The basic idea is that you only spend money that the business has already earned. That way you aren’t risking any personal assets.
For example: You want to start a handyman business. You do a few of jobs for friends and neighbors in your free time. You take the money from those jobs and upgrade your tools. Do a couple more jobs and set up your LLC Do a couple more jobs and set up Bond and insurance Eventually you get enough work that you quit your day job and turn this side hustle into your full time career. Grow the business enough eventually you hire assistants, etc
But the whole time, you keep your personal money separate from your business money. They way you are never risking your personal stability. Worst case scenario, the business implodes for some reason but your personal assets are fine. You still have your house, your retirement savings, etc. And you have to go back to a 8-5 job.
Obviously this method would make growing a business slower. But it would also give you a chance to gradually learn how to run the business as it grows.
I would really like to hear anyone else thoughts and perspective on this kind of business strategy.
This can be done and has been done. It GENERALLY requires a high value and in-demand skill. A handyman business really only requires tools and a google business profile to get started. There are also services that will send you out.
Once the business DOES start making money you should probably be spending 20-30% directly back into marketing to keep growing.
Yeah, check out The $100 Startup by Chris Guillebeau (I haven’t read it, but there was a lot of good info/crossover in his later Side Hustle book which I did read).
He has a podcast which is TBF a bit padded out with advert/self promo, but OTOH is free and does have some good info. He interviews a different person who has started a side hustle and asks questions about things they did right, mistakes they made, etc.
Me and my family are entrepreneurs, but mainly engineers and whatnot. Across our lifetimes we’ve seen horror stories a la “my friend’s business was failing so he and his kids each mortgaged their houses and put it into the business which then proceeded to fail” or “I put my life savings into this funny looking sticky note company because my family said it was a cool business when I asked them if they liked my idea”
Because of this we never put our own money into businesses. A few dollars here and there for small stuff (like domains and whatnot) but we essentially do everything in house and if we don’t have the skills to do something we figure out how to learn them (which has had some great successes that give us permanent and useful skills, and some failures where we’ve been unable to learn and successfully apply a skill)
We work 9-5s and just work on business afterwards or on days off. If you want to quit your 9-5 you should seek funding from VCs/angels and give yourself a salary out of that funding (we never do friends or family “FF” even if they are investors, because we don’t want to alienate people around us or pressure them, and also because we don’t want to lose them money). Getting a salary from VC/angel funding is a pretty normal thing for companies that get investment (at least, so I’ve heard - never done this myself)
My personal plan at the moment is to work my normal job and then on the side start these businesses which cost me little money. This way I can do this sustainably for the rest of my life and after each business I learn and grow, increasing my odds of success after each one. Whereas, if someone treats entrepreneurship as a “one and done, dump my life savings into my first business”, they never get to go through that iterative improvement/growth process. It seems, from my observation, like good entrepreneurs can repeatedly succeed; it’s skill based and not a lottery ticket (although there is a lot of luck involved, positioning yourself well with good skills and good decisions can significantly improve your ‘luck’)
Starting businesses with little money allows you to start a lot of them over your life, and grow while you do it. In industrial engineering the aim is to establish “a process of continuous improvement” cause it pays dividends
That’s my thoughts anyways. I consider myself a novice though so take what I say with a grain of salt
Read the the book the e-myth. It basically covers the progression from technician to business manager.
And, you might not be putting money in your new business, but you have opportunity cost you are losing by not having another job. You time is worth money.
By the way, this is basically how I started my business 22 years ago.
Time is money. So it really comes down to what is most efficient. For instance you could spend 200 hours learning to make a nice webpage. Or you can work 40 hours at a 8-5 job, pay to have the webpage created and spend 160 hours working on your product.
The flip side is treat it like gambling. Only put up what you can afford to lose. If your 8-5 income is a fixed value and you have free hours. Then spending the time to learn creating a webpage could be the most efficient way of making it to the goal.
Be careful in that scenario of doing jobs without insurance, LLC, etc. It’s not very likely, but it can bite you.
The main thing is not getting into debt. That’s where all the risk is if the business fails. At the start you may have to use some of your savings to get up and running, successful businesses spend time and money preparing before launching. I spent about $3000 over a few months of my personal money getting my business set up which is really nothing in the grand scheme of things. Just DO NOT get a loan.