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.
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