You Can Start a Real Business With $1000 and a Dependable Friend
It is an absolutely achievable goal to launch your business with just 1000 bucks. you’re wondering how I know this is true, I’ll tell you. Not only am I going to tell you how I know, but I am going to show you exactly how to start your own business on a shoe string budget. Heck, I’m proud to share my little secret with you. This isn’t just a hypothetical scenario. You actually can start a real business with $1000. I’m going to tell just you how I did it and how you can too. I did it four times! I’m going to show you exactly how I did it the fourth time and how successful I was. How’s that sound to you?
There’s a few things I’ve got to tell you before we dive right in. You see, I don’t want you to be disillusioned when you tell people about your newly discovered path to success, and they’re not impressed. I’m telling you now – be prepared for some downers. Your good friends may try to convince you you’re wasting time and money. Some may be offensively insulting. I want you to pay attention to the ones who have been successful on their own. They’re the ones who are going to be the most inspiring and I want you to be inspired so you can be successful.
Preparing For Starting the Business – The Mindset
Thousands of people have started businesses with little or nothing. There’s multi-millionaires who started their businesses on a shoe string. There are great example of true entrepreneurial spirit and execution. I’ve met countless people, in person who had started a business with a mere good idea and a few hundred bucks. No kidding! I’ve met them at chamber of commerce events. Heck, They’ve even walked into my office on cold calls at times. Some of them come across as exceptional, others not so much. However, they all have some thing in common; they want to build something, they believe and they take action. They did it, I did it and You can too!
My dream was to not have to work for somebody else. I hated answering questions by an a-hole sales manager and being micro-managed along the way. I longed for independence.
Looking back, I was a decent salesman. I wasn’t the top performer, but I was always in the running for a prize. Here’s the thing – from the time I decided to go it alone, to the time I actually did it, I never had a doubt. Why? I believed I could sell my product. It wouldn’t be a problem for me.
On hand was about $1000 I could use to put into this thing to get started. I knew though, that I couldn’t spend all of it right away. What I did have was a girl friend who had a really good job and she was behind me all the way.
6 Prerequisites For Considering How to Start a real business with $1000:
- Beware of Friends who aren’t convinced you can pull this off – this will be the norm. Don’t let feelings of betrayal and their lack of confidence steer you off course.
- Don’t believe this is going to be easy – This will be challenging and require perseverance. Your mind has got to be in the right place to have a chance at success.
- You need one dependable friend (my girl friend from the previous paragraph) – this could be your life partner, a parent, or someone else who believes in your goal to be independent. Unless you have free housing, I suggest your friend may be the one who houses you.
- You have to be realistic – Whether you start out great or at a snail’s pace, stay grounded and have tunnel vision.
- Map out your activities and game plan before you even start. If you don’t plan, then plan to fail because that’s what will happen.
- Know your suppliers if its goods that you sell. Have the details of costs, shipping, time, delays….all of it – know your product and who your customers are.
My Experience Starting a Business With $1000 and a friend, and How You Can Do it Too
So, provided you’ve got the prerequisites covered and you’re able to visualize starting, your head is in the right spot and we’re running on all 8 cylinders, I’m going to tell you, right now, how I started four different businesses at different times of my life, each on no more than $1000.
The one I am most proud of is the fourth and last business I started for $1000. To be clear, this wasn’t the last business I started. But, the absolute truth is that the fourth one – one that I did start for a mere $1000 was every bit as good or better than the one after that I started with substantially more money. I’ll tell you why a little bit later.
It was this fourth bootstrapped business that really got me going. I’m sure it’s no coincidence that my fourth and not my first, second or third was the most successful. You see, the experience you learn while starting and then running a business is something that can’t be replaced by reading a blog or taking in a seminar. The truth is, you won’t know a lot of things until actually start doing them for real. Sure, you may have a good conceptual understanding, but you’re going to have a baptism by fire, know that. Have courage and don’t worry. I actually enjoyed the process from the very start.
Really, this is how it happened for me – my fourth business started on a very meager budget of $1000.
The Year – 1993
I had been in a business, which I also started about a year earlier, for far less than $1000. In that situation, I was a commodities broker operating under a dba as a sole proprietor. I had been able to eek out a living doing the commodity thing. I was a licensed broker (series 3) and was able to trade commodity futures and I had a designation as a CTA, commodity futures trading advisor. It sounds high and mighty, I bet. Now that I’m 25 years older, I think of it as a license to gamble with other peoples money. To make a long story short, I felt a career change was needed…..again.
I mentioned earlier that I was living with my girl friend. I felt comfort in the fact that that I wouldn’t go hungry. You know, I actually remember her telling me exactly that. You need to understand that the biggest expense you will have in a new startup, the biggest challenge, will be meeting your living expenses. I’m telling you this because I don’t want you to go out and start a business, having read all of these wonderful business start-up posts thinking you can just turn on the spigot and start righting checks for rent, food, car payment and whatever else without challenges.
Be prepared for making little or no money in the beginning. The best advice is can offer here is for you to plan for the worst case right out of the box, but work your tail off to do better than that.
I left out that I was in the copier business before. Well, I was for about 5 years, maybe less if I really analyzed the partial years and pieced them together.
My First purchase, well under $1000 –
Armed with 5 years of sales experience in the copier business, and a lot of desire, I was determined to succeed on my own.
I really wasn’t even sure I wanted to be in the copier business, but it was something I really knew I could do. That’s crazy thinking, right? I mean, you should be ecstatic about your choice of businesses to start. After considering it for just a day, I decided to act.
Action is what separates the starters from the dreamers and I knew that it was time to move forward. So, I did and never looked back. That’s what you need to do too. Make something happen and don’t wait till everything is perfectly aligned, because it never will be.
I strongly recommend you do something you are passionate about, if possible. I wasn’t, but that’s just not a text book outlook. My grandfather always told me you didn’t have to love what you do. He instead, told me at a young age, just do something you can stand doing. By the way, my grandfather was a true cynic. You really should strive to like what you do and do what you like. If you love what you do, you’re far ahead of most people. But then, most people are not business owners.
I paid $500 for my first inventory item – a used copier from one of the wholesale resale equipment companies in my area of Tampa Bay, Florida.
That was the start of my business. The plan- buy copiers and fax machines and sell them or lease them out.
The tricky parts (there’s always something tricky):
- How to fix up (refurbished) the equipment – I’m a sales guy, not a technician – I break stuff, but I don’t fix anything. It’s a difficult challenge to deal with, because subcontractors can steal your business and aren’t always reliable. Yet, if you don’t have income yet, you’ve got to adapt and make due. So, I asked around and found a technician I felt I could trust. He charged me $40.00 to come by and work on that copier for me, for an hour. If you’re wondering what that would cost in 2016, you could get the same hour of work for about $65.00 from an independent technician.
- How to provide after the sale service – Customers in the copier business generally buy service agreements, but in every case want to buy where they can get it fixed. Once again, its a technical issue for a trained repair guy. Initially, I used the same fellow that fixed the equipment up so I could sell it.
- Where to get your customers financed for a lease – I couldn’t afford to hold the note and rent out equipment from my own inventory, so I had to have someone else to do financing. I found a local company that was part of a larger company and they did leasing. What that means is that they would pay my invoice to them, the lessor, and get their payments for the term of the lease from the person I arranged the leasing with, the lessee.
Off to The Races
I sold the first machine for $1795.00 cash, which represented a profit before repair costs of $1295.00. I netted about $1000.00. Remember this was 1993. Oddly, the numbers haven’t changed as much as you might think. Equipment has really increased very little in the copier industry. Technology has improved leaps and bounds, which has kept costs down.
If you duplicated what I did in 1993, today, you could buy pretty decent equipment for the same $500.00. You would buy something 6 or 7 years old, but it would work pretty well and you could get by with a couple hundred in repairs. Once that first sale was under my belt, the business became real to me.
Up to the point of getting the proceeds from the first sale, you may have what I would refer to as nervous apprehension. Mind you, its not a bad thing. You may find as I did, that its something that keeps you pushing hard from the start. The feeling of making that first real sale is one that every entrepreneur relishes. It’s a right of passage into your own business. You may put the first $100.00 you make in a frame and hang it. On the other hand, you may need to spend it on essentials. In either case, I guarantee you will take great satisfaction in receiving the first payment you earn in your new business.
Business Grows on You as It Grows
I mentioned earlier that I was apprehensive about starting a copier business because I wasn’t excited about the industry. That changed. What allowed that to happen was a result of hard work and perseverance. In truth, it wasn’t all that hard for me to sell or lease copiers, even in my new business. I learned that People are more concerned about your conviction and your offering than they are about your tenure. If you say you’re awesome like you own awesomeness, customers will buy from you.
And that’s what I said, essentially. I was a cold calling champion, preaching the gospel of my wonderful copy machines. If you don’t know about cold calling, let me tell you; its the most grass roots, basic way to get known and find customers in a hurry. You walk and you talk, as you go door to door, business to business introducing yourself, ideas and products. Cold calling is considered a dated way of prospecting today, but it deserves some respect and your time. Prospecting is important, but we’ll leave that for another post.
Each time I would sell equipment, I took the initial capital investment and added perhaps half of the remaining proceeds and put them aside for equipment. That allowed me to grow my inventory funds, as long as was able to sell at a fast enough rate to pay some bills. I worked out of my garage (my girl friend’s house) initially, to keep expenses to a minimum. I recall that I took home about $2000 per month, on average that first year. Now, it didn’t start out that good. Not that good, you say? Read on —
Pay Your Business First – Yourself Second or Third
The biggest disadvantage to having a business is that you are the last one to get paid. If you can accept that, then you are one step closer to being a good candidate for starting a real business for $1000. If you can’t accept that, then self employment isn’t for you. I’m going to show you how this works:
- Pay your business first – In the beginning, you’re going to have to funnel your profits right back into your business. What that means, is taking not just your initial inventory cost, but also the profits from each sale and putting it into the business. With that money, you have to replenish inventory, pay business bills and hopefully have more money each successive month than the previous. That indicates growth.
But wait, what if you have an employee in the early stages?
Employees Get Paid First
- Pay your employee(s) before yourself – If you take care of your employees, they will be there to take care of the business. In the beginning, I started off with no employees as you’ll recall. Instead, I subbed out the technical work as I needed to, thus avoiding fixed costs. After a few short months, I couldn’t bare the unreliability and undependability of relying on someone else who had their own customers, besides myself. By this time, I already had a track record of success on which to base future sales. I hired a full time technician, which greatly expanded my confidence and capabilities to provide reliable service on which to build a service base.
You would think growth would mean more money, right? Well, not exactly. By adding an employee, I added more than $2000.00 per month in expenses, which meant the business had to generate $2000 plus the other business expenses before I got paid. Sure, the extra help allowed the earnings to increase, but I had to take a step back before I could move forward.
Last to Get a Paycheck
- Pay yourself if there is any money left over after you pay the business expenses and your employees. Hopefully, you don’t have to pay yourself much in the beginning because you can stifle the business growth. Worse yet, you could drain the business of needed capital that you built up. These are the challenges you will face, early on.
Ups and Downs as You Grow Your Business
You’ll see there is a rhythm to building a small business on limited startup funds of $1000. If you’re building a business that will be more than a one person business, this is particularly true. What happens is that your business’ needs surpass the ability of your existing structure, so you have to increase your investment in the business to add the additional infrastructure.
Once you add the additional resources and corresponding costs, you will need to grow into your new capabilities. If you do well enough, you will be able to grow faster. On the other hand, you may find slow, steady growth to be a happy place to be. Sometimes, the tortoise with his slow steady pace, actually does win the race.
The point is that you will grow into your capacity, and just as you’re starting to make more money, maybe much more, you have to reinvest to keep from halting the growth. You see, most businesses are either growing or shrinking and you can guess which one you want to own. So, you make more money, then you hire more people and make less until the business catches up.
You hope that with each increase in resource investment, comes a greater return and more income surplus, meaning more money in your pocket and a stronger foothold in your market.
How Business #4 That I Started for $1000 Turned Out And Why It Isn’t Around Today
I was the only sales person in my business for the first three years. In the first year, I was able to get an office space and work with one employee. By the middle of the second year, I was making consistent money from my small but growing service residuals. I added a second full time technician.
By the end of the second year, the business was getting fun and had a delivery vehicle and three full time employees counting myself. I came across an opportunity to buy another business, which repaired thermal fax machines, and laser printers under Sharp Electronics warranty program. I bought that business for $20,000 with money I had made in my small business.
When I bought Bay Calculator, it was doing $110,000 in revenue a year, about 70% of which was service. Within the third year, the overall business was approaching $300,000 in sales. I had five technicians and things were going well.
Grow for It – Big Change Up
In 1996, I sold 49% of the business to a dynamic and charismatic fellow that I had known from another company in the copier business. I wanted to grow faster and felt a strong sales partner would be the ticket. Besides, I was a little lonely for a partner. In retrospect, it was a foolish move. I could have and should have hired sales people, not practically give away half my business for 5 figures.
We grew the business, having 10 employees in 1998. Due to some things beyond my control – some things that my partner desired to change in his living environment, I became disillusioned with the business. I’ve got to tell you, that I’ve been married a couple of times and I find that a partnership (sub s corporation) in a business is every bit as challenging as marriage. Worse, it comes down to money, because there is no love.
I sold my half of the business I started 5 years earlier in August of 1998. We were on track to do $1 million in sales that year, having nearly $700,000 in the books in August. It was a bitter sweet end for me. The business I had single handedly begun on a thousand bucks, grew to a million, but I took a paltry settlement to get out.
My former partner stayed on for a while, then sold his shares to the Maxx Group, Inc. He stayed on as V.P. and they went belly up less than two years later. The name of my company was Carrollwood Office Systems, Inc. If only I knew then what I know now, perhaps I would still have that business. Perhaps, it worked out for the best. What I did learn is that You definitely can start a real business with just $1000.00