How do you start a business without money? How do you become your own boss if you have little or no capital? Pavlo Phitidis chats to entrepreneurs who have done just that…
So, you’ve got a great idea for a business. Where are you going to get the money for it?
Neledzi Cleaning Services: started with nothing, grew to employ 1500 people
“My cleaning business is almost 15 years old,” says Patrick Makhubela, founder and CEO of Neledzi Cleaning Services. “I employ about 1500 staff.”
When Makhubela started his company he had no money. “I lived on pumpkin and it was very difficult.” At first Makhubela also had to do odd jobs to sustain himself while his business was still struggling.
Makhubela says the best way to start anything is to start small, which is exactly what he did. “I did tiny jobs and slowly built up a reputation. I knocked on a lot of doors that stayed shut so I kept on doing small jobs. By doing a few small jobs really well I built up references that led to the next few jobs.”
His big break came when a friend offered to finance his business if he managed to get a contract. “I offered him 25 percent of my business, which he was quite happy to accept.”
Although Makhubela didn’t have money he did have a lot, says Phitidis. “Firstly, he had knowledge of the cleaning industry and didn’t try something completely different. Secondly, he knew people that could help him out. Thirdly, although he had a big vision, he started small.”
“I pounded the pavement in order to get clients beyond my friends and family,” says Makhubela.
The first staff member Makhubela employed earned more than him because he was, in fact, not earning anything! “My advice,” says Makhubela, “would be to tighten your belt. Spend very little on yourself and reinvest every cent you can into your business.”
Makhubela says it’s vital that you are passionate about your idea for a business. “If you don’t love what you’re doing, then rather don’t do it! You must have a clear vision and you must believe in it.
“Today I still eat pumpkin, but only as a side dish!” laughs Makhubela.
Scully Scooters – started with nothing yet quickly grew into four franchises
To save money Lynne Scullard gets around with a scooter. “It is fantastic! In many countries everyone including their grannies rides a scooter. It’s so much fun and people are constantly commenting and asking questions about riding a scooter. I saw this as a business opportunity so I did a survey and here we are!
“I was saving a lot of money by riding a scooter instead of a car,” says Scullard. “So I had those savings – it wasn’t a lot – to go towards my business.”
Scullard started to informally teach some school kids how to safely ride a scooter. “I initially did it for free in a car park to test whether I could build it into a business. Every time I did this more people gathered and asked me to train them.”
By offering free services Scullard learned about an industry that she had no previous experience of. She learned what worked and what didn’t and started to build a product around the comments her “customers” made. In effect, by offering her services for free at the start, she “paid” for invaluable market research.
Scullard founded Scully Scooters about three years ago and already it consists of four franchises. “I’ve trained at least 450 people in that time!” says Scully.
“I’ve had to change my plans many times,” says Scully. “For example, I learned very quickly that most of my clients don’t have access to credit. I had to start taking this fact into account.”
Scullard says that, even though you might not have any money, everyone has some value to offer.
Start small, but think big. Start at home. Be resilient! Hold your course of action. Don’t start in an industry that you know nothing about. Work with what you know; you have something to offer so develop that into a product.
Start your business amongst your own community and listen carefully to their comments. Remember always that it’s not about you, but about your customers.
Bootstrapping: the first phase in building a business without money
Financial bootstrapping is a term used to cover different methods for avoiding using the financial resources of external investors. Bootstrapping can be defined as “a collection of methods used to minimise the amount of outside debt and equity financing needed from banks and investors”.
The use of private credit card debt is the most known form of bootstrapping, but a wide variety of methods are available for entrepreneurs. While bootstrapping involves a risk for the founders, the absence of any other stakeholder gives the founders more freedom to develop the company. Many successful companies including Dell Computers and Facebook were founded this way.
There are different types of bootstrapping such as, but not limited to, owner financing, sweat equity (increased value in a property earned from labour toward upkeep or restoration), minimisation of the accounts payable, joint utilisation, delaying payment, minimising inventory, subsidy finance and personal debt.