How to Finance a Home-Based Business

As I was doing some research on small businesses, I read that the average home-based business takes $10,000 to start. In this economy, that is a bit steep for the average family. If you've got money saved in a bank account, you are ready to go. But what if you don't? How can a money-strapped family start a home-business?

Obviously, a lot depends on what type of business you want to start. But for most of us, the best course of action is to start small, making the most of what we have and expanding as we get more income.

Also, I strongly recommend that if you are looking to replace the income you currently make outside the home, that you start your business before you quit your job. That way, you still have a steady income while trying to start your new business.

Creating a transition plan or a start-up plan can help you spread out your expenses over time. You can include things like paying down debt, tucking money away for hard months ahead, and making a few purchases each month.

When we started our online retail business (www.roselanecottage.com) , we had to start small. Thankfully, we already has some things in place. We had an extra bedroom, computers and some software programs in place. We did have to make some software purchases, like Photoshop. Through Yahoo Store, we were able to start our business for $99 a month. Although Yahoo provided a store template, my husband did all the research on how to set it up.

Our biggest expenses were products to sell. I'd love to tell you the story of my first trip to Atlanta. It is a miracle story as far as I'm concerned. I'll tell that next.

Anyway, I knew I wanted to offer cottage-style home accessories. So I joined a decorating book club, and got five free books on cottage style decorating. I poured over the books, making note of accessories you might find. Then I made a list of everything I would want to offer, and how I would organize it on my store.

Living in Arizona, I could not find a place to purchase many of the items I wanted to carry. Since I couldn't find them to buy in local stores, I figured I would need to go somewhere else to find wholesalers. So I went to Atlanta to Americas Mart. Second in size only to the New York market.

Here's what I learned fast. Everyone has a minimum first order, and a set reorder minimum. Most wholesalers want you to spend a least $100-$150 the first time you order. The big wholesalers want you to spend $400-$500. The exclusive wholesalers, like Crabtree and Evelyn, want you to spend about $1000 up front. The folks at Brighton offered me a water bottle with their name on it, and ignored me from that point on. Needless to say, I looked for the smaller companies.

We started with what we could afford. And added more manufacturers as we grew. We now have about 650 products and 25 manufacturers.

If you want to sell a product, my advice is to find smaller stores in your area that are selling something similar, and just go in and ask to talk with a manager or the owner. Then ask if they are willing to share where they purchased their product. I've had people call me up and ask if we sell wholesale. After saying no, I always share the name of the wholesaler of the product they like. I figure God has blessed me with an open hand, and I need to bless others with an open hand.

I find that people are most often very willing to share their information, especially when you are green as grass. The more clueless you are, the less likely they are to worry about you being a competitor. (grin)

Today we definitely impacted by the economy. Our online business isn't growing anywhere near what I wish it was. But we are still in business, thanks to low expenses. My husband also runs an environmental consulting business, which has low monthly expenses too.

The environmental business was a bit trickier to start because he was in consulting before. But I'll tell you next week how we started that business.

I'm not an economic nor a banker, so I can't predict what might happen with small business loans. That might be a wise option if you will be investing it in something you can sell if necessary. But that will take a much more formal approach than what I'm suggesting. As a friend, I will tell you to NOT borrow money from someone you love. Period. If anything happens to your business, you don't want that added stress.

If you want to start a business from scratch, but don't have the money, then try and take on a second job, mow lawns as a family on Saturdays, have a big yard sale, sell things on E-Bay, sell Mary Kay and save that money. Do whatever it takes to not borrow. If you can use your own money to start your business, I believe you'll be going in to it with a much better chance of surviving hard times.

I'll end on this a positive quote from Walt Disney: "All our dreams can come true - if we have the courage to pursue them."

And an even more positive quote from a much more inspiring place:
"Blessed is the man who trusts in the Lord and has made the Lord his hope and confidence."
Jeremiah 17:7

In His Love,
Glynnis