anything except anger at these marketing ploys.
a reader says on November 22nd, 2007 at 7:18 am
A professional would have spell checked the article before posting it. IMHO: Typos reduce credibility.
Organic says on December 22nd, 2008 at 9:15 pm
I know this article is a bit old now but most of the points are still valid. Thanks!
StartBreakingFree.com says on December 26th, 2008 at 4:31 am
Thanks Organic! Glad you enjoyed the article!
Brian Armstrong
http://www.StartBreakingFree.com
Vic @BusinessAccent says on August 29th, 2009 at 10:03 pm
Nice list of tips. They are all very helpful for business starters. For those who have the skills in social media marketing, they are in the advantage. What I can only recommend is that we should start on businesses that we know…that means we the knowledge to do it even without spending a dime.
Kyle says on January 16th, 2010 at 3:03 pm
Maybe this has changed since the article was written, but I tried to create an EIN as a sole proprietor and it specifically states that you cannot later incorporate under the same EIN. Is it still a good idea to create an initial EIN as a sole proprietor? My plan is to incorporate later on, but I don’t want to pay before I know if this idea will work. Thanks.
Brian Armstrong says on January 16th, 2010 at 7:17 pm
Hi Kyle, that’s right you can’t use the same EIN, but this doesn’t really matter or prevent you from incorporating later. You just file taxes with the new EIN after incorporating. Hope it helps!