You don’t need start-up capital to start a business. In the start-up phase, you are coming up with an idea. This is a very fragile phase that can be killed by fear or procrastination. Many dreams die at the conception stage. You tell it to the wrong person and they help you bury it even before it is born.
At the conception stage, what you need is the ability to identify problems you can solve that people are willing to pay for.
After you have come up with your concept, you need to create a prototype. At this stage, the less money you have, the more creative you become. Not having money forces you to be prudent, a skill you need even when funding arrives. You don’t need start-up capital at this stage. If money comes into your hands, chances are, you will spend it on the wrong things.
The next step is proof your concept. You get to test your prototype with actual clients. If the market accepts your product, you start to get actual clients. This provides cash to sustain your operations while also creating financial records investors or creditors can examine.
Start-up capital is for the growth phase
You have entered the growth phase. You have a product or service that has been market tested. This is when you need to start up capital, to take your product mainstream.
In the initial phase, you are your best source of funding. You can save up and start with what you have. In the early days, most of your inputs are free – labor, accommodation, power, utilities, advertising, etc. They are not technically free, but since you are operating from home or your backyard, you don’t have to pay separately for them. You can get help from family for free. You improvise to minimize your expenses. Ingenuity is more important than start-up capital at this stage.
There is no reason to wait for start-up capital before you start. Start small with what you already have. When you make a success of what you already have, you effectively position yourself to attract the resources you need. If you succeed at this stage, you have a winner in your hands.
A lot of people don’t know how to sell. They believe if they start a business, customers will simply come. It is not as simple as that. If you don’t know how to sell, you end up wasting money on poorly targeted advertising that does not yield the desired results. Consequently, if you think money is your problem, you will end up wasting that money. If start-up capital was the critical success factor for start-ups, then all start-ups with funding will succeed.
You are better off starting with what you already have, and learn the key skills you need to succeed at the venture before pumping in money.
Photo: entrepreneur.com
