For young people saddled with student loan debt, rising housing costs, and wage stagnation, the prospect of starting a business – much like buying a house, maintaining a savings account or eating a meal that’s not some variation on instant ramen – can feel like an impossible feat. All this financial stress may explain why millennials – who, despite having a reputation for being entrepreneurial – are less likely to be business owners than their counterparts in previous generations. According to a Wall Street Journal analysis of Federal Reserve data, just 3.6% of adults under 30 reported owning their own business in 2013, compared with 10.6% in 1989.
While it may be harder than ever for young people to get their business ideas off the ground, millennials are nothing if not scrappy and resourceful. We talked to a few successful millennial entrepreneurs to get their best tips for starting a business when you’re young and broke.
Build what you know for who you know
“One piece of advice I like to give entrepreneurs is build something that you understand,” Jasmine Shells, founder and CEO of Five to Nine, an HR tech tool that helps companies create more inclusive work environments, told VICE. “A lot of people start with a solution that they want to build, but they don’t really know what issue they’re trying to solve, or who they should be marketing to.” Narrowing the scope can mean spending money more wisely.
Shells often hears aspiring entrepreneurs say they want to create a product for “everyone,” without realizing how much that would actually cost. Finding a more niche market to focus on not only saves on marketing costs, but it also helps you to gain a better understanding of the problem your product is working to solve.
“As a scrappy entrepreneur just starting out, you simply cannot serve everyone with your limited resources,” said Shells. “Instead, learn everything you can about the problem you want to fix. Once you understand that, you’ll understand who that problem affects, find a very specific kind of customer who is trying to buy what you’re selling.”
Give yourself a safety net
Be it nine to 12 months worth of savings, a flexible job you can work while you build your business, or a free room at Chez Mom, establishing a financial safety net is imperative for young entrepreneurs. You’ll need to save where you can, cut out unnecessary expenses (cut out cable, and make your own coffee), and generally pay much attention to the money going out.
“Without a financial runway, you can’t put your full focus, time and attention on growing your business,” said Shells. “Save up enough, or work part-time, and you won’t have to worry about paying rent or eating.”
Before quitting her full-time job to focus on her business, Shells made sure she had enough in savings to cover a year’s worth of living expenses. But when it comes to startup business costs, being able to afford food and shelter is just the tip of the iceberg.
“I had no idea what the cost of doing business was going to be,” said Tanner Agar, owner and CEO of Rye, a neighbourhood restaurant in McKinney, Texas. “Insurance, payroll taxes, accountants, licenses, and more seem to come out of nowhere and consume your profit margins. In light of that, make sure you have healthy margins from the beginning. You need that cash badly.”
Time is money
“Most entrepreneurs forget their time is also worth a lot of money,” Chloe Spilotro, founder of Cannabling, a luxury cannabis accessory company, told VICE. “I’d caution other entrepreneurs to be wary of how they’re spending their time.”
Whether you’re building your website, driving to the post office to mail out orders, or working to build a following on social media, Spilotro suggests springing for a virtual assistant or an intern who can help you be more productive. While it’s true that entrepreneurs must be prepared to wear several hats at once, if you’re always tied up in monotonous administrative tasks – especially those that fall outside your skill set – you won’t have the time or energy to devote to high-level strategizing.
Agar learned this lesson the hard way while opening up Rye. If given the chance to go back in time, he said he would tell himself to hire an accountant instead of trying to do it all on his own.
“I wanted to save money, but instead a created a nightmare,” Agar told VICE. “I hate minutia like that and so I wouldn’t do it, which created a major issue. Either find a partner who can handle those items while you focus your talents elsewhere, or get a professional.”
Investors aren’t the only way
Every entrepreneur dreams of finding that one billionaire angel investor who believes in their company, but this is easier said than done if you’re not a white dude with existing VC connections.
“About three percent of venture capital money goes to women founders, even though women are shown to create more profitable businesses,” said Shells. “For people of color, it’s like less than one percent, so I always thought the idea of getting funding would be cool, but I understood the odds of that actually happening were low.”
Instead, Shells bootstrapped, reinvesting the money she made through events back into her company, and doing constant research on accelerator programs and pitch contests she could enter. Starting out in Chicago, she found a lot of free and low-cost resources for entrepreneurs. From weekend workshops to government grants and established companies offering free office space, Shells’ research helped her to float Five to Nine for years without a cent of outside funding.
Use the media
When Ofo Ezeugwu began building the landlord review site WhoseYourLandlord.com, he was just out of college, and didn’t have a budget for ads or marketing. So he decided to have the media do his marketing for him.
“We had a product that was actually having a positive impact on the community, so I felt that if the community knew what we were doing, it would create enough momentum to keep it going,” said Ezeugwu, who spent a lot of time reaching out to local outlets in Philly and New York City with story ideas. “Luckily that proved to be accurate!”
To follow Ezeugwu’s example, brush up on your PR pitching skills, look for journalists in your area who report on your industry, and find a compelling story to tell. Focus on the good your company is bringing to the world; “How my new business is helping disenfranchised population find empowerment” is a story, “Hey look guys I started a business” is not.
Ask for what you need
Forging partnerships with other businesses can also help a broke entrepreneur cut costs and establish a brand identity. But in order to create these kinds of professional relationships, you have to be willing to ask for what you want.
“Always make the ask,” said Shells, who spent her first few years as an entrepreneur partnering with local venues. “You never know unless you ask! Ask even if you don’t know exactly what you need, because you’ll find people are a lot more open to connecting than you’d think.”