Can you start a business with little or no money? Part 2.
The other articles in this series are…
The story so far:? I wrote the original articles about 5 months ago, and since then I have been trying to put my money where my mouth is and see if I can prove out this concept. ??My current position is that I am an entrepreneur, trying to promote my own personal brand, while writing about the experience of starting a business from next to nothing.? This is about my side-hustle.? My day job is Business Development Consulting and M&A.
The concept, in a nutshell, is this.
You cannot start a business with no money, not a legal one anyway, so the challenge becomes.? How do you keep business start-up costs to a minimum while you focus on creating revenue opportunities?? Instead of the old school model of “borrow money and hope that you generate positive cash flow before that money runs out;” the better method is: establish phase one of your business while you focus on cost controls, then focus on revenue generation, in order to self-fund the growth of your business.
This is not easy.? Most entrepreneurs fail at this more than once, but it is the lessons learned from those failures that enables the entrepreneur to eventually succeed.? It takes vision, determination, and grit to succeed as your own boss.? It also takes dedication, passion, confidence in your concept, and an ability to adapt and flexibly build your business as the rest of the world turns.? My colleagues have a great analogy for a start-up company.
Working on the jet engines while you are simultaneously flying the airplane.
Funny, yes.? Clever, also yes.? Disturbingly truthful, yes again.? I am firmly convinced that being an entrepreneur is a mindset, a lifestyle.? There is no such thing as a beginner or junior entrepreneur.? If you envisioned a streetcorner lemonade stand at 6 years old, then you are an entrepreneur.? The other fundamental truth here is that some entrepreneurs succeed while other’s fail.? What separates the success stories from “we thought it was a great idea, but it went nowhere” stories?? If I had to boil it down to a few words they would be “fundamentals” “planning” and “adaptability”.
Success in business is all about the fundamentals.? ?If you do not have a solid of foundation of fundamental basics when you start your business, then your chance of it growing and succeeding is greatly reduced.? To make this a bigger challenge, human nature kicks in. ?We get excited about the business concept and since we ourselves think it is a good idea, we tend to skip some of the foundational steps.? At the other end of the spectrum, some people over-analyze and over-plan their business start up to the point where nothing ever gets fully completed.? There is a joke that says, “The reason why there are entrepreneurs, not as intelligent as you, making more money, is because they are not smart enough to have self-doubt.”? We need to be aware that logical thinking and “paralysis of analysis” can be a dream killer, which brings about a delicate balance.
Looking back at the past several months I realize that I am guilty of both mistakes at one time or another.? At some point you must take a leap of faith, plus a risk, and act.? Nobody starts a fool-proof business, and few start a business that is successful from square one.? There are some basic truths here that MUST be considered.
·??????? Starting a business will take longer than you think.
·??????? Starting a business will cost more money and other resources than you think.
·??????? You are a human being, and you will make mistakes; learn from them.
·??????? There will also, absolutely, be unforeseen challenges and problems that will arise unexpectedly.
So back to my business idea.? This past spring, coming into an election year, I was convinced that there was an opportunity to sell non-partisan, funny T-shirts.? I wouldn’t take sides, I wouldn’t point fingers, I would only make a mockery at the divisive, dysfunctional shambles that the American Political Process has evolved into during the past few decades.
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In my previous article I started with planning, market research and validating the business need/concept.? My market research started with me showing proposed designs to my friends, who all mostly happen to have political viewpoints and an outrageous sense of humor like I do. ?My mistake here was not to validate the concept with a larger demographic representation of potential customers.? There is/was no business need. These shirts would purely be an impulse buy, which is a challenge in a tough economy.? Based on a few articles I read, there was good evidence that said younger people were more and more politically apathetic. ?I formed an opinion that politically independent millennials, with a sense of doing what’s right for America, would be my customers.
I tried multiple social media platforms and advertised my designs.? People looked at my web page but did not buy my shirts.? I decided to go directly to my customers and attended two moderate, independent political rallies where I wore my shirts, and talked to the other people in attendance.? People liked my shirts, took pictures of them, and complimented my designs, but still nobody bought them.? Long story short, I came to be aware that most people will make snarky comments and poke fun at politics, in a hushed voice, with their close friends.? Very few people, on the other hand, would buy and wear potentially controversial political statement out in public.? Furthermore, most of the positive comments I got on my web page and on social media, came from people over 50. ?I had totally missed with my market research.
What are the take-aways from round one?
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·??????? Market research cannot be based on assumptions and limited data.? You need to ask yourself if what you believe about your business concept is actually true? ?Think about all of the cop shows that you have watched, do you have real evidence that supports your theories?? You need to have people, who are not your family and friends, validate your ideas.
·??????? I did analyze potential competitors in the non-partisan funny political T-Shirt space and found very few.? I assumed that this meant that I had found a niche market, and the business was mine to win.? In actuality, it was because very few people buy controversial T-Shirts and the vast majority of people that were wearing an outrageous T-Shirt publicly, made it themselves.
·??????? Marketing is difficult.? The first significant expense I took on was hiring a marketing person to help with my website and my brand development.?
·??????? The first big challenge that all solopreneurs face is, you are it.? You are the only employee, and you are 100% responsible for everything.? Do not make the mistake where you think that you are working for yourself for free.? Your time and effort is worth something.? At a minimum, you could have worked at a 2nd job, at a fast-food place and earned a few hundred bucks a week, instead of spending money on business development.? Do the math.? It can be an eye opener.
·??????? This leads to some difficult decisions.? If you do everything yourself, then you will delay the launch of your business because there are only so many hours in a day.? So, pick and choose very carefully which services and functions you pay for someone else to do.? Focus on the things that are a time-consuming challenge for you.?? There absolutely must be a return on investment (ROI).? Anything that you pay for must either create revenue, free up your time and/ or reduce your other costs.?
·??????? Any time/effort or monetary cost that does not have a quick ROI needs to be changed or dropped, sooner than later.? My marketing efforts on one social media platform were mostly fruitless, almost zero people went from that platform, directly to my web page during the first few weeks.? What did I do?? I spent more money and a bunch of extra time trying to make that web platform deliver results that never came.? Follow your instincts.? If you get that itchy feeling that something isn’t working right, spend your time proving out what is not working, instead of spending time trying to “fix” something that doesn’t work.
·??????? Last but certainly not least, real life reared its ugly head.? It is difficult to plan for unforeseen problems, but you will be much better at reacting to them if you believe that they are going to happen, because they always do.? The T-shirts are a side-hustle, and my day job suddenly got more stressful and time-consuming.? There was also a lot of change going on in my family life, which also took me away from my entrepreneurial venture.? I do not want to oversimplify this but problems, challenges and delays cost time and money.?? The best way to plan for this is to set aside some extra money, outside of what you budgeted for your business, as a safety net for unforeseen challenges.? Easy to say but very hard to do.
How do you get past an initial lack of success?? The author John C. Maxwell said, “The only guarantee for failure is to stop trying.”?? Succes comes through determination, trial and error.? If phase one doesn’t work or work as well as intended, dedicate some time towards analyzing it, update plan one into plan two, and try again.? The modern business guru’s who talk about agile businesses and continuous improvement call this a pivot.? There are many definitions of the word but the one we are talking about here is:
Pivot. (verb)? To modify a policy, process, product, etc., while retaining some continuity with its previous version or purpose, especially as part of a strategy to appeal to a different or larger audience.
I went back to the drawing board.? Since I had less time and even less money after round one, I became more purposeful and methodical in planning round two.? I still thought I was better off marketing to a younger audience.? I started researching what clothing, T-shirts and other fashion trends were popular with people in their 20’s to early 30’s.? The most common theme there was for Americans in that age group is that they are the most diverse and well-educated generation the world has ever seen.? (Not much help. ?In fact, it was intimidating.)?? A trick I have learned in the past is “if you cannot determine what somebody wants, start with what they don’t want”.? There is a fair amount of research that says the younger generations dislike how the earth is deteriorating, and they are very pro-environment.? Pivot #1 was to focus on recycled and sustainable materials and use that as a marketing point.
In fashion, the younger generation is more into minimalist, basic designs with muted colors.? This is a generalization, of course, but a walk around the mall proved it to be true.? Many people under 35 were not wearing bright splashy colors and their T-Shirts tended to be fairly simplistic in design. ?There, of course, were plenty of exceptions.? If your T-shit was promoting your favorite sports team, video game or band then there were no rules.? Pivot #2 was to focus on two new basic concepts.? The first was simplistic, foundation type garments that could be worn separately or as a base under other garments or accessories.? The 2nd was custom designs.
This led to a realization that I wished I had several weeks earlier.? I am NOT an apparel designer and certainly not a fashion designer.? I was initially so convinced that I had a valid business concept that I did almost zero research into the industry I was launching my business into.? There was the benefit that I had now spent several weeks creating and attempting to market my designs, and I had learned a lot of very useful things.? I was getting better at creating new designs and I also worked with some graphic designers to get feedback on how to improve my designs.? This was another unplanned cost, but I believe that I was getting noticeably better in what I was doing, but still not enough sales.? It was obvious that I needed to learn more and practice more to develop a more desirable product.
In the custom design space, the first realization was that there is a TON of competition.? Especially in T-shirts, polo shirts and sports team jerseys.? First of all, there are hundreds, if not thousands of entrepreneurs that bought an embroidery machine, and a silk screen press and are selling custom shirts out of their garage or spare bedroom.? They largely are focused on low-cost options, and I quickly decided that I should not, and probably could not compete with the lowest-cost option.? The question became, how do I differentiate myself from these businesses?? I spent some “free” time going to shopping areas and farmers markets to talk with people who bought and were wearing low-cost, custom shirts.
1.????? Low cost means inexpensive materials.? The $15 T-shirts were of a noticeably lower quality than the $25 T-shirts.
2.????? Lack of options.?? Lowest cost usually means only a few choices of background color and a single-color design only on the front of the shirt.
3.????? Marketing strategy.?? These businesses are making money by drawing in customers with the low price, then upselling them on everything else.? I heard dozens of stories where someone proudly said that they "bought their T-shirts for $15 each," then went on to say there was a $200 design fee and a minimum order of $750 to get that price.? Furthermore, it was $3.50 per shirt to put a design on the back and if you wanted any kind of personalization there was an upcharge for that too.? Entrepreneurs who only needed 10-15 shirts, were buying 50 to get a “discounted” price.? A bunch of these stories ended with “I now have a box of 20 shirts left in my storage area that I don’t think I will ever use.”? The truth of the matter is that they paid way more than $15 per shirt for the ones they actually needed/wanted.
Pivot #3 was to focus on new technologies that were noticeably different from the way custom shirts were made a decade ago.?? Sublimation, all-over print designs, direct to garment (DTG) and direct to fabric (DTF) technologies offered infinite design options and colors, made from recycled materials.? Another thing I realized is that embroidery technology has really taken off in the past few years.? If you are working with an embroidery machine that is more than a few years old, then you are definitely going to get a product that does not look nearly as good as what more modern equipment will produce.? The additional benefit was that these new technologies all supported manufacture on demand factories which eliminates minimum orders and inventory issues for both me and my customers.? It also means that I would have zero involvement in the actual production of the shirts, or the equipment needed to produce them.
In summary, for those who are keeping score.? I have now spent a little over $4,300 over 5 months, to establish my business.? I am still spending more in monthly operating costs than I am bringing in revenue, which means I am still operating at a loss. I am also confident that things are moving in the right direction.? Another unforeseen challenge is that I broke ties with one of my web-page platforms (too expensive) and had to rebuild my web site and CRM from scratch, which was another couple of weeks additional work.? The funny part here is that I confidently thought I was going to be where I am now, 30-45 days into my business, instead of almost 6 months.? It is a clear indication that my expectations were unrealistic, so I can only hope that my audience has learned from my experiences.
Author’s note:? I am in no way trying to discourage anyone from starting a business, and I am happy to discuss what I have learned. ?The main point is it that it is difficult, and it takes determination and passion to succeed.? ?Feel to reach out to me if you want to learn more.? I plan to be releasing the third article in this series, as I move forward, in a couple of months.? Please join me on my entrepreneurial journey.
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