How do I start up a traditionally capital-intensive business with no money?

By Tim Berry

Opinions expressed by Entrepreneur contributors are their own.

With little savings and no home to leverage (or economic history/reputation) that would help me qualify for a traditional loan, I'm running into a brick wall with starting up my retail business. Any way I slice it, my business model seems to require these expensive necessities: a location and hefty funding for store inventory, employee wages and marketing/advertising. I've been unsuccessful in trying to define a creative starting point, that is small enough for me to afford, but realistic enough in theory to bring in sufficient profit, which would allow the business to grow into the image I have for it. I am leery of VC's and hesitant to hand over the majority of my business to angels before I even open my doors. Help?!
It's good to want things but if you're serious about it, change your attitude. People do manage to do what you want to do, but you have to be more realistic about it. If you don't have the money then you have to start thinking about how to make an attractive offer to people who do have the money, meaning investors, whether VCs or angels.

Don't worry too much about VCs because they want you a lot less than you want them. VCs fund a few thousand businesses per year at most, and they don't want many retail businesses at all, much less a retail business that starts out "leery" of them. Unless you have one of the best retail businesses ever, which seriously promises VCs a good chance of making 100 times what they put in, they aren't intertested. Don't waste your time or effort on that.

As to angels, in your case it would be somebody who knows your line of business and wants to invest in it and likes you and trusts you, and they would do that only if they stand to make a very good return, and probably -- although not necessarily in all cases -- only if they own a controlling interest in the business. After all, assume they aren't stupid, and think about it from their point of view. If you were an angel investor, would you invest your money in a retail start-up that doesn't want to give you ownership? Why? What would you get out of it? Answer that question and you'll have made some real progress.

You might have to be more realistic about starting small, not large. Sometimes people get where you want to go by starting small and working hard and making good decisions and managing to grow by force of will, attractive offers to customers, and sticking to it.

Ultimately, it isn't magic. You either have the money or assets to risk or you make an attractive offer to investors. I hear about grants and government money but I've never seen that really work, and I've been in this business more than 30 years. To investigate further, go to the SBA website at www.sba.gov and do a good search of loan programs and grants, but don't get your hopes up because even SBA loans require you putting up at least 30% of the start-up funds. Also, contact your local Small Business Development Center and ask them for help, take their classes, get to know them. They are very good, amazingly inexpensive, and local. You can find local contact information at www.bplans.com/sb/

Tim
Wavy Line
Tim Berry

Entrepreneur, Business Planner and Angel Investor

Tim Berry is the chairman of Eugene, Ore.-Palo Alto Software, which produces business-planning software. He founded Bplans.com and wrote The Plan-As-You-Go Business Plan, published by Entrepreneur Press. Berry is also a co-founder of HavePresence.com, a leader in a local angel-investment group and a judge of international business-plan competitions.

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