If you have to “spend money to make money,” how do you start a business on a budget?
While nearly every business idea will require some sort of initial investment, it’s definitely possible to start and run a business on a tight budget. Here’s how!
Can You Start a Business On a Budget?
No matter how much money you have, starting a business is hard. But if you’re starting your business on a budget, you’re likely to face some challenges.
First off, you might not have access to expert support or guidance. Bigger businesses can afford to hire consultants, strategists, and coaches to get their idea off the ground. On a budget, you’ll have to do more research on your own and invest more time in trial and error. Plus, you probably won’t be able to hire a huge team right off the bat, so you might end up being a solopreneur for a while.
Also, you won’t be able to invest as much into your startup expenses–things like new equipment, supplies, and packaging. You’ll have to get a little scrappier with your spending and make sacrifices to get your business started.
All that being said, it’s definitely possible (and pretty common!) to start a business on a budget. If you want to launch your own without spending thousands, do your research and go for it!
Budget Business Practices to Avoid
Not all low-budget business ideas are created equal. And unfortunately, some people use the idea of starting a business on a budget to make money off prospective entrepreneurs. Here are a few business ideas you should avoid.
Online Get Rich Quick Schemes
You can’t spend more than twenty minutes on TikTok without hearing about “the easiest way to make a million dollars” or “the top business ideas for high schoolers”. While these ideas are super tempting, they rarely work out and become sustainable businesses. Plus, plenty of these schemes require tons of time and energy, often more than the payoff is worth. Rule of thumb: If the business idea mentions how quickly you’ll become rich from it, it’s not worth your time.
Drop shipping is the process of purchasing items for cheap (often poor-quality items made overseas), marking up the prices, and selling them online. While drop shipping can be done ethically and sustainably, that’s not often the case. Many times, entrepreneurs turn to drop shipping as a quick way to make money off of poorly-made merchandise and underpaid workers. If you’re interested in owning an online store, create real relationships with wholesalers and offer high-quality, thoughtfully curated items to your customers.
It’s true that some people make decent money in network marketing, but not many. About a quarter of people in the industry turn a profit, and nearly half actually lose money. Plus, less than 3% of the people making a profit make more than $25,000 a year. In addition, if you’re in the network marketing business, you don’t actually own your business; instead, you’re a contractor for a larger company, meaning you can’t price your own goods or launch your own products. The odds just aren’t great, and your energy is better spent elsewhere.
5 Steps for Starting a Business On a Budget
Ready to start your business on a budget? Follow these steps!
1. Find a business idea with low startup costs.
When you first start a business, there are bound to be startup costs. You might need to purchase supplies, marketing materials, a bookkeeping software… You get the idea.
That being said, some businesses require less up-front investment. If you have a few ideas for your small business, consider the ones with the lowest startup costs. Typically, these are service-based businesses that don’t require you to buy tons of supplies, packaging, or equipment.
If your business does require startup costs, shop around to find supplies and equipment that is affordable but will last a long time. Finding this balance can be tricky, so don’t be afraid to take your time and do your research before putting any money down.
2. Invest in the necessary education, and learn the rest as you go.
As a new business owner, it’s tempting to soak up every bit of information you can. But not only does this sometimes lead to analysis paralysis, it’s also dangerous for your bank account.
If you really want to start your business on a budget, invest in only the necessary education. You’d be surprised how many free resources there are for prospective business owners like…
Community centers. Your local community center probably offers seminars and workshops for everything under the sun! Keep an eye on their calendar for workshops on things like filing your taxes, writing a resume, and budgeting.
Your local library. When you sign up for a library card, you usually get tons of extra perks, including access to online databases, in-person workshops, and even course subscription sites. (My library card came with a membership to LinkedIn Learning!) Ask a librarian or scour your library’s website for upcoming events and included perks.
Blogs and videos. Head to Youtube or Pinterest and ask away! Tons of creators invest their time into educating prospective business owners. Just be sure to check multiple sources to ensure the information you’re getting is legitimate.
Books and podcasts. I’ve learned so much just from reading books and listening to podcasts in my free time. Get yourself a library card for the books, and listen to business-related podcasts while you work out, clean the house, or walk the dog.
All that being said, don’t feel like you need to know everything about running a business before you get started. Make sure your business is legally legitimate, and learn the rest as you go!
3. Go virtual!
These days, just about every business has a virtual component. If you’re just launching your business, start there! With an online business, you won’t need to invest in a storefront or office. Instead, you can operate your store from your website, meetings via Zoom, and process payments digitally. Plus, in most cases, you’ll be able to market your goods or services to people around the world, which opens you up for more revenue and profit.
4. Hone in on one or two types of marketing
Once you know what you want to sell and who you want to serve, you need to attract clients. Many new business owners get overwhelmed by all the different types of marketing they can do–from Instagram to Facebook to Pinterest to Google Ads to Tiktok… The list is never ending.
My advice, though, is to pick one or two types of marketing and get really good at them. You’ll find more success (and save tons of energy) creating great content on a few platforms than you would creating mediocre content on ten platforms.
When choosing which types of marketing to invest your energy and budget into, ask yourself these questions:
“Where do my ideal clients hang out?” Are they searching for recipes on Pinterest, shopping on Instagram, or engaging in Facebook groups? Get to know your audience, and start showing up in the virtual spaces they frequent.
“What kind of marketing shows off my product/service best?” Not every product or service is easy to photograph, but maybe they’re better suited for blogs or videos. Try a few mediums, and pick the platform that allows you to make that kind of content.
“How much can I grow organically on this platform?” Truth is, every social media platform is designed to convince you to spend money. But some are better suited for unpaid content. If you want to keep your marketing budget small, try platforms with growth opportunities for organic content, like Instagram, Linkedin, Pinterest, and even TikTok.
“Which platforms do I enjoy making content for?” If you hate writing, a blog might not be for you. But if you love making videos, why not give Youtube or TikTok a try? At the end of the day, you need to choose platforms that you’ll actually be motivated to use.
As you grow your business and your team, you can branch out into other forms of marketing. But when you’re just starting out, don’t spread yourself (or your budget) too thin!
5. Choose tools that can serve multiple purposes.
When you’re starting a business on a budget, you might start looking for the absolute cheapest options for your softwares: payment processor, meeting scheduler, email platform, etc. But all those small investments add up, and most of the time you’d be better off investing in a more expensive program that does multiple jobs.
I recommend all my service-based business clients invest in a CRM (Client Relationship Manager) like Honeybook or Dubsado. These programs are designed to handle all your necessary client communication–emails, meetings, even invoices and contracts–all in one place. Not only will you save money in the long run, but you’ll improve your client experience as well.
6. Check in often to minimize expenses and increase profit.
It’s one thing to start a business on a budget, but it’s another to keep that mindset as your business grows and earns more. It’s a good idea to check in with your expenses every so often to make sure you’re not spending more than you need to. If you’re spending money on a software or tool you rarely use, you can probably find a free or inexpensive alternative.
Want to learn to manage your business finances with confidence?
If you want to learn to manage your money without stress, navigate Quickbooks like a pro, and get even closer to your business goals, check out my course Quickbooks for Entrepreneurs!
Want more tips like these? Be sure to subscribe to the newsletter! (and don't forget to follow along on IG @prettypennyaccounting)
Feeling unsure or worried about the accounting side of your business? Download this free guide with 3 steps to financial confidence in your business.
Ready to hand over your accounting? Download my services guide and let's work together!