How to Start a Small Business With a Small Budget

By Donna Porter

  • Overview

    Amid a credit crunch, layoffs and a recession, an increasing number of aspiring entrepreneurs aim to start a small business on a small budget. With proper planning, access to useful small business resources, some small office or home office (SOHO) savvy, and the following tips, it is possible to reach self-employment goals on a shoestring budget.
    • Step 1

      Develop a working budget that identifies the available capital for both start up costs and operational expenses over six to 12 months. Use this information to later eliminate business opportunities that prove too costly or that may require a loan. When the small business plan is better defined, adjust the budget accordingly.
    • Step 2

      Set both financial and personal goals prior to starting a small business on a small budget. Ultimately, define what is required in terms of time spent and profit margins to reach these objectives. Guide the choice of a small business opportunity accordingly.

    • Step 3

      Evaluate personal skills, interests and talents to both increase the odds of entrepreneurial success and limit the need for paid help. Take a vocational or career aptitude test for additional insight.
    • Step 4

      Research turnkey business opportunities or small businesses ideas that are compatible with steps 1 and 3. Remain mindful of the budget and the competition. Consider thoroughly if the product or service is in demand as well as the intensity of the competition.
    • Step 5

      Explore service-based work or skilled trades with minimal operating costs. When looking to start a small business on a small budget, factor in the state of the economy. Avoid product sales with specious returns on investment, multi-level-marketing hype and costly overhead margins. Further define the small business budget as necessary.
    • Step 6

      Determine what skills are needed to operate and start the small business and those which areas may require additional training or professional assistance. Save money by taking free classes online or locally. Seek out the Small Business Administration (see Resources below) for more information and to enroll in one of many free small business classes, including the "Shoestring Budget Course."
    • Step 7

      Set up the legal structure of your small business (sole proprietorship, partnership, LLC or incorporation). Seek legal advice when in doubt, otherwise, begin by applying for a Tax ID (Employee Identification Number) and open a small business bank account. Visit the SBA and IRS to best determine a suitable legal structure and locate the necessary forms. Nolo Press (See Resources below) is one of many commercial websites that offers low-cost small business and incorporation forms.
    • Step 8

      Purchase pre-owned and budget equipment via classified ads, auctions and surplus stores. Take advantage of low-cost and free small business software to operate and manage your business, from accounting to business correspondence to desktop publishing (see Resources below).
    • Step 9

      Employ DIY marketing from business cards to website advertising to cold-calling. Find instructions on budget-minded marketing techniques at eHow or related websites. Some commercial websites, such as, offer specials and low-cost printing services--less than local retailers. For make-or-break advertising, such as press releases or a yellow page ad, consider if a marketing professional might provide a better return on investment. Focus on word-of-mouth and inexpensive or free online advertising, including online directories, rather than costly paid-to-click ads found on search engine result pages (SERPs).
    • Skill: Moderately Challenging
    • Tip: When considering a small business loan or grant application, visit the Small Business Administration first to increase your chances of success.
    • Tip: Visit forums dedicated to like-minded small business owners and/or the profession of interest to gain additional advice and insight.
    • Warning:
    • Seek legal and financial advice as needed prior to undertaking any business venture.

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