Here is a question from one of my newsletter readers:

“Hi Evan,

My biggest problem for starting a business is capital or funding. And also due to that reason I am confused what to start first and when.

Currently I am working for one company which is in Automobile Transmission, but I want my own identity as an entrepreneur.

Could you suggest me some positive tips. I am eagerly waiting for your reply.

Thanking you.

Ashish”

Thanks for the question Ashish! The question is around raising capital but I’m going to take one step back and talk about how to get started as an entrepreneur and give yourself the best shot at success.

Step 1: Work To Learn

“The point here is to make your mistakes while working for someone else. They will teach you how the business works and you’ll learn about how be successful in the industry of your choice.”

If you’re going to work for someone else make sure that you’re learning from the experience. If your goal is to start a business related to automobile transmissions then you’re in the right place for now – if your passions lie somewhere else then look for a new job where you can learn about the industry.

The point here is to make your mistakes while working for someone else. They will teach you how the business works and you’ll learn about how be successful in the industry of your choice. Try to learn more about the business side of the company you’re working. Think about ways you can help the company grow beyond just the task you’ve been assigned. Your boss will certainly appreciate the extra support and you’ll gain an invaluable education.

You can work in any industry you want – make sure that you’re going to work for someone else that you’re going to learn from it.

Step 2: Start Part Time

“By starting off on a part time basis you can afford to experiment with ideas while still earning money from your job to pay your bills.”

To test your business idea, see if you can start it up on a part time basis. Create a business plan and then try to go out and get a customer for yourself – see if you can convince someone to pay you for what you’re offering. Then work around your job schedule to support your customers. The better service you can offer the more likely you’ll get referrals and your small business will grow. By starting off on a part time basis you can afford to experiment with ideas while still earning money from your job to pay your bills.

Once you’ve got a few customers, see if you can negotiate an arrangement at your job to reduce the number of hours you’re taking on or if you can work remotely on some days. Faced with the choice of having someone work less hours who is experienced and has been a valuable contributor to the company (see Step 1) versus finding someone brand new, your boss will likely grant your request.

Next, figure out how much money you need to support yourself – I mean really support yourself – bare bones. You’re not going to be living the high life but you’re not going to be starving either or out of a home. As soon as you’re able to consistently hit that income target from your business, you’re ready to quit your job and grow your company. You may take a short term pay cut but you’ve got enough to survive on and you’re working 100% for yourself now.

Step 3: Start a Service Business

“A service based business is a great way to start because the only cost is your time. You don’t have to worry about supplies, production, shipping, etc which all typically have high up front costs.”

There is no such thing as a startup company with too much startup capital – it’s just the nature of the game. Entrepreneurs never have enough money to start but you shouldn’t let that hold you back. The quickest answer is to take whatever product idea you had and turn it into a service. Take whatever you’re passionate about and find a way to trade your expertise in that subject for money.

A service based business is a great way to start because the only cost is your time. You don’t have to worry about supplies, production, shipping, etc which all typically have high up front costs. Get started by offering a service and as you build yourself up you can later on expand into products. Expanding will be easier because you’ll know your market better and you’ll have a collection of clients who are ready to buy from you. (Tip: make sure the customers you target for your service are the same customers who will eventually buy your product).

Back to Your Question

“Don’t let a lack of funding prevent you from starting your business!”

Your original question Ashish was about how to raise capital for your business idea. My best advice for where you’re at right now is to follow the 3 steps above so you won’t have to raise capital.

There are some businesses that genuinely do need to go for funding but in most cases you can bootstrap yourself up to having a company that will support yourself and more. Don’t let a lack of funding prevent you from starting your business!

Good luck Ashish!

PS – Get started today!

If anyone else has a suggestion for Ashish please leave a comment below.

Photo credit: ttstam