The Art of the Zero Start

January 27th, 2009

The art of building a business from absolutely nothing with no money.

I have built four small businesses from a zero start. The first three I sold successfully the fourth failed to get off the ground.

So I thought hey why not share some of my experiences.

Firstly why would you take part in a zero start?

  • If you have no capital
  • Your idea is too risky to raise debt financing
  • It forces you from day one to be creative about achieving objectives
  • To prove an idea works with minimal capital
  • To give yourself a huge challenge

What are the personal pros/cons?

  • Forces time management
  • Stimulates fight or flight response, really need to drive the idea to fruition
  • Can develop workaholicism which impacts on the rest of your life
  • Doing things you never thought capable
  • Can be a time sink if you do not manage your time effectively
  • Can get stuck in the mud and forget the strategic macro level
  • Helps you realise what is truly important to you

Overall I think it has been a huge learning curve for me, forced me to grow up and provided challenges I wouldn’t have gained elsewhere. I would highly recommend everyone to give it a go.

I think that doing this can be a bit of trap for some people so I highly recommend some steps to take to avoid this.

Here are the Top 10 Must Do for Entrepreneurs starting a zero start:

1) Have a board of directors (whether they be friends or family) Report to them as you would a real board of directors. They will help you recognise (and admit) problems in a faster manner.

2) Take time out. Have your limits. Keep home time, family time, your own time. This is essential.

3) Eat healthy, exercise, keep up with your favourite recreational activities. When your sick and have a day off you lose earnings. So suddenly life / health balance is vital.

4) Review/Reflection. Force this every week, month and quarter to check your up to par.

5) Set Key Performance Indicators (KPIs) and report to board of directors.

6) Watch your cash. Cash is king. This needs to be your top priority, a business without cash is nothing.

7) Quit and quit often. I fail at lots of projects a year, it helps to recognise something is failing and quit early.

8) Persevere, in contrast to 7, persevere with your business, its up to you to drive it to fruition.

9) Delegate, as soon as possible bring on others to delegate responsibilities to.

10) Read. Read as many reputable business books as you can. This will help you draw new perspectives and learn.

How can you be creative with money to get your business off the ground?

  • Minimise your fixed costs (till you get significant cashflow), ie trade work for office space, use a home office. Try and make all others variable costs.
  • Use free software and online tools.
  • Pay your suppliers on time, you will get more efficient pricing from them and give you leverage when you need it.
  • Bundle your technology costs, mobile, internet, phone. Save by bundling where possible.
  • Stretch every dollar, business meetings have tea instead of a coffee, use public transport, skype for meetings.
  • Give equity to key suppliers in exchange for services, not only builds better relationships but keeps them with a vested interest.
  • Share the love, if you can’t deliver what a customer wants, send them to someone who can, this may return.

That concludes Part 1 of of my Art of the Zero Start.

I suspect that you may have questions or more of your own to add, I welcome both just post in the comments.

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6 Responses to “The Art of the Zero Start”

  1. Tony Eyles Says:

    zero start is pretty common in NZ given the state of the investment community. I do think it can be healthy for focus and commitment. It also allows you to own the value you build. It is key to be nimble and responsive within longer term passion and persistence. I’d add one important element is revenue – earn it asap, not just for cashflow but for market validation.

  2. Matt @ Kurb Says:

    These days y’know, government funding, grants, venture capital, angels etc. it’s just not how I think. Even specifically in music business.

    My board of directors is in my gut. Haha.

    Either your product/concept is good/viable or it aint. You just got to bring it to market asap . . . yada yada

  3. Nicole Fougere Says:

    Hey Ben, nice post. Sounds like boot strapping to me!

    Numbers 2, 3, 6, and 10 have been very important for me. The KPIs one is sometimes hard because you’re not always sure if you’re measuring the right things. But if you measure everything you can, you’ll figure out what works, just have to persevere (#8!)

    I’m interested to know what the 3 businesses were that you sold?


  4. Ben Young Says:

    Thank you everyone for your comments 🙂

    @Nicole, they were:
    1) A Pay Per Click company, value was in the contracts and using arbitrage to leverage my clients value.
    2) A small hosting company, I grew it very fast but got bored so passed the contracts onto someone else.
    3) An online computer store.

    My fourth that didn’t get off the ground was a travel startup called Biiki and we simply didn’t have the right people in the right place.

  5. Paul Spence Says:

    Good points. We’ve chosen not to chase funding with our current project and instead get the product offering to market as quickly and cost effectively as possible. Companies with cash to burn tend to do exactly that.

    And as Tony stated – getting revenue in the door is the quickest way to validate. Customers are your best source of capital.

  6. Ben Young Says:

    Customer Capital is a double whammy, cash in the bank and validation that at least one person is prepared to pay for it!

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