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Pinch Those Pennies

How do you start a business on a budget? One author shares his thoughts on the subject.

Every startup entrepreneur wants to know how to spend as little as possible while building his or her business. We asked David Caplan, author of How to Start a Business for Free: The Ultimate Guide to Building a Money-Making Something From Nothing (Silver Lake Publishing), for a few tips.

What kinds of things do entrepreneurs often overspend on or misuse their resources for?

David Caplan: Being [overly] optimistic on what you think your profits are going to be and spending too much on rent, equipment and long-term contracts. You have to pretend you won't make a profit for two years.

It seems that a lot of free services have hidden costs, especially on the Internet-like pop-up ads or spam. How can a startup find the best and most reputable free services?

Caplan: If I want to find someone to work on Web sites, I would [search for] "built Internet sites and ratings"; and there are sites that will rate different services. will rate software, and it's a free service. It's a great site to find free software. Now, not everything is absolutely free, but you can find out what sites are the least expensive and the [ones] rated very highly.

You conclude your book with the concept of "free mentality." Please describe what that is.

Caplan: We recommend spending very little, starting small, seeing if you have all the pieces of the pie that will make it work. You have to be able to do all the aspects. The free mentality, it's a success mentality: being willing, as a business owner, to do everything from conceiving the idea to [taking] out the garbage to [typing]-to do whatever is necessary.

This story appears in the April 2004 issue of Entrepreneur. Subscribe »