How to start-up on a shoe-string budget

By Phillip Chichoni

One of the most common excuses from potential entrepreneurs is “I could have started this or that business but there was no funding.”

The truth is, no bank can or is allowed to give a loan to a new business. This is because banking regulations do not allow putting clients’ funds to high risk lending, of which new business are notoriously known as such. In fact, only one in five new businesses survives beyond the start-up stage of 3 to five years.

The only people who can lend you money to fund your start-up are relatives and friends, or angel funders and venture capitalists if your idea is very good and promises significant and fast growth.

Some entrepreneurs, instead of sitting and crying over lack of start-up funds have managed to start-up with the little funds from their personal savings. A recent survey revealed that nearly 75% of successful new enterprises were started by the owners’ personal savings.

This article will give you tips on how you can start up and grow on a low budget.

a)   Keep costs low: there are normal recurring expenses that must be met each month well before your business starts in bringing revenue. These include premises expenses, marketing costs etc. One way to keep these low is to share them with other like-minded entrepreneurs that you can partner with. Some have shared offices, IT equipment, secretaries, furniture, etc. You can even start by operating from home. Mrs. Ndhlukula of Securico said she started the now huge security company from her kitchen table.

b)   Find creative ways of raising essential funding: a number of entrepreneurs I spoke to raised start up money by selling domestic furniture and appliances they no longer needed. Others started income generating activities like selling airtime, fruit and vegetables or other things that people need.

c)   Learn to do more with less: Successful entrepreneurs have shown they can create value from a relatively small amount of start-up capital by focusing on the needs of their customers and serving them in a way that uses “customer capital,” or capital that comes from selling something to a customer.

d)   Pre-sell to customers: find customers that know and trust you and need your product or services and ask them to pay in advance. This requires some good marketing efforts and selling skills.

e)   Get supplier credit: if you have built a good relationship with suppliers, you can ask them to give you goods on credit, and then pay after you have sold them. This works best for fast selling products as many suppliers are only prepared to give very short credit terms.

 Please email your feedback to chichonip@smebusinesslink.com.

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You can also download my eBook The entrepreneur’s guide to starting a business here.The Entrepreneur’s Guide to Starting a Business in Zimbabwe 2011

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