Starting a business without spending a dime is a challenge, but it can happen. You need to look at your current skills and resources. In terms of funding, consider a crowdfunding campaign or an angel investor. Websites and apps make it easy to find customers looking for services near you. This list provides you with 14 ways on how to start a business with no money.
1. Provide a Service
In general, the easiest no-cost business to start will be a service-based business, specifically, a knowledge-based service business such as tutoring, writing, managing social media, coding, personal training, or graphic design.
Consider combining knowledge with your resources to earn you a higher hourly rate. For example, if you combine landscaping equipment with native plant knowledge, you can charge a higher rate for taking care of specific plants that other businesses in your area may not provide. Use social media to promote your business for free online.
2. List Services
The easiest no-cost business to start is to put your skills or offerings on a website that connects you with a customer base. Many people who have their own freelancing businesses do just that. There are hundreds of websites available to connect you with paying customers. Typically, these websites charge the business owner a percentage fee of the final amount charged, anywhere from 5% to 20%.
Consider the following websites to connect you with paying customers for free:
- Craigslist: This is the best website available for finding local service-based jobs. Under Craigslist’s “Gigs” section, find paying jobs that may require knowledge such as writing, or equipment such as a small truck to help someone move.
- Fiverr.com: Consider a low-cost freelancing website, Fiverr is generally design-related. Many of its project fees start at $50 and below. You can charge several hundred dollars for projects that require greater skill.
- Upwork.com: Considered a higher-end freelancing website, Upwork generally offers skilled freelancers in areas such as web development, mobile development, and writing.
- Care.com: This is a website dedicated to the care of other people. On Care.com, nannies, babysitters, senior care, and housekeepers can find work. Businesses can be listed there as well.
- YourGreenPal.com: This is a website to help people find lawn maintenance services near where they live. If you provide lawn services, you can sign up on YourGreenPal and bid on lawn projects near you.
To determine if a directory website is available for your expertise, simply go to Google and try a few different searches. For example, if you go to Google and search “musician tutoring,” you’ll find that LiveMusicTutor.com is the No. 1 search result. It’s a website that connects those looking to receive musical training with those who can provide it.
3. Use Gig Economy Apps
In addition to websites, there are several apps available that are service-based. Some you may need resources for such as a car or smartphone. However, many of the service-based apps don’t require a specific skill, such as delivery services.
- Uber: Ridesharing apps, including Lyft, have been growing in usage since they were launched. Make anywhere from $10 to $25 an hour as a ride-sharing driver.
- Amazon Flex: Use this app to sign up to deliver packages for Amazon as an independent contractor. When you want to work, you sign into the Amazon Flex app, choose delivery jobs, and get paid for those jobs. Make $18 to $25 an hour as an Amazon Flex driver.
- Instacart: This is an app where people order groceries, and Instacart contractors pick up those groceries from the customer’s store of choice and then deliver those groceries to their residence.
- Task Rabbit: Many people need help with random tasks such as assembling furniture, moving items, mounting a television, and planting flowers. Those are all paid jobs that can be completed near you through the TaskRabbit app.
- Rover.com: Americans have more pets than ever before, which means that more dogs need to be walked than ever before. Roverr connects dog owners with those who can take care of their pets while they are away from home.
- Soothe: Are you a trained massage therapist? Consider using the app Soothe to find interested clients. You don’t need a physical location because you can give massages in the client’s residence; however, you will need equipment like a massage table.
All of the above apps are free to use. These businesses typically make money by taking a percent of the final amount paid to the worker. Or, the businesses may pay by the hour, which is how Amazon Flex pays.
4. Start a Digital Business
A digital business is when you start a business on the internet. You can start a digital business for free when you take a resource you already have, like a smartphone, computer, or camera, and create something on a free platform, such as YouTube, Facebook, or Instagram. You can also start a website for free on a platform such as Blogger, or a podcast for free with a smartphone mic.
Depending on what platform you use to start a digital business, there are several ways to monetize it. For example, once you earn 1,000 subscribers on YouTube, you’re eligible to receive a percentage of the money earned by YouTube from the ads shown on your videos. On Blogger, you can enable AdSense, which allows Google Ads to display on your blog. When a website visitor clicks on an ad, you get paid by Google AdSense.
5. Enter Into Pitch Contests
If you have a great business idea, consider entering pitch contests—competitions where several entrepreneurs pitch their business idea to a panel of investors. The finalists or winners receive the funding available in the contest. For example, the Atlanta Startup Battle runs a quarterly pitch contest where participants pitch their business idea for a chance to win $100,000.
Pitch contests are typically very competitive. Often there are hundreds of applicants, even for a prize of $5,000. For you to compete, it’s important to have a quality business plan with financial projections, and a pitch deck that can be presented anywhere from 5-30 minutes. It may be a challenge to win your first pitch contest. A compelling presentation with great public speaking skills is needed to separate yourself from the competition.
6. Run a Crowdfunding Campaign
Create a crowdfunding campaign to pre-sell products or services in an effort to raise funds from potential customers. This is an excellent strategy if you have a product idea but don’t have any money to get the product created. This may also be a wise strategy if you are going to provide a service, but don’t have the money to purchase the equipment.
If you’re going to start a crowdfunding campaign, it’s important to already have a network of people who may be interested in what you’re providing. The network can be an email list, Facebook group, or Facebook page. If you don’t have access to a network of people, you can work with someone who can help promote you to their group online or ask a local church to promote your crowdfunding campaign to its members.
Additionally, it’s important to have marketing skills (or know someone who does) so that you can create a compelling and well-organized crowdfunding webpage. It’s free to create a campaign on a website like Kickstarter, GoFundMe, or Indiegogo; however, the platforms typically charge 5% of the final amount raised plus a 3% processing fee.
7. Get an Angel Investor
An angel investor is typically a wealthy individual looking to invest their personal funds in a high-risk, high-reward business. Their funding amounts are usually smaller than a traditional bank. In exchange for funding, an angel investor will want equity in your business. That means if you earn a profit, they want a certain percentage of that profit.
For example, if you give up 40% equity in your company to an investor, and your business earns a $100,000 profit, you owe the investor $40,000. You will owe the investor money every year; they have an ownership interest in the company. That may sound like a lot of money, especially if they only originally loaned you $20,000; however, if your business makes no money, they make no money as well (which is an outcome no one wants).
It can be difficult to find an angel investor, but attending entrepreneurship networking events in your city can help. Build relationships by talking about your business idea or how you are looking to grow your business. Before approaching an angel investor, it’s important to have a well thought out business plan. Include financial projections that show how much money the business is expected to make and spend over the next three years.
8. Hire Employees For Equity Only
Another option for someone who wants to start a business with no money, is to hire an employee by giving them equity in your business instead of a salary. The equity set up is similar to that of an investor, except the employee won’t give you money, they will work for you for free.
Before approaching anyone about working for free in exchange for equity, it is important to have a persuasive business plan. The employee has to be convinced that your business is likely to succeed. If your business doesn’t succeed, they may be working for several months without any pay.
When giving equity to an employee, we recommend creating a partnership agreement. This helps both of you understand what will happen to the equity ownership if one of you leaves or cannot work any longer in the business.
9. Ask Family & Friends
A common saying in the investing world is to always ask the three “Fs” (friends, family, and fools) for money before giving up any equity of your company for money from an investor. This is because money from an investor is typically much more costly than from the three “Fs.”
When asking family and friends for money for your business, it’s important to write up a contract outlining, at a minimum, what will happen to the money if the business fails, and what happens if the business succeeds. To avoid ruining close relationships, make sure expectations are understood upfront, including what happens to any funds if the business fails or succeeds.
10. Keep Your Day Job
If possible, keep your day job for as long as possible until leaving it for your side-business full time. Before leaving a stable job for the risks of entrepreneurship, it’s important to build up a steady customer base, a portfolio of work, and an online presence for your new business so that when someone searches for what you do in Google, they’ll find you and your business.
We recommend saving six months of living expenses before leaving a full-time job. This ensures that if your business does not earn the revenue you planned on, the business won’t fail for at least six months, giving you more time to make it a success.
11. Consider a Personal Business Loan
A personal business loan differs from a traditional bank loan (discussed below) because it’s usually under $50,000 and is an unsecured debt, meaning there is no collateral tied to the loan. However, personal business loans usually have a high-interest rate, anywhere from 12% to 25%. You most likely will need a good credit score as well to qualify for this type of loan.
Some lending institutions may only offer a personal business loan if you have another source of consistent income. This is another reason to keep your day job. You can use it to qualify for capital for your side business.
12. Choose a Low Liability Risk Business
If you are truly choose a business to start without spending any money, then you won’t be able to pay to register your business as a legal entity (limited liability company or corporation) with the state. Registering a business as a legal entity costs anywhere from $50 to $500, depending on the state. However, when you don’t register your business with the state, it leaves your personal finances at risk if a lawsuit were to be filed against the business.
If you don’t want to pay a fee to register with the state, choose a low liability business that is unlikely to become the target of a lawsuit. For example, tutoring or basic graphic design may be less likely to bring on a lawsuit.
Alternatively, if you start a high liability business, like a lawn care company, and don’t register it as a legal entity with the state, you may be more exposed to the risk of financial damages. For example, if an accident causes property damage to a customer’s house and you don’t have insurance to pay for repairs, the customer may file a lawsuit, and a court may require you to pay for the property damage. If the business doesn’t have adequate funds to pay court-mandated damages, then it will have to come out of your personal finances.
13. Look For Local Grants
You may find that there are grants given out by the city or state to start a business in a low-income or underdeveloped area. These types of grants are rare and may provide assistance other than cash such as reduced office space or training. If you think your business may qualify for a grant program, it’s recommended to schedule a no-cost consulting appointment with a local Small Business Development Center (SBDC) to inquire further about local grants.
Grants from the federal government are typically for research and development purposes and are given to tech-related companies. In most cases, you won’t benefit from paying someone to look for grants for you unless you have a grant-qualifying business, such as a grant-qualifying research-based company. If you visit the Small Business Administration (SBA) grants webpage you can learn more about specific grant programs.
14. Don’t Apply for a Traditional Bank Loan
A traditional bank loan is typically a loan for at least $75,000, and many new entrepreneurs make the mistake of believing the bank will lend them this amount of money (or more) for their new business idea. Unfortunately, many articles online make this recommendation.
What many articles fail to tell new entrepreneurs is that banks rarely lend to startups due to the business risk. If a bank does lend to a startup, it will require the amount of the loan available for access in a liquid account owned by you, such as a certificate of deposit (CD).
This essentially means you need the amount of the loan already saved. The bank requires access to the liquid account so that they can collect on the amount of the loan if the business were to fail.
While we do recommend creating a business plan for your startup, we don’t recommend scheduling a meeting with a banker unless you’re to put your savings on the line. Once new entrepreneurs learn that they can’t get a loan from a bank without risking a substantial amount of personal savings, they typically look for an investor.
As a new entrepreneur, starting a business with no money is a low-risk and wise choice. You may not want to follow some of the guidelines listed above forever, but they are great options if you need to start a small business with little to no startup capital. Once you have sufficient funds built up, re-invest the money back into the business to grow it or consider starting a new business with the funds you have saved.