Starting a business with little or no money takes planning and resourcefulness, but it is possible. Low-cost and free resources, such as online courses, mentors, and small business financing options, can help you get started without a large upfront investment.
Many people also start a side hustles while keeping a full-time job, which lets them test an idea while they still have a steady income.
If you want to start a business on a budget, here are the steps to consider.
Identify the right business idea for you
When you're starting with limited funds, your skills, experience, and connections are your startup capital. Knowing what you already have to offer can help you narrow down which business ideas are realistic for you.
Start by taking an inventory of what you can offer, including:
- Skills you've built over your career (ex. project management, sales, accounting, operations)
- Knowledge of an industry you've worked in, such as typical customers, common challenges, and how services are delivered
- Licenses, certifications, or specialized training you already hold
- Problems that colleagues, clients, friends, or family regularly ask you to solve
- Professional contacts who could become customers, partners, or referral sources
- Tools, equipment, or workspace you already own that could support a business
- Hobbies, volunteer roles, or other experience outside your career, such as organizing events or coaching a team
As you review your list, look for skills that carry over from one field to another. Transferable skills like communication, problem solving, and leadership are often a starting point for a new business. For example, strong communication skills could lead to work in public relations or community engagement consulting. Leadership and mentoring experience could translate into corporate training or career coaching.
If you're missing a skill, you can often fill the gap with a free online course, a library resource, or a mentor already working in your field, such as through SCORE.
Next, think about what you want from the business. How much time can you realistically put into it? Do you see it as a temporary source of income, or do you want it to grow?
It also helps to choose a field you enjoy. Many businesses take two to three years to become profitable, and working in a field you like makes it easier to stay motivated along the way.
Consider business ventures with low startup costs
Once you've taken stock of what you have to offer, build a list of business options. The goal at this stage is to find a handful of ideas worth exploring, not to make a final decision.
Businesses with low startup costs tend to rely on your time and expertise, and many can be run from home with a laptop and a phone. Here are some ideas to get you thinking, grouped by the type of work.
Professional services
- Consultant in a field you've worked in, such as marketing, operations, or human resources
- Bookkeeper
- Virtual assistant
- Freelance writer or editor
Creative and digital services
- Graphic designer
- Photographer
- Social media manager
- Influencer
- Web or application developer
- Drop shipper
Teaching and coaching
- Tutor
- Career or business coach
- Corporate trainer
Local and home services
- Dog walker or pet sitter
- House cleaner
- Handyman
- Lawn care or landscaping
Look for ideas that match the skills, experience, and contacts on your inventory list. Then narrow your business ideas list to three to five options.
Perform market research
Once you have a shortlist of ideas, market research helps you decide which ones are worth pursuing. The goal is to find out whether people need what you plan to offer and are willing to pay for it.
Here are the areas to focus on:
- Customers. Think about who would buy from you, including their location, age, budget, and the problems they want solved. If you can, talk to a few people who fit that description. Ask what they use now, what they pay, and what frustrates them.
- Competitors. Search for businesses that offer something similar, either locally or online. Note what they charge, what they offer, and where customers seem underserved.
- Demand. Check whether there are enough potential customers to support a business. Free sources such as Google Trends, and industry association reports can give you a general picture. Talking to potential customers will tell you more.
Use what you find to weigh your strengths and weaknesses against the opportunities and obstacles in the market. If an idea has weak consumer demand or heavy competition, move on to the next one on your list. Once you've settled on an idea, your research will give you a solid foundation for your business plan.
Write a business plan
A business plan puts your idea, your customers, and your finances on paper. It helps you decide whether the business is feasible and gives you a roadmap for the first year. Lenders and investors also typically ask for one.
If you're starting small, your plan doesn't need to be a lengthy report. A lean plan of a few pages is enough to get going, and you can add detail as your business grows. A simple outline includes:
- Executive summary. A short overview of your business and why it's a good opportunity. Some people find it easier to write this last.
- Business description. What your business does, who it serves, and what sets it apart from competitors.
- Products and services. What you will offer and what you will charge.
- Market analysis. Your target customers and competitors, based on the research you've done.
- Marketing plan. How you will reach potential customers and turn them into paying clients.
- Organization and management. Who will run the business and how it will be structured, such as a sole proprietorship, partnership, or LLC.
- Financial plan. Your estimated startup costs, expected income and expenses, and how you'll cover costs until the business becomes profitable. If you plan to seek funding, include how much you need and how you'll use it.
Your plan will change as you progress. Treat it as a working document and review it regularly. Customer feedback, rising costs, and shifts in the market can all affect your strategy.
Choose the right business structure
The structure you choose affects your daily operations, your taxes, and your personal liability risk. Here is how the most common options compare for a new business:
- Sole proprietorship. A sole proprietorshipis the simplest and least expensive structure to set up. You don't need to file anything with the state to form one, so you can start operating as soon as you meet any local license and other compliance requirements. The downside is risk. There is no legal distinction between you and the business, so you are personally responsible for its debts and obligations.
- Limited liability company (LLC). An LLC separates your business assets from your personal assets, which can help protect you if the business takes on debt or faces a lawsuit. You will need to pay a state filing fee to form an LLC, and many states charge annual fees and require annual reports.
- Corporation. Like an LLC, a corporation offers limited liability protection, but it comes with more formal requirements, such as bylaws, a board of directors, and regular meetings. An S corporation is a tax status that eligible LLCs and corporations can elect, and it can change how business income is taxed.
There’s no single “right time” to incorporate or form an LLC, but it’s a good idea to do it before you sign a contract, to limit your liability, or when you're ready to raise capital.
For more information, see When to incorporate or form an LLC.
Complete the legal requirements for your business
Depending on your business structure, location, and industry, you may need to meet several legal requirements before you start operating. Common ones include:
- State tax registration. Your business may need to register with your state's department of revenue, for example to collect sales tax. You may also need to register in other states where you have a significant business presence, which is known as nexus.
- Business licenses and permits. Most businesses need at least one license or registration, regardless of structure. This is often a general business license from your city, county, or state, and some industries require additional licenses. Even if you work from home, some local governments require a home occupation permit.
- DBA filing. If you do business under a name other than your own legal name or your registered business name, you will need to file a DBA (also called an assumed name, fictitious name, or trade name) with your state or local government.
- Employer identification number (EIN). An EIN is a federal tax ID issued by the IRS. Corporations and multi-member LLCs need one, and many single-owner businesses get one to avoid using their Social Security number on business forms.
- Employer requirements. If you plan to hire employees, you'll need an EIN, and you'll typically need to register with your state's department of labor and set up payroll.
Tip: You should also separate your business and personal finances from the start. Corporations and LLCs need to keep them separate to preserve their liability protection, and it's a good practice for every business structure. Doing so keeps your records organized and makes tax filing easier. The simplest way to do this is to open a business bank account and get a business credit card for business expenses.
Explore financing options
There are several ways to pay for startup costs. Options to consider include:
- Bootstrapping. Fund the business with early customer payments and whatever personal savings you can spare, and reinvest that revenue instead of taking it as income.
- Friends and family. People close to you may be willing to lend or invest. Put the terms in writing, and be clear about whether it is a loan or an ownership stake.
- Business credit cards. A card can cover early expenses. Approval usually depends on your personal credit, and interest rates can be high, so charge only what you can repay quickly.
- Microloans. The Small Business Administration (SBA) offers loans of up to $50,000 through nonprofit community lenders. Some microloans are set aside for specific groups, such as women, veterans, minorities, and low-income owners.
- Bank and SBA-backed loans. Banks and other lenders offer term loans and lines of credit, and the SBA guarantees some of them to reduce the lender's risk. These loans can be difficult for new businesses to get. Lenders typically look for a business plan, good personal credit, and sometimes collateral or a personal guarantee.
- Grants. Small business grants can be hard to find and win, but they do exist. Start with Grants.gov, the federal grant search site, then check state business offices and local community development corporations. Be wary of anyone who charges a fee for a "guaranteed" grant.
- Crowdfunding. Reward-based platforms like Kickstarter and Indiegogo, where backers receive the product or a perk, work best for launching physical products. Equity crowdfunding sites like Wefunder and StartEngine let everyday investors buy shares in your company.
- Investors. Angel investors and venture capital firms provide money in exchange for ownership, and seed funding is an early round of this. Most investors look for businesses that can grow quickly, so this route is rarely a fit for small or local businesses.
Stay compliant as you grow
Launching your business is only the first step. Most businesses have ongoing requirements, such as periodic renewals and filings. Missing them can lead to fees and penalties. Which ones apply depends on your business structure, location, and industry.
Every business, including a sole proprietorship, typically needs to keep up with:
- License and permit renewals. Many business licenses and permits expire and must be renewed, often every year. Some DBA registrations also expire.
- Tax filings and payments. Depending on your business, this can include income tax, sales tax, and payroll tax. Many owners also pay estimated taxes each quarter.
- Record keeping. Keep your business and personal finances separate, and track income and expenses throughout the year. This makes tax time easier and helps if you're ever audited.
- Business changes. If you change your address or business name, add or remove an owner, or expand into another state, you may need to update your filings or licenses, or register to do business there.
LLCs and corporations have additional requirements:
- Annual reports. Most states require a report and a fee on a regular schedule. Missing a deadline can lead to late fees and, eventually, loss of good standing.
- Registered agent. You must keep a registered agent in your state to receive legal and government documents. If your agent changes, you'll need to update your state filing.
- Formalities. Corporations are generally expected to hold regular meetings and keep minutes. LLCs have fewer formal requirements, but it's still wise to follow your operating agreement and document major decisions.
Deadlines vary by state and structure, so it helps to track them in one place. A shared calendar with reminders works for many owners, and some use a compliance service to monitor and file on their behalf. Staying current also helps preserve the liability protection of an LLC or corporation and saves you from costly surprises later.