How to Start a Neighborhood Business on a Shoestring Budget
As a local resident, you can easily imagine the kind of business that your neighborhood needs. Maybe it is a coffee shop with Wi-Fi and a place for events. Maybe your neighborhood needs a nearby cafe for quick meals and socializing. Or, maybe, like I thought a few years ago, you’d like a neighborhood grocery for quick errands and a place to hang out.
Well, the good news is that your vantage point gives you great insight into what kind of business may work in your neck of the woods. The bad news is that no matter how modest your business idea, it will take money, and lots of it. In fact, building your business will probably require more money than you expect.
This shouldn’t deter you if you’re passionate about the idea and sense there is a need. Harvard Business School professor Howard Stevenson described the business-building process as such: “Entrepreneurship is the pursuit of opportunity without regard to resources currently controlled.”
The good news is that our little market, George Bowers Grocery, survived, morphed, and thrived. Here are some tips we learned the hard way about building a neighborhood business on a shoestring budget.
Find the Money
There are dozens of ways to finance a business. Your personal piggy bank, friends, neighbors, and family are just the beginning. You may find success with crowdfunding (Kickstarter.com, Indiegogo.com) or crowdlending. For instance, Prosper.com is available to U.S. residents while FundingCircle.com lends to entrepreneurs in the U.K.
Search for the best business loan deals with sites like Lendio.com, but don’t neglect to check with national banks, local banks, and credit unions. National chain banks are required by law to lend a percentage to local community and business development projects. Local banks and credit unions will determine your creditworthiness on more than your credit score and will keep money circulating in your local economy, too.
Community development organizations also aggressively support new business through low-interest development loans. Find the microlending organization near you through the national database of the Opportunity Finance Network. Search by your state for a list of organizations that distribute loan funds near you.
Also investigate the “free” money in the form of grants, rebates, awards, and prizes. Keep your eyes open because many cities have programs specific to neighborhoods, kinds of businesses, or supporting entrepreneurial endeavors. It’s only in their best interest to support you since they want a vibrant tax base!
Learn to Manage Cash Flow
Managing business cash flow is different than managing your personal cash. The primary difference is that with a business, you must protect the cash flow so you can keep the doors open and operational. By comparison, personal spending tends to be focused on paying down debt, saving, or investing. Chances are good you’ll need to become a frugal business builder and rethink many of your expenses.
Prepare for the Unexpected
Problems happen. When cash is tight the first thing you’ll want to skimp on are the things like insurance that protect you and your business but seem like wasted expenses. Don’t be tempted to put more at risk. Going without insurance can jeopardize your ability to do business. Be sure to stay current on business insurance and key personal life insurance. Many entrepreneurs go without health insurance because of the expense. Hopefully that will change in 2014.
Preserve Your Personal Cash Cushion
You’ll be reaching into your own pocket a lot as you build your business. Try to limit your personal contribution into the business. You’ll need some cash at home.
If the prospect of starting your own business sounds too risky for you there are more options bubbling up for you to directly influence the businesses on your street. For example, Fundrise.com solicits crowdfunding of commercial real estate in New York, Washington, D.C., and other cities. Individuals can invest in specific projects and become partial owners. The related site called Popularise.com sources ideas for specific places and projects, which gives the average person a say in what is built nearby.
Regardless, it is an excellent time to start shaping your street. There are more resources available to start businesses than ever before. What you don’t know you can figure out — because information is as close as your nearest search engine. All you need is hard work, grit, and a bit of luck — so get started!
About the Author: Katie McCaskey is a small business owner and freelance journalist who covers small business trends for Vistaprint.com, a trusted source for custom marketing materials like address labels, postcards, and countless other branded marketing products to help small, local businesses succeed.