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Part I: Hang On to Your Wallet
Inspired by her second child, Heather Allard invented two wearable baby
blankets that became a worldwide sensation. The blankets were featured on
Access Hollywood and sold in more than 200 stores, and it was all she could
do to keep up. After the birth of her third child in 2006, Heather sold the
products to a larger company in order to spend more time with the family.
Success! She wasn’t done with entrepreneurship, though; the next step was
to help other women, especially mothers, learn to do what she had
accomplished. She started her next business, The Mogul Mom, with the
goal of mentoring busy women who wanted to create more independence
through a small business. The baby blanket business was highly successful,
but it also became a high-spending operation as the product took off. On
reflection, Heather realized that she would need to run her second act
differently:
I had gotten into a ton of start-up debt with my product company and
spent thousands on things that I absolutely did not need (big
advertising campaigns, a custom e-commerce website, a publicist,
etc.), and I definitely did not want to do that with The Mogul Mom.
Therefore, when I spend money on The Mogul Mom, it’s for things
that will continue to build my brand and boost my sales while allowing
me ample time with my family—things like Web design, payments to a
small group of contributors, or a new computer.
The distinction Heather points out at the end is important: She’s not
reluctant to spend money on things that will (1) build her brand and (2)
boost her sales. This kind of spending can grow a business. If you can
spend $100 and create $200 in value from it, why wouldn’t you? It’s the
other kind of spending—the unproven ad campaigns and unneeded custom
websites—that Heather learned to stay away from. Lesson: Spend only on
things that have a direct relationship to sales.
The stories from Naomi and Heather illustrate two important principles,
both related to money. The first principle is that a business should always
focus on profit. (Always remember, no money, no business.) The second
principle is that borrowing money or investing a lot of money to start a
business is completely optional.
This doesn’t mean that there are no examples of businesses that have
done well through traditional methods; it just means that borrowing is no
longer essential. Don’t think of it as a necessary evil; think of it as an
undesirable option to be pursued only if you have a way to limit risk or are
sure you know what you’re doing.
If you don’t know what you’re doing when you’re starting out, that’s OK,
you’re in good company. Almost every entrepreneur pursues projects with a
much-trial-and-much-error system. But since it’s easy to try things without
losing your shirt, why seek investment and go into debt for something that
may or may not work?
It’s completely possible to start on a very low budget without hindering
the odds of success. Consider the reports of many in our study group:
• Chelly Vitry started a business as a tour guide for Denver food
lovers, connecting them to restaurants and food producers. Startup
costs: $28. Recent annual income: $60,000.
• Michael Trainer started a media production company for $2,500, the
cost of a nice camera, which he later sold to recoup the cost in full.
He then went on to work with two Nobel Prize winners: the Acumen
fund and the Carter Center.
• Tara Gentile started her small publishing business for $80, hoping to
earn enough money to be able to stay home with her daughter. One
year later, she earned enough money ($75,000) that her husband
could stay home as well.
• Chris Dunphy and Cherie Ve Ard started Technomadia, a software
consultancy for health-care providers, for $125. The business now
produces net income of more than $75,000 as Chris and Cherie
travel the world.
• A former store designer for Starbucks, Charlie Pabst needed a $3,500
computer for his Seattle design business. But after he had the
powerful machine and a $100 business license, he was good to go.
Annual income: just under $100,000.
These stories are not outliers. When I began the research for this book, I
received more than 1,500 nominations, with similar stories from all over the
world. You can see the range of startup costs from our study group in the
graph below. The average cost of the initial investment was $610.60.
*
You might expect that certain types of businesses are easier to start with
limited funds, and that is correct. It’s also the whole point: Since it’s so
much easier to start a microbusiness, why do something different unless or
until you know what you’re doing? Small is beautiful, and all things
considered, small is often better.
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