Shoestring Entrepreneurship: Dave Ramsey’s Guide For Startups

By A.B. (Staff Writer), on June 15, 2010

Starting a business on a budget is no easy task. There’s always a product, gadget, gimmick, or location that someone’s willing to convince you that you need — the worst part is when you’re convincing yourself. After signing papers on my own space last Tuesday, I’m right in the thick of it, but got some great advice from an unexpected source, Mr. Dave Ramsey. A listener wrote in to ask Dave his advice on starting a business. He gave four solid points:

Photo by House of Sims via Flickr

Do You Love It?

Mr. Ramsey says you better love what you’re doing because you will work you to death. My parents were both self-employed when I was young and I can tell you from personal experience, the only guarantee about being self-employed is that your day won’t end at 5 p.m. I remember when I was 10 years old bringing tea into my mother at 10:oo p.m. because she had to finish putting together a presentation for a client the next morning; most Saturdays my dad would tell me we needed to stop by a job site on our way to anyplace we were going so he could “check in.” I didn’t mind. My parents loved what they did, and when my parents were tired, it was usually a “happy tired.”

Now, I come home from my day job and put in extra hours to launch our business, and my husband watches. Right now he’s not too happy because I’m still in panic attack mode, but as soon as I have to stop putting out money for initial expenses, that will go away. It’s worth it because I love what I do. I hear a lot of people say they want to start a business because they “want to make money,” but Mr. Ramsey is correct: It takes true passion for what you are doing. Otherwise, the compulsive e-mail checking will seem like drudgery immediately. You will start to spend less and less time making your business great and you will fail.

Plan Beyond Your Business Plan.

Mr. Ramsey said to “do a business plan…projecting what you make…what you spend…and know it will cost twice as much and take twice as long.” You might even make “half as much” as you think too. Putting together a business plan is tedious work. SCORE has a free business plan template available. Make use of it, then plan for a contingency.

A contingency is a chance occurrence, a possibility you cannot foresee. My father was in construction and had a set rule of a minimum 20% contingency. That means for every dollar budgeted, you added 20 cents for Murphy’s law. Business will always cost you more than you think, but if you have a good business plan and a solid budget, it won’t break you.

Do Not Borrow Money.

Mr. Ramsey continued to advise, “Grow slowly, buy used..Be the tortoise, ’cause…the tortoise always wins.” In our “I want it now” society, most entrepreneurs think they have to borrow money so they can start their business immediately. They seem to think they will miss out on the opportunity, or someone else will take their idea if they don’t move right now! I hate to break it to you, but most songs have been sung, most movies are remakes, and it is better to start a business smart than to start one fast.

It’s not easy. I wasn’t able to escape borrowing some money to start my business, but I cut my initial expenses by 30%, paid cash for half, and got an unsecured low-interest rate loan for the remaining. I made sure that even if the business fails, it’s within my ability to repay. If you have to borrow money, make sure you can borrow it without attaching your house or car, and that you can pay it back without assistance. Remember, your goal for a business is to have cash flow, not debt coverage.

Read Every Book You Can Find.

According to Mr. Ramsey, an investment in a book is an investment in your mind, and an investment in your future. He recommended:

1. The E-Myth by Michael Gerber
2. Guerilla Marketing by Jay Conrad Levinson
3. Tribes by Seth Godin
4. The Legend of The Monk & The Merchant by Terry Felber
5. Who Moved My Cheese? by Spencer Johnson

There is so much information out there. Take in anything you can, but take it all with a grain of salt. In other words, just because something makes sense, doesn’t mean you make it your business’ Bible. Read different perspectives on the same issue. Consider where the author’s coming from. Do you think (s)he would have the same perspective if he had a service business instead versus a product business?

Other sources of information are webinars, seminars, and workshops. If you’re lucky enough to live close to a college campus, there’s a lot of opportunities for free educational workshops that you should take advantage of whenever possible.

In Conclusion

I have to say Mr. Ramsey had some excellent points. In a perfect world I’d use them all, but instead I’ll love what I do, plan as best I can while remembering I can’t plan for everything, borrow as little money as humanly possible, and keep learning as much as I can to make myself successful.

Recommended articles:

• Where To Find Small Business Loans
• What’s Your Financial IQ? Here’s A Test
• 8 Ways to Reduce Pet Care Costs
• 5 Ways To Dramatically Improve Your Business Profitability
• Build An Emergency Fund To Avoid Financial Crisis
• Moolanomy’s Financial Success Plan, Introduction
• Cheap Loans and Good Debt versus Bad Debt

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A.B. writes about graciously building wealth through thrift and putting the stereotypical notion of a "tightwad" on its tush at Modern Tightwad. For frugal tips and money management solutions with a tightwad twist visit her website or subscribe to her feed..

All posts by A.B. (Staff Writer)

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