How I built a business with no money - Part 1 of 2

Is it possible for an entrepreneur who is big on vision but short on cash to compete in today's crowded market? Here's part one of a two-part story of how I built my business with nothing out of pocket.

Written Mar 18, 2008, read 639 times since then.

Back in the summer of 2001, I was in the final stages of loan approval to open a coffee shop just off the campus of a university in Fort Worth. I had the site selected, which was less than a block from the local and major academic buildings, with no competitor within miles. I had a compelling pro forma laid out that seemed like a can’t-miss model. I had met with the Senior VP at my bank that was cheerily on board with my concept, and I had designers ready to launch with logos and other items to put my vision into action.

Then I woke up on September 11th, 2001 and it was all gone. The bank froze their commercial lending and I was finished, before I had even started. Though the experience hardly crushed my entrepreneurial spirit, I resolved to find another way around going from bank to bank, or investor to investor, the next time I launched a business.

In the fall of 2007, the right idea cam along, and it had been long enough since my last experience that I was ready to give it another try. However, determined to learn from my history so as not to repeat it, I struck out looking for ways to build my model without investment capital. This was tough, especially since I’m a writer and my wife is a minister: a generally lethal combination when it comes to economic prosperity.

Given that all I had was an idea, I had to make sure it was something I could present clearly and compellingly to potential partners. But even before working on my pitch, I had to come to terms with a few things on my own. Since I could not pay employees, the initial people that helped me get my company off the ground would only do so because they had a vested interest; this meant bringing them on as partners, which meant less control overall for me. It was very important, then, that I chose carefully who I teamed up with, as I could not just cut ties later on and find someone better.

Aside from identifying people with whom I could work well, I had to make sure they brought skills to the table that I didn’t already have. This brought with it some inherent challenges, trying to learn how an introverted writer – that’s me – a manically social big-picture entrepreneur and a computer programmer would progress without killing each other.

The key for us has been a healthy respect for each skill set that the other partners bring about which the rest of us know very little. Stated another way, I don’t micromanage the computer programmers approach to our website, and the other guys don’t meddle in my approach to delivering content. In turn the big-picture partner is set loose to do what he does best, not tied down by responsibilities that might otherwise hamper his energy and creativity.

Another compromise I had to make was actually giving up even more control as we began to grow. I decided early on that the big-picture guy, who is out front helping us grow our capacity, would not be as motivated to do so if his margins didn’t increase as we hit certain performance thresholds. So although he begins with only a ten-percent ownership, he has the opportunity to grow his share to nearly twenty-five percent. Granted, this percentage comes right out of my pocket, but the way I look at it, a smaller share of more revenue is better than a big share of almost nothing, which is what I’d have if I tried to do this whole thing myself. Also, I did make sure that, although I’m willing to give up some control and a good deal of the profits to motivated partners, I didn’t put myself in a position to have myself usurped in my own company. So even at the highest level of performance we’ve estimated, I still maintain a fifty-one-percent interest in the business.

With my foundational team in place, we started looking for ways to start spreading the word about what we do with little or no cash. For us, we recognized that word-of-mouth would be huge, so we approached a few key players who we knew could help us get our message out to their network of friends, partners and prospects. Though we’d offer varying types of free services, most of the people we talked to were excited enough by our model to help us out for nothing. After all, most other businesspeople appreciate the drive of a young company with a strong vision, and they enjoy being a part of your success.

Learn more about the author, Christian Piatt.

Comment on this article

Posted by Marie Chandler, Everton Park, Brisbane, Queensland Australia | Mar 19, 2008

Well done Christian! It was a hard way to get started, but I wish you and your partners all the best for the future. I know what it's like to start out with $0, but my business is so much easier to market - usually old employers and friends will know someone that needs typing done! Looking forward to part 2 of the story.
Posted by Aamer Iqbal, Lahore, Punjab Pakistan | Mar 19, 2008

I am developing another business on a shoestring budget, and opting not to get a loan, your story is inspirational. Thanks for sharing.
Posted by Brianna Young, Tulsa, Oklahoma | Mar 19, 2008

Excellent article. Thanks Christian!
Posted by Adrian J Cartwood, Deerfield, Illinois | Mar 20, 2008

Great article; I got 51% of an existing business for nothing ... sold it 18 months later for a number well into the multi-millions. In fact, I started ALL of my businesses with NOTHING - every one of them sold, or is worth, more than $2Mill. It's all about perceived expertise, vision, and negotiation.
Posted by Carol Skolnick, Santa Cruz, California | Mar 20, 2008

9-11 was a wake-up call for all of us in so many ways; I think everyone with their own business felt the repercussions. Everyone I know survived it...not always in the way we thought we ought to have. Some, like me, found a new direction. Starting out with nothing makes room for new vision. Great araticle.
Posted by Kare Anderson, Sausalito, California | Mar 20, 2008

Give up a bigger piece of your pie to motivate your "promoter" to make the pie bigger. Sounds like, writer that you are, you got specific on who would do what, for what rewards - perhaps the key to enabling diverse partners to bring out the best, not worst, side in each other.

As an author of three books on partnering, the last as an ebook, SmartPartnering, I was impressed with how many things you did right.

Now, are you going to tell us about the business - or leave us hanging?
Posted by Bruce Colthart, Paramus, New Jersey | Mar 20, 2008

Nicely outlined, Christian. Can you tell us how you found your "big picture guy?"
Posted by Christian Piatt, Pueblo, Colorado | Mar 20, 2008

Yes, Kare, I envisioned a smaller piece of a bigger pie as more attractive than keeping a small project all to myself and going crazy in the process.

I talk a little more about the business in part 2, which is being reviewed by Biznik folks, but in an effort not to be too self-promoting, I avoided talking about too many specifics.

The company is www.MyWordTree.com, providing writing, editing, marketing and design services for businesses.

And Bruce, regarding my Big Picture guy, I looked for a few things. First, I wanted the guy who always had people around him, listening to his stories in a gathering. While I'm the perimeter-lurking observer, Steve is the organizer, the storyteller and never runs out of ideas. He also has a history in business startups, so he lacks any fear in stepping out boldly. After all, he has me, the pragmatic nuts-and-bolts guy to do the worrying!

Thanks all for your great comments.
Posted by Danielle Hermeler, MBA, Seattle, Washington | Mar 21, 2008

Hi Christian,

Thanks for sharing your start-up experience with us. Letting go of control must have been difficult sometimes, but a wise decision considered your business situation.

I am working with an entrepreneur and we (the whole team) are in a similar position. Your article gave me insight in what he may go through. I'll send him the link of your article, for sure.
Posted by Christian Piatt, Pueblo, Colorado | Mar 25, 2008

Part two is now posted, for any who are interested. Thanks to everyone for your comments.