Is it actually true as MJ claims that starting a business doesn't require much capital?

[Matt33]

I started mine with $2,000 out of my dorm room, 18 year old freshman.

$1500 product inventory, product was free to prototype (clothing product with a twist)
$500 shipping supplies, Shopify, misc

Spent many man hours (months) custom coding and editing together a kick a$$ website, built on Shopify but really a giant landing page.

Next step, executed a variety of free marketing methods, i.e. product hunt, reddit growth hacking, etc. Sold my $1500 inventory for $6k. Next step took a $3k loan from a friend and got $9k in inventory ordered. I'll leave out the next 2000 steps and lay out my yearly sales.

First year $10k sales
year 2 $103k sales
year 3 $800k sales
year 4 $2m sales
year 5 $5m sales
year 6 - TBD, projection around $7m sales

Never had an investor, only loans from places like Shopify capital, clearbanc, paypal working capital. I own 100%

I credit the success to solving a legitimate problem, there is a large need for the difference I offer with my product. It's a broad product, not super niche. High quality marketing and high quality product.

When I was 15 I found TMF and this forum, got addicted to it. I spent my time after school creating websites and ads, affiliate marketing, teespring, etc. I learned a lot. Never made much. But learning by doing helped me identify the opportunity that eventually became my business.

 

[Kak]

I don’t know his exact words, but wouldn’t be surprised in the slightest.

It is one million percent true on so many levels.

You seem to have talked yourself out of the possibility just because you don’t understand it. “Investors are hard to get.” Even if they were... So?

There are literally companies on the NYSE that make zero money and have multi-billion dollar valuations. I like any competent entrepreneur’s odds raising money in today’s world.

Go check out the show “undercover billionaire” on the discovery channel. There are so many different moves that can be made. There is always a way.

Or like I always say: “you can solve any solvable problem with leadership.” Even if that problem is that you don’t have enough money to start your business.

 

[IceCreamKid]

Can you start a biz with no capital? Absolutely. There has never been a better time in history for it. I can post multiple business models that yield 6-7 figures profit with zero capital if you're interested.

For most though, the trick is to combine a long term view with a short term view

Long term: Creating significant equity value resulting in an exit worth millions of dollars

Short term: Create a cashflow stream to cover living expenses + capital to invest

 

[MTF]

@MTF just started a new business... how much did it cost you @MTF?

$13.74 for the domain.

I use two tools that offer a 14-day trial each. After the trial I'll pay $10.80/month for one tool and $9/month for the other (actually paid upfront for a year so $108/year).

The rest depends on one's financial situation. The way I see it, you either invest primarily time or money in a new business. If you're new to entrepreneurship and don't have much to invest, you primarily invest your time.

When you can afford to invest more (and you understand how to do it properly), then you can primarily invest your money (in, for example, finding the right people to build the business for you).

But if you're super clever, there's also the third way of joint ventures and other creative ways to build a business taught by Jay Abraham. @FauxPas, you may be interested in reading Jay Abraham's Joint Ventures: From Mediocrity to Millions. Jay Abraham's INSIDERS's Guide to Engineering Highly Successful Joint Ventures, Strategic Alliances, Partnerships and Other Lucrative Host-Beneficiary Relationships.

If you type "Jay Abraham's Joint Ventures: From Mediocrity to Millions" in Google you'll find a free PDF. It's an old document (from 2005) but extremely powerful and will teach you how people structure deals with zero money involved.

Also, in the end, your question has nothing to do with whether you need money to start a business or not. It's all about your mind somehow conditioned to tend to persuade you that this can't work. Entrepreneurship is about ignoring that silly voice and just figuring things out.

 

[MJ DeMarco]

I hear someone making excuses.

Money is not needed to get started, albeit, the challenges are greater. The real problem here is expectations. Do you want to launch the next Tesla? Or Facebook? Yea, you'll need money. But to bootstrap yourself from nothing, it has never EVER been easier.

@MTF just started a new business... how much did it cost you @MTF?

 

[ZCP]

@FauxPas he's trying to get you over and past the GREATEST obstacle you face ........ your own mindset.

MOST people who think of going into business find an obstacle that CANNOT be overcome so they can stay in their scripted life and feel like 'they did all THEY could do' 'i'm just not LUCKY' 'got to have money to make money' and other forms of bullshit they feed themselves to feel good about staying in place.

You do need money to start a company.
You do not need money to start a company.

Both are true. Neither is the obstacle in your way to getting started.

 

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[SammyGlick]

I don't get how MJ can say that you don't need much money to start a business when there are literally businesses that absolutely require capital to even get started. (Whether from your own money or investors). Starting an internet company is not the same thing as a manufacturing company. Where the former can be bootstrapped easily while the latter not so much.
While I understand that MJ can often oversimplify things to not have one overwhelmed by the details of everything to make the messaging hit home, knowing the details of everything is important when it comes to actually intending on taking action. If your product requires manufacturing, you cannot bootstrap that at all. You have to get money somewhere, and that's not bite sized money. You can only get that kind of seed capital from angel investors, and often, they're hard to find and convince. So personally, I find it a bit misleading. I like MJ's stuff and all, I just wish he did not leave out at the details of everything when it comes to the core components of what he talks about. It would be way more helpful if he at the very least explains the details that apply regardless of what kind of business you intend on doing. Your messaging can be fantastic, but if it doesn't actually spell out the precise details on what you must do action wise, then you feel helpless.

@FauxPas, is there a specific business opportunity you are pursuing where you perceive the need for start-up capital to be an obstacle? If you can describe your situation in general terms (no need for revealing details), I am sure there are lots of people on this forum who would be happy to make suggestions.

In your original post, you mentioned that (I paraphrase) you did not believe a manufacturing company could be easily bootstrapped. I run a business that manufactures a physical product. In order to bring the product to market, the business had to invest $140k in tooling for injection moulded plastic parts.

We did not have $140k, so we spent a much smaller amount of money (perhaps $2k) to have prototypes 3D printed and ran a crowdfunding campaign, which brought in the capital required to pay for the tools. The successful crowdfunding campaign also provided some credibility which I leveraged to raise $800k in angel investment.

I will not pretend this was easy - but it was possible. The crowdfunding campaign brought in enough capital to pay for the tooling but not enough to pay for the products the campaign backers had ordered (or the many other costs we needed to cover). Raising investment was a close call - on the day I closed the angel round, we were five days away from being totally out of cash and defaulting on some payments (and I had already done a lot of work to delay our payment obligations).

Some businesses are certainly easier to start than others in terms of the capital required. However, obtaining capital is just one of many challenges you may need to overcome in order to build a business. I do not think the MFL is misleading in this regard and frankly, I don't think it's reasonable to expect MJ to lay out al the details for you. The replies in this thread alone detail the very different steps that are required depending on the context. I believe that the MFL provides a great framework for approaching business creation but it is not (nor is it presented as) a guide to starting any specific business.

To echo the point made by @Kak, this is an issue of mindset. If one believes that obtaining capital is an impossible obstacle to starting a business, it almost certainly will be.

If you want to talk about the details of raising capital for a specific opportunity - let's do it.

 

[Guest-5ty5s4]

I don't get how MJ can say that you don't need much money to start a business when there are literally businesses that absolutely require capital to even get started. (Whether from your own money or investors). Starting an internet company is not the same thing as a manufacturing company. Where the former can be bootstrapped easily while the latter not so much.
While I understand that MJ can often oversimplify things to not have one overwhelmed by the details of everything to make the messaging hit home, knowing the details of everything is important when it comes to actually intending on taking action. If your product requires manufacturing, you cannot bootstrap that at all. You have to get money somewhere, and that's not bite sized money. You can only get that kind of seed capital from angel investors, and often, they're hard to find and convince. So personally, I find it a bit misleading. I like MJ's stuff and all, I just wish he did not leave out at the details of everything when it comes to the core components of what he talks about. It would be way more helpful if he at the very least explains the details that apply regardless of what kind of business you intend on doing. Your messaging can be fantastic, but if it doesn't actually spell out the precise details on what you must do action wise, then you feel helpless.

Can you afford to buy a lawnmower?

How about a hammer?

You can start a service-based business for almost zero dollars, and the potential is limitless.

Better yet, get a customer to agree to do a project with you, have them pay you maybe 10% upfront and 90% when you're finished, and use the 10% to go buy the tools you need to do the project.

If you want to be an entrepreneur, you have to think creatively. This is actually pretty common stuff that entrepreneurs do.

Here are some examples of these types of businesses that you can start with basically $0 and can grow to billions:

Carpet cleaning:

Home & Business Professional Floor Cleaning Services | Stanley Steemer

Stanley Steemer provides the best floor cleaning services like carpet cleaning, hardwood floor cleaning, tile and grout cleaning, area rug cleaning and more. We also clean air ducts. Find a Stanley Steemer near you and schedule an appointment online today.

www.stanleysteemer.com

Pest control:

Pest Control & Termite Treatment: Local Exterminators

Terminix is committed to providing exceptional termite control, pest control, bed bug inspections, and more. Call or purchase/schedule online today!

www.terminix.com

Home remodeling:
(The top company here did over $1.8 BILLION in sales in a year)

Top 500 2020 - QUALIFIED REMODELER

The 42nd annual ranking of the nation’s largest remodeling firms based on remodeling revenue. Use…

www.qualifiedremodeler.com

Landscaping (the top company does $2.4 BILLION in a year):

Lawn & Landscape's Top 100 largest companies

www.lawnandlandscape.com

 

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[Johnny boy]

Yes a lot of bold, smart, hard working people made it here. But besides @Johnny boy very few of them came up during our time with our circumstances. Zillennials/Gen Z have statsitically the worst parents on paper, we have different mental woes, different environments, different problems. It's not the same.

Don't give up, but you don't gotta play on extra ultra hard mode. 'Cause few here even did.
That's my limited outlook on this.

It’s never been easier idk what you’re talking about. Life is on easy mode. There are more
opportunities than ever before. New technology shifts = new needs. You need some cash? Go scrape some gunk off someone’s roof and make $500 in an afternoon. If you’re in America or Europe this shit is easier than playing candyland

if you have mental woes it’s because you watch too many tik toks that tell you “feel bad for yourself, millennials are poor and it’s not their fault, boo hoo depression and anxiety”.

The only difference is sad losers used to just sit alone at the lunch table and shut up, now they infect people with their bad ideas on Instagram.

Got a friend who’s 26 and makes a couple hundred grand a year. Just bought a Ford raptor and owns commercial property downtown.

If you think life is that hard you need to make better friends

 

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[Kak]

How can a company be valued that much and not make profit? Is it the assets of the company that's driving that valuation?

Subjective Theory of Value: Definition, History, Examples

The subjective theory of value states that the worth of an object can change based on its context and appeal.

www.investopedia.com

No, it is not the assets on their balance sheet or their threat to opposing firms either.

Summarized like this: Something is worth what people are willing to pay for it. There is a reason people value these companies that don’t produce, most likely because they have an expectation of future production. It has subjective speculation value to them.

There are people, en masse, given opportunity cost, that decided they would like to own unproductive companies more than something else. So they do. It creates a market price for the stock.

Door dash, air bnb, Uber, wework are just a few of the very popular stocks that don’t make money.

This also means that MILLIONS of dollars of private equity and VC money flowed to these companies before their IPOs too. Once again before they even made a profit.

The moral of the story is free yourself from thinking that this is somehow luck. That this is nearly impossible, or not for you. It could be, if your project inspires the right people. If you are a good leader the world’s resources are at your fingertips.

 

[tylerwilkinson]

I started my side gig with no investment, the $600 truck I already owned, and it was profitable on day one. Not life changing, but I haven’t grown it. That’s my fault and no one else’s.
Every single call I answer for trash removal or clean up is profitable.

That profit could very easily go towards advertising. I also look at the tax info on properties in neighborhoods I already work in to find leads. The latter costs nothing, and I do it from my iPhone.

 

[sparechange]

holy wall of text, lol.

You don't need a fancy job, minimum wage is fine, you can be a dishwasher, cook, janitor (that may pay a bit above min wage) security guard or whatever slave position that is available for you. Work that job and save a few hundred bucks a month and use that to fund a business.

I can't speak for the great USA but I know here in Vancouver which afaik is one of the *most* expensive cities in the world, it IS possible to survive on minimum wage and be able to get by feeding yourself and paying rent. I'd imagine the US is significantly cheaper than here. You are just making excuses young man, it's possible to make most people's yearly salary in a month, try to do that instead of focusing on excuses.

It has been done by millions of people around the world



Yes I agree, some of those millionaires have had advantages growing up from already having wealthy parents maybe, but there are alot that have started from nothing with MJ being one of the millions that made it. So shutup and get started.

There is a reason people ''fail at life'' and end up being 60 years old at a dead end job.......

F E A R and the inability to risk take, let me paint a picture for you. Imagine MJ didn't have the balls to pull the trigger and move to Arizona, I bet the guy would be sitting somewhere right now in a limo hating his life and getting drunk watching reality tv, just think about it. Fortune favors the bold.

 

[TheKingOfMadrid]

Let's go back to the very basics of business.

A lot of people when they start a business do most of this: buy a trademark, get their tax code, pay for a tax company, hire staff, hire an accountant, buy product, hire equipment, rent an office, spend out on productivity suites, and before they even have one person giving them money IN they are giving it all away.

But that's the kinda stuff you'll learn is important at business school.

But if you start by taking in massive amounts of money before you even begin, people give you revenue that you can then invest into the business essentially starting it for free or little capital.

Think about famous incidents like FyreFestival guy, now i'm not saying be a fraud, but he understood more about business as a hustler than 99% of people these days.

Could you not apply this principle to most businesses? Even hard lines? Receive liquidity, invest liquidity, serve customers, get more liquidity.

A business only thrives by people giving you money, if you haven't solved that problem you don't have a business.

This should be common sense but today most people are stuck with their website that no one visits.

 

[SEBASTlAN]

IIRC, pretty sure Spanx started with $5K and Paul Mitchell was started with just $700

 

[Strm]

I can tell from only my own experience, but I didn't need that much. It was around 2K€ for me to get started in april 2020 - not a big amount to save from dayjob. Sales in 2020 was over 50K, in a very small country. Profit around half of that. Now its almost fully automated. May get a job to save more money and start something new.

Of course there are examples where you would need tens or hundreds of thousands, even more. Basically depends on the business model.

 

[Andy Black]

I don't get how MJ can say that you don't need much money to start a business when there are literally businesses that absolutely require capital to even get started.

Just because one business requires money to get started doesn't mean you need money to get started in ALL businesses.

Find just one business that can get started without money and you've proved you don't need money to get started.


If you want to get started in business then help/serve/entertain someone and get paid for it. Tada. You're in business.


You don't NEED money.

You don't NEED a website.

You don't NEED a business plan, a marketing strategy, a degree, to be handsome/pretty, to go on a course, to work long hours, etc.

You just need to make a sale. Then keep making sales.


Here's a similar thread about figuring out what you really need:

• You don't need a website, you need sales

If you want to start a business that requires capital then you have two choices:

1. Get the capital.
2. Start a business that doesn't require capital.

I recommend you start something where you can make a sale this week, and figure it out from there.

 

[Deleted85763]

I don't get how MJ can say that you don't need much money to start a business when there are literally businesses that absolutely require capital to even get started. (Whether from your own money or investors). Starting an internet company is not the same thing as a manufacturing company. Where the former can be bootstrapped easily while the latter not so much.
While I understand that MJ can often oversimplify things to not have one overwhelmed by the details of everything to make the messaging hit home, knowing the details of everything is important when it comes to actually intending on taking action. If your product requires manufacturing, you cannot bootstrap that at all. You have to get money somewhere, and that's not bite sized money. You can only get that kind of seed capital from angel investors, and often, they're hard to find and convince. So personally, I find it a bit misleading. I like MJ's stuff and all, I just wish he did not leave out at the details of everything when it comes to the core components of what he talks about. It would be way more helpful if he at the very least explains the details that apply regardless of what kind of business you intend on doing. Your messaging can be fantastic, but if it doesn't actually spell out the precise details on what you must do action wise, then you feel helpless.

I will tell you that you absolutely do not need capital to start a business. In fact not having capital forces you to be resourceful and profitable quickly. I had a very bad situation some years ago. I was laid off. I was so depressed. I literally packed a suitcase and and got a on a bus with no destination! This is what I did then: I called a former supplier and got pricing on goods. Then I called a former customer and offered them the goods plus a great mark-up for me. They bought and I made a heck of a profit. It only cost my next to nothing in telephone calls. Not so long after I was doing deals with a billionaire.

So when anyone says you need capital to start a business you can tell them it's not true.

 

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[Consolation]

I suggest you to read Mindset by Carol Dweck. Because, I don't think your problem is lack of capital. I can you PM you this pirated ebook.

---

I'm not sure who copies whom. Because Not only MJ. Mark Cuban, a billionaire also did say that you can start business without capital.

 

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[Ernman]

If you don't have much money - or any - you need to think harder, be more clever and imaginative. That actually makes you stronger in the long run as your success grows. Nobody said it would be easy or fast.

Sometimes having too much money in the beginning is bad. It can lead to bad habits. It can cause you to miss important details that get worse over time until the money can't cover it anymore. It can lead to a false sense of security.

 

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[farmer79]

The agricultural company Kinze was stated with $3500 loan. Granted it was 1965, but it didn’t start at a huge manufacturing business. It was started as a welding shop by a 21 year old. I believe their yearly sales now are around $100,000,000. They also had John Deere try to completely destroy them, patent infringement, government regulation, pressuring their lenders etc. the story (chronicled in an excellent book about the company) almost makes you sad that a historic US company would behave so horrifically. The larger point though was 1 welder did all that starting with $3500. Available capital is very much a two edged sword that is very difficult, especially for beginners to manage. If I said I would invest 10,000,000 in your manufacturing idea you would spend 10,000,000. If I invested 100,000,000 million you would spend 100,000,000. All before you knew if you had sales. Build one sell 2 then go from there.

 

[sparechange]

You are right, MJ doesn't have any idea on how to build a business.

OP is correct, you need money. Have an awesome day.

 

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[WJK]

I don't get how MJ can say that you don't need much money to start a business when there are literally businesses that absolutely require capital to even get started. (Whether from your own money or investors). Starting an internet company is not the same thing as a manufacturing company. Where the former can be bootstrapped easily while the latter not so much.
While I understand that MJ can often oversimplify things to not have one overwhelmed by the details of everything to make the messaging hit home, knowing the details of everything is important when it comes to actually intending on taking action. If your product requires manufacturing, you cannot bootstrap that at all. You have to get money somewhere, and that's not bite sized money. You can only get that kind of seed capital from angel investors, and often, they're hard to find and convince. So personally, I find it a bit misleading. I like MJ's stuff and all, I just wish he did not leave out at the details of everything when it comes to the core components of what he talks about. It would be way more helpful if he at the very least explains the details that apply regardless of what kind of business you intend on doing. Your messaging can be fantastic, but if it doesn't actually spell out the precise details on what you must do action wise, then you feel helpless.

I started my real estate career with the salesman licensing fee. I "bird dogged" for investors by finding Equity Purchases (now called flips). At first I got a finder's fee for finding the deals and turning them to guy with the money to do it. Then, in time, I got a cut of the of profits. And over time, I self-funded and ran my own deals. But, there was nothing instant about any of it. There was a long learning curve and I made a lot of money for other people for a long time. What I got in exchange for selling them my deals was to follow them around, fetch their coffee, and learn their secrets. I got to ask them all of my questions. And I got my hands dirty helping to make them money. I can remember the horrible smell of some of the houses as we stood on the front porch to get our paperwork signed. One of my favorite investors always would take a deep breath of the stench, and say, "Oh, I smell money!"

I think you're putting the cart before the horse. You sound like you want to start with the whole business pre-built out of the box. Part of going through the process of building it up is learning how to make it a success.

 

[DeletedUser84644]

I don't get how MJ can say that you don't need much money to start a business when there are literally businesses that absolutely require capital to even get started. (Whether from your own money or investors). Starting an internet company is not the same thing as a manufacturing company. Where the former can be bootstrapped easily while the latter not so much.
While I understand that MJ can often oversimplify things to not have one overwhelmed by the details of everything to make the messaging hit home, knowing the details of everything is important when it comes to actually intending on taking action. If your product requires manufacturing, you cannot bootstrap that at all. You have to get money somewhere, and that's not bite sized money. You can only get that kind of seed capital from angel investors, and often, they're hard to find and convince. So personally, I find it a bit misleading. I like MJ's stuff and all, I just wish he did not leave out at the details of everything when it comes to the core components of what he talks about. It would be way more helpful if he at the very least explains the details that apply regardless of what kind of business you intend on doing. Your messaging can be fantastic, but if it doesn't actually spell out the precise details on what you must do action wise, then you feel helpless.

 

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[ZF Lee]

How can a company be valued that much and not make profit? Is it the assets of the company that's driving that valuation?

yeah, if you want to value companies using enterprise value.

The formula is Debt + Equity - cash and equivalents to give you assets and working capital. Simply working the financial statement backwards...

What counts as "debt" in an enterprise value calculation?

I know every guide says "debt" is added to enterprise value, but what exactly comprises debt? Is it any long-term liability? Do short term notes count under this definition? Would

www.wallstreetoasis.com

You can also use cash flows for valuation if the company hasn’t turned a profit yet (free cash flow and discounted cash flow)

I bought stock on a local semiconductor companies that still had a negative PE, but their Price-Cashflow ratio was edging up. Eventually they could improve their cash flow enough to go green. I think that stock is now 30% up since February.

 

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[Unknown M.F]

You can sell another person's product and you are already in business I guess...

 

[ZF Lee]

So then wouldn't your only option to cash out would be to turn your company public? Because I can only see a company that doesn't make a profit be bought out for the sake of eliminating competition.

Actually going public SHOULDN'T be about cashing out...going public is to be used to raise more funds for massive expansion. But well...even entrepreneurs have lost sight of that purpose.

And yes, while buying out other companies for competition's sake is one route, not all companies stay unprofitable forever. They just need time to improve.

That semiconductor stock I mentioned earlier was AEMULUS...they had earlier poor earnings since 2019 or so because eventually they found their customer services was f*cked up, and their semicon tester products were all over the place. They ended up specialising in a few good testers, smartened their customer service and also expanded to China. Turned out OK, I'd say...

Cover Story: Coming out of the dark

In March, Aemulus Holdings Bhd was at its lowest ebb. The company, which specialises in semiconductor testing equipment, had a problem collecting payments from its customers in China and it was running out of money. “Back in November 2019, the first thing I told my chief financial offic...

www.theedgemarkets.com

 

[MJ DeMarco]

If you type "Jay Abraham's Joint Ventures: From Mediocrity to Millions" in Google you'll find a free PDF. It's an old document (from 2005) but extremely powerful and will teach you how people structure deals with zero money involved.

How has this book aged? Still relevant today? 15 years is forever in internet time.

 

[MTF]

How has this book aged? Still relevant today? 15 years is forever in internet time.

I think it's still as relevant as before. Because the examples may be different and are mostly offline but the principles are the same. Jay Abraham doesn't really sell short-term tricks, he's a big thinker.

 

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[Simon Angel]

1. Come up with a decent idea
2. Decide you're going to execute it
3. Establish a relationship with someone who can fund it
4. Present it as a win-win situation for both of you (and especially for them)
5. Take responsibility in executing the plan and negotiate a generous cut for your sponsor
5. Deliver on your promises

 

[Andy Black]

I will tell you that you absolutely do not need capital to start a business. In fact not having capital forces you to be resourceful and profitable quickly. I had a very bad situation some years ago. I was laid off. I was so depressed. I literally packed a suitcase and and got a on a bus with no destination! This is what I did then: I called a former supplier and got pricing on goods. Then I called a former customer and offered them the goods plus a great mark-up for me. They bought and I made a heck of a profit. It only cost my next to nothing in telephone calls. Not so long after I was doing deals with a billionaire.

So when anyone says you need capital to start a business you can tell them it's not true.

A good example of being resourceful vs having resources.