Looking at Amazon’s behemoth status and involvement in
myriad industries, it can be hard to imagine the company started as a small
business operating out of a garage that exclusively sold books online. Since
Jeff Bezos launched the company in 1994, he’s grown Amazon to hit a $1 trillion
valuation.

Although it’s an impressive milestone, Amazon wasn’t the
first company to reach a $1 trillion valuation; Apple was. Coincidentally,
Apple also started in a garage. It then went from building computers to expanding
its product line by offering phones and consumer services.

Both Amazon and Apple started as smaller businesses with a
fraction of their current budgets. Through bootstrapping, managing cash flow
and stretching their business’s budgets as far as they could go, Bezos and
Apple co-founders Steve Jobs and Steve Wozniak were able to grow their
respective companies.

One of the most common reasons that startups fail is because
of money issues, according to CBInsights.
Avoid the pitfalls and learn how you can set up a home-based business to make
your early budget work. There’s no guarantee you’ll become the next Amazon or
Apple. But you can learn from their founders’ experiences and use them to help
your small business succeed.

How You Can Start Your
Own Business With No Money

You don’t need to rent office space to start your business. Even if you don’t have any money, you can start a home-based business. This gives you the opportunity to focus on getting your company off the ground, without having to spend money on rent and utilities. In fact, 33% of small businesses in 2017 started with less than $10,000.

To start your own home-based business:

  • Know your
    local regulations.
    Make sure you understand what’s required to start your
    business. This includes the structure of your business, tax numbers and
    necessary licenses.
  • Get
    insured.
    Your homeowners or renters insurance likely doesn’t have coverage to
    protect your home-based business. Get the necessary business insurance to
    protect your company from different liabilities.
  • Designate
    a space in your home.
    Pick an area in your home that will serve as your
    business space. This will be important when it’s time to file your taxes
    because it can qualify you for a tax deduction.
  • Setting
    up your space.
    Get a desk, computer and any other necessary equipment for
    your business space. This is going to be the area you operate your business, so
    make sure you have access to everything you need. And don’t forget about
    ergonomics.

Starting as a home-based business is an approach Apple took.
Jobs and Wozniak sold their personal possessions and they used available
resources to operate Apple. They gathered in Job’s parents’ garage and used
that as their place of business. Without having to make monthly payments, Jobs
and Wozniak could focus on building computers and trying to make money for
their company.

They also used resources readily available to them. Jobs and
Wozniak requested parts at their jobs and spent time in the garage putting
together computers. They’d make money by selling their computers to hobby
computer makers and eventually working with local shops to secure purchase
orders. One of Apple’s first deals was to supply a local store with 50
computers. But Apple didn’t have the money or resources to fulfill the order.
So, Jobs leveraged the order with another store to get the parts on a loan.
This allowed Jobs and Wozniak to get the parts they needed and they were able
to fulfill their order.

How can you use Apple’s experiences for your own small business? Jobs and Wozniak put their efforts into running their business. They only spent money when it was necessary. And when they didn’t have money or resources, they found creative ways to get around it. Although we don’t recommend that you use resources at your day job to support your small business, we believe bootstrapping is a must.

Bootstrapping

Bootstrapping is a term that refers to small business owners
starting a business with little to no money. Any money that comes into the
business is put back into it to continue its growth. Business owners practicing
bootstrapping don’t spend money unless it’s absolutely necessary.

It’s a principle Bezos utilized in his early stages of
entrepreneurship with Amazon. Bezos stretched his financial and physical
resources as much as possible. He secured nearly $1 million in investments and his
parents also contributed a portion
of their life savings
. Needing to spread that money as far as he could,
Bezos had to get creative. When his staff needed desks to work, he built his
own – out of doors. Nico Lovejoy, the fifth employee of Amazon, told
CNBC
that Bezos researched desk sales and found doors were significantly
cheaper, “so he decided to buy a door and put some legs on it.”

You can make bootstrapping a critical part of running your
business. It’s not just about being frugal. Bootstrapping can make you think of
your business differently and force you to be resilient.

Stay away from debt. Bootstrapping
is all about using your current resources and money in a way that gives your
business the best opportunity to grow. Putting your business in debt defeats
the purpose of bootstrapping.

Don’t mix personal
and business funds.
This can be a critical mistake for small business
owners. Keeping your personal and business money separate from each other means
you won’t misspend or have issues with taxes.

Look to the local community. Whether it’s for marketing or getting advice, go out into your community. If you need advice about your business, you may not have to hire a consultant. Your community may have free resources for small business owners, like SCORE or Small Business Development Centers.

Be a jack of all
trades.
If you’re bootstrapping, you’re going to need many skills. Being a
well-rounded business owner means you can handle issues as they come up. You’ll
have to learn how to handle tasks that are outside of your skillset. This is
also great because when you can finally hire someone to take on these
responsibilities, you’ll have some background knowledge on how to do the job
and manage the employee.

Create a prototype.
Creating a prototype or small-scale version of a product or service can let you
test the waters. If there’s a lot of interest in your business, product or
services, you know you have a place in the market.

Don’t be afraid to
fail.
Bezos is famous for detailing the ideas that failed as he and his
team tried to expand Amazon. In a 2016
shareholder letter
, Bezos described Amazon as “the best place in the world
to fail.”

An important element to bootstrapping is understanding your
financial resources. One of the best ways to know what your business’s finances
look like is through a budget.

How Do You Set Up a
Small Business Budget?

Creating a small business budget gives your business a good opportunity to grow. With a budget, you’ll know how much money you have on hand and the amount coming in and out of your business. Despite the benefits of creating a budget, 61% of small businesses didn’t have one in 2018.

If you don’t have a budget for your business yet, don’t
panic. Take a look at these steps to help you get started with creating your
first budget:

  • Look at your revenue. Calculate how much money your business is bringing in. If you’re just starting your business, you can estimate how much money you think will come in.  When you’re estimating, it’s better to be conservative than overly optimistic. If you pick too high of a number, you could put yourself in a tough financial position.
  • Subtract monthly expenses from revenue. This will give you an idea of how much money you have leftover in a given month. If it’s a positive number, your business was profitable for the month. If it’s a negative number, that means your business lost money. But don’t be alarmed. Not every business has a profit each month.
  • Count your monthly expenses. Even though you may not have regular monthly bills like rent and utilities, your business likely has some expenses. Total up your total expenses in a month. This includes any items your business pays for. Simply put, this is money going out of your business.
  • Flexible expenses. These are expenses that relate to running your business and can change from time to time. For example, implementing your marketing plan can cost your business money. As can buying more office supplies for your business. If you find you had a profit one month, you can use the extra money to pay for these other expenses. During slower times of the year, your business may have to be more frugal.
  • Build a rainy day fund. The unexpected can happen. And if it does, you want to be sure you can cover it. Set aside some money to build up your rainy-day fund, which is also called a contingency account. A good rule of thumb is to have at least six months worth of expenses saved.

Updating Your Small
Business Budget

Businesses change and evolve constantly. As your business
changes, you should revisit your budget to make sure it’s still accurate. The
budget you created when you first started may not be applicable after being in
business for a few years. You may have a lot more income or increased expenses.
Updating your budget gives you an opportunity to see how your business’s
finances are changing.

There’s not a simple answer of how often you should review
and update your budget. It’s dependent on each small business. In the early
stages, it might not be a bad idea to review your budget on a monthly basis.
This can be especially helpful if you created your original budget before you
had any income coming into your business.

Once your business is a bit more established, you can update
your budget after every quarter. The goal is to make sure you know how much
money is going in and out of your business. And you want to be able to prepare
for slow seasons and large expenses or bills ahead of time.

Moving Your Business
Out of Your Home

Some home-based business owners may come to a time when
their company has grown enough that it can move out of their house. A variety
of factors can result in you moving your business into its own location, such
as:

  • Space. If
    your home office is no longer big enough for you to continue running your
    business, it may be time to start looking for a new place.
  • A bigger
    team.
    When you started your home-based business, you were probably the only
    employee. But as your business grew, you may have hired your first few
    employees.
  • Customers.
    Depending on your business, you may have clients or customers visiting your
    home. This can get hectic and pose some liabilities.

If you’re looking for business space, there are a couple of things
you want to keep in mind. From location and size to finding an agent, these
factors can help you find the perfect space for your business to move into.

Think about the physical
aspects.
Think about the location of your new office space. Where do you
want to be located? How big do you want the space to be? Some businesses may
want to be located near a busy main road, while others are satisfied being in a
quieter area.

Work with an agent. A commercial property agent can help you find the space you’re looking for. They’re like real estate agents but specialize in helping you find the building you need for your business.

Take tours. A
potential new home for your business may look pretty in photos, but consider
taking a tour. You may get a different opinion after seeing the space in
person.

Go over the
paperwork.
As with your home, you’ll have paperwork to go over when you
decide on a place to move your business into. Go over it carefully and
negotiate any changes you may want.

Starting a home-based business is a big decision. Getting it
to be as successful as Amazon or Apple isn’t a guarantee. But you can use their
experiences to help you get your business up and running. Maintain a budget for
your business. It’ll put your business in a good financial situation and you
won’t be surprised by any large expenses. And practice the principle of
bootstrapping. Stretch your resources as much as possible and spend money only
when necessary to grow your business. Eventually, your small business may be
successful enough to move out of your home.