Many entrepreneurial success stories begin this way: X had a dream, but his dream was turned down at the local bank. This is a situation that many entrepreneurs face. While it can be scary, it does not have to be a dead end. The reason so many success stories begin this way is that it is actually very difficult to get a bank loan to start or expand a small business. However, there are alternate forms of funding that can help you achieve your dreams. It’s just a matter of knowing how to approach them.

How To Fund Your Entrepreneurial Dreams Video

The first question to ask yourself is a hard one: why did the bank reject you in the first place? Here are a few reasons.

• No prior relationship. In some cases, the rejection comes because you do not have an established relationship with the bank. Banks prefer to extend loans to their own patrons. They can easily see your financial history and already have a relationship with you. This was not as important in the days of easy credit, but it has become increasingly important as small business loan funds dry up.
• Poor presentation. You need to package your entrepreneurial dreams as a sure thing. This means showing that you have done your homework. Do you have a professional business plan? Have you investigated the market for your product or service? If insufficient or poorly presented information is the reason for your rejection, it will be a barrier with other funding sources as well.
• Too much risk. Banks have been burned by defaults, which is making the institutions increasingly wary. If you simply are presenting top much risk, there is little that you can do to change this. It is a seller’s market for loans right now, with far more demand than available funds. Many banks are looking for as much as two years of consistent revenue before they throw their own money in the pot. If this is  the case, you will simply need to find alternative funding.

Many lenders are not shy about letting you know why they are rejecting your application. Talk to your loan officer to see what the problem is. This will be very important in getting alternative funding because you will often be able to correct the situation before exploring other avenues. Here are a few sources to consider.

• Angel investors. The banks are unwilling to finance your dreams because they don’t know you. They don’t know how motivated you are, or what skills you bring to the table that will make you a better-than-average entrepreneur. However, you probably have friends, family and acquaintances who know these things about you. Consider asking one or more of these people to invest in your business or become a silent partner. This is a difficult step to take because financial relationships can interfere with personal ones, but it may be the only way to make your business dreams see the light of day. Just make sure your agreement is spelled out clearly in a contract so both sides feel protected.
• Microfinance. Because small business loans are becoming increasingly difficult to get from large financial institutions, there are smaller businesses offering loans within set geographical area. You can usually find ones in your area by contacting your local Chamber of Commerce or your city government. Microfinance lenders are usually nonprofit organizations that have been given grants to boost local businesses. Often, they offer not just loans, but a wide array of services and information for entrepreneurs. Some also help to link up potential entrepreneurs with angel investors.
• Crowdfunding. This is one of the newer ways of getting a loan, but it is also one of the fastest growing. Crowdfunding is almost exclusively online. It usually focuses on peer-to-peer lending, with a large base of lenders each loaning a small amount to your entrepreneurial venture. One thing to remember is that many of these websites will check your credit record and set your interest rates accordingly. Others let you set your own interest rate. Some charge fees, while others do not. Even though these are largely philanthropic ventures, you still may not be getting the best possible deal. Each site is a little different, so shop around before you decide that this avenue is right for you. If you are interested, check out sites such as Prosper and Kickstarter.
• Seller financing. If you are not starting a business but rather buying an existing one, seller financing may be a possible funding source. The market for businesses is similar to that for real estate—that is, tanked. Many sellers are willing to consider alternative payment structures or receive their payment in several payments rather than in just one. This is becoming increasing common right now, so don’t be afraid to ask about it.
• A side job. Running a business is hard work! While you probably feel exhausted enough at the end of each working day, getting a side job (or keeping your day job for the time being) may be the only way to finance your entrepreneurial dreams. One way to make your money really work for you is to use your earnings to set up an account at a local credit union. Place your earnings in this account. After several months, you will not only have a decent amount of money for your small business ventures, but a relationship with a potential lender. Local credit unions are often more generous with loans, especially when dealing with members.
• Lean operations. If you have some start-up money already, you may be able to open shop with only your own funds if you can keep costs low enough. Many small businesses now are starting with less than $10,000, so you will certainly not be alone. You can also break down your business’s opening into phases, financing each one as you have the ability. Few people can afford to open a business in the traditional manner anymore, but this does not have to stop you from achieving your dreams.

Some entrepreneurs are reluctant to use social networking to promote their business ventures. There are good reasons for feeling this way; social networking may be low cost, but it requires an immense amount of time to set up and maintain. In addition, it is just as easy to anger and alienate your audience as it is to win their hearts. Many entrepreneurs prefer to focus on more traditional marketing methods. However, there are a few good reasons to make social media a part of your business. The first and more important one is that social networking works.

A good example of entrepreneurial success through social networking is young businesswoman Shama Kabani. Kabani was recently covered in a story in Entrepreneur magazine and is considered one of the social media experts of our times. Although she is only 26 year old, Shama Kabani is a published author on the topic of social media marketing and hosts a web TV show on the topic. She is also the founder of The Marketing Zen Group, a two-year-old business that specializes in helping businesses find and implement the right social media marketing options for their companies.

Another factor that makes Kabani an expert is her education in the matter; her master’s thesis at the University of Texas was written on Twitter, back when the social networking website had only 2,000 users and not the hundreds of millions that we see today. It was a somewhat prophetic thesis that predicted the rise of tweets as a social force.

Kabani points out that we live in a world in which business has become ‘faceless’. People are shopping on the internet or at superstores. The brand interaction that used to be provided by face-to-face interaction is now absent, and customers long for it. Social media is one way of giving customers the face and the personality that they want when choosing a company with which to do business. However, the social networking approach that works best can vary according to the unique business and market. This is where consultancies such as The Marketing Zen Group come in.

One case study from the business is that of k9cuisine.com, an online dog food retailer. Under the guidance of Marketing Zen, the business established a blog and an active Twitter following, while also wooing some of the best known names in pet blogging. For other companies, the right approach might be to simply have a well-optimized blog. The right social networking approach depends on the business itself.

In order to be successful in the early days of the business, when many entrepreneurs flounder, Kabani is running a lean operation that will look familiar to many people. Most of her employees work virtually, and some of them are located in countries known for offering highly skilled and inexpensive labor. So far this has been an effective strategy; the business grew 400% last year and is predicted to be a multimillion company by 2014.

At a time when many young graduates are leaving college to find that there are no jobs even for motivated and educated people, Kabani has realized at a young age what most entrepreneurs know: in life, you must create your own opportunities. Social networking is a way of creating opportunities that entrepreneurs in previous generations never dreamed of.

Indeed, creating your own opportunities is what social media marketing is all about. You can reach out to customers and build a brand without a huge investment of money. The marketing that was once limited to multi-million dollar corporations is now completely available to every entrepreneur. The secret is to know how and when to use this tool.

As Kabani emphasizes, the social media approach that works best for your company will depend on your business and your market. However, there are a few general rules that can help you to make a plan.

• Optimize. Whatever you do on the internet, it needs to be optimized so that it shows up in search engine results. After all, a vast and comprehensive internet presence that is seen by no one is a complete waste of time. It is usually easy to optimize a website; it involves only moving around words and inserting tags. Not only does your website and blog need to be optimized, but your Facebook, Twitter and other social content as well.
• Consider your market. Where are your target customers hanging out? Are they tweeting, checking their Facebook status, surfing YouTube or simply typing random phrases into Google? You may need to think a little and get into your consumers’ minds in order to find this answer. However, it is important to know your market so you can tailor your approach specifically to their sensitivities.
• Have personality. This is not a business plan; you are interacting with customers and need to have a personality. Consider what tone and which persona will work best with your market. You may want to do a little research to see what works best.
• Allow two-way communication. Modern people don’t like being dictated to. You need to allow people to communicate with your business. Ask questions and post polls. This will make modern customers feel heard; it will also allow you to see new directions for your business.
• Watch the competition. What videos and posts are getting shared and going viral? Your goal is to take note of these and try to emulate them. Dissect what makes a social media message successful with your target audience and re-create it in your own social media marketing campaigns. Often, what works for one business may work just as well for another. Don’t be afraid or ashamed to copy a successful strategy.

Social media is one of the greatest opportunities for a business, as Kabani’s success and that of so many other entrepreneurs have shown. The major social media websites have hundreds of millions of regular users, and your target market is probably included in this number. Social networking is much cheaper than other types of marketing and also more effective, so what are you waiting for?

A few weeks ago, Steve Jobs resigned from his position as chairman of Apple, which we all recognize as one of the most powerful and well-known companies in the world. Although most people consider Apple a clear leader in its field, it had a rather bumpy road to the top and still fights to maintain its position.

Steve Jobs Business Lessons

Apple has not just been a social and business force, but a marketing leader as well. It has shown the rest of us how to build and maintain customer loyalty, which is the most important asset that any business can possess. Consider the lessons that we learned from Apple’s meteoric rise back to the top of the brand heap.

• Think outside the box. Some of Apple’s most popular modern products were innovations, items that did not exist until Apple introduced them to the market. It is easy to be an industry leader when you have a head start on development and also the free publicity inherent in a new and unprecedented product. There was no small and portable music storage until the iPod, and the iPhone revolutionized the way that we view and use our mobile devices.
• Design is important. Would Apple be where they are if they had a complicated, ugly or generic logo? Luckily for the corporate giant, we will never have to find out. Similarly, most Apple products are designed to be part of the Apple brand: sleek, sophisticated and simple. People are proud of their Apple products and want to be seen using them. Design is a huge part of this company’s cult status.
• Leadership matters. Steve Jobs is a notorious micromanager, but he is also notorious as a leader. He demanded excellence not just from employees, but from himself. His hunches became some of Apple’s most popular products because he knew how to lead the company from concept to a physical product without losing his vision.
• Know your audience. Apple’s marketing is extremely targeted toward their market. Consider the humor and thinly veiled sense of superiority seen in the “I’m a Mac” commercials, or the simple graphic appeal of the happy silhouettes seen in the iPod commercials. These appeal immensely to Apple’s market and show exactly how well they know their market. The product design and the products themselves confirm the impression that few companies are as customer-centric as Apple. Apple moves people on an emotional level, which is unusual and very difficult in their industry.
• Keep your investors happy. Just a decade ago, Apple was at the bottom of the heap and the Microsoft-driven PC was on top. Apple shares were down to $9 a share, which is less than most fast food meals. This blip in company history did not last long; one of the world’s most valuable companies, Apple currently fetches $372 per share. The company followed through and proved that investment in Apple is worthwhile.
• Keep your customers happier. I have never bought an Apple product without being delighted as I open the package. The cords match the rest of the design and are tucked away neatly. The package lining is soft and the instructions easy to read. Compare this to the experience of opening similar products, in brown cardboard packaging with peripherals thrown haphazardly in the box and instructions written in incomprehensible wording. Apple knows how to make you happy you bought their product.
• Set the bar. Apple is best known for being the company that others must match. It is the technology to which most others are compared. All mobile music devices are held up to the example of the iPod, and we are seeing a similar phenomenon with the iPad. Apple is not scrambling to keep up with the competition; they are setting the standards against which their competition is compared.
• Do it for the passion. Steve Jobs was fired from Apple in 1985 and the company soon went into a tailspin. When he was rehired in 1997, Jobs asked for a salary of $1 per year. With plenty of company stock, money was simply not an issue. Jobs led Apple because he loved the company and believed in it. His passion was clear to employees, investors and even customers. This salary was certainly not enough to demand the level of work that Jobs put into the company, but money was never his motivation.
• Some games turn around in the overtime. When Jobs took over Apple in 1997, the company was at an all-time low. Jobs tool what many considered a desperate deal with Microsoft, agreeing to cooperate with Apple’s historic rival in exchange for a nonvoting minority investment in the company. This investment became seed money for the iMac, which received rave reviews and helped to bring the company out of their slump. Another CEO might have given up altogether or stubbornly refused to play nicely with their enemy. Jobs’ actions show real vision.
• Be an inspiration. Obviously Jobs is an inspiration to many entrepreneurs. He saw the company through some very difficult times and emerged on top, which is a dream for the many people struggling through the recession right now. There is a reason that we chose Jobs for this article. Not only is he a timely figure, he is truly an inspirational one.
• Protect your brand. Apple made the news recently when they sued a Chinese food company that used an apple image as the basis of their logo. While this seems a little heavy handed, most of the highly successful corporations of our times are very protective of their brand and logo design. Apple wants to ensure that customers buying a product with an apple on the front will be thrilled with their purchase. Controlling the use of that apple image is the only way to ensure that customers associate only good things with the Apple brand.
• Brand loyalty pays off. While it may take a lot of work to build brand loyalty, it is always worth it. While many entrepreneurs prefer to focus their efforts on products, this is a short-sighted approach. Loyal Apple users may complain about the company, but they will simply never abandon it. We’ll complain when our favorite computer game is PC-only or when the price of an iPhone drops by a huge percentage just a few days after we finally buy one, but the emotional attachment to the Apple brand remains.

The last few years have been difficult for most American small businesses, and for many there is no light on the horizon. However, some owners are managing to bounce back from some very serious blows. Whether you have lost a few of your top clients, lost a supplier, or otherwise been hit hard by the recession, there are steps that you can take to ensure that your business bounces back to its former stability. Here are a few common-sense ways of leading your small business back to the top.

• Get in touch with your customer base. Your business needs are changing with the economy, and your customers’ needs are changing as well. Take a good hard look at the challenges being faced by your customers and attempt to meet them. This can mean a whole new market and an entirely new set of profits for your business. Your customers are probably feeling a budget pinch, but they may also be looking for ways to free up time, to increase their feeling of security, and to replace the items they have cut out of their budget. Identify these new needs and look for lucrative ways to meet them.
• Modify your products and services. In many ways, this is an extension of our first suggestion. Look for ways of ‘value pricing’ items so that customers can feel that they are getting the most for their money. You may want to look into flat fees and other nontraditional pricing structures as well. Make sure you keep quality consistent; security and stability are crucial to recession consumers.
• Trim your operations. What aspects of your business are not contributing to the bottom line? In hard economic times, these areas may need to be pared back severely, even if it means lay-offs or closing locations. Your business will need to be a lean, if not mean, operation in order to bounce back, so trim the fat. Often, outsourcing or combining jobs will allow you to run in much the same manner with a higher level of efficiency.
• Hire new talent. Other businesses are feeling the crunch as well, and many are forced to lay off talented employees. Now is the time to bring in better and brighter employees. Be sure you can afford every new employee. Ideally, the best workers will pay from themselves and then some. In addition, when the market begins to turn in a more positive direction, you will have the right workforce for taking advantage of the times.
• Invest in your business brand. While many companies trim their branding and marketing budgets when funds run low, these divisions are the only way to keep steady income flow. If your brand is no longer resonating with your customer base, make the necessary changes to stay on top of the times. Look into a new logo design and other elements that will represent your new business model and brand. You may think you can’t afford it, but you really can’t afford not to.

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Many small business tips are written assuming that the business in question is not succeeding. But what if it is? Maybe your business is doing great and you merely want to take that success to the next level! Here are a few tips for that crucial expansion process.

• Franchise. Franchise is one good idea for businesses that have a proven successful model. If the people in your community love your scrapbooking business (or whatever it happens to be), franchising can offer an opportunity for other small businesses to use your brand. There are several franchising companies that can help you do this. However, it is very important that you have a professionally created logo design, website, and other visual branding elements before you embark on this step. If you want for people to buy your brand, it has to be top-notch in every way.
• Branch into related new markets. Maybe you aren’t ready to franchise but you are ready to see new locations for your existing business. On the other hand, you can also open peripheral businesses that are related to your core brand. Sometimes an ecommerce website is the best way to put your toe in the water before taking the dive. Keep in mind that the products and brand need to be very similar to your original one so you can build the power and recognition of your brand. Also, avoid cannibalizing your core business by placing locations too close together.
• Develop new lines. If you are reluctant to branch out into new locations or franchises, offering new product or service lines can be a great way to grow your business organically within its current structure. These new lines will work best if they share a brand with your core business or have a compatible brand. Another useful tip: make sure they relate directly to your company’s original product. A line of seasonings wouldn’t be a good fit with a printing service, but it certainly makes sense with an Italian restaurant.
• Maintain your core. Although any kind of business expansion is time-consuming, it is crucial that you give your core brand the same amount of energy that brought it to your current state of success. Your core small business is the ‘launch pad’ for your expansion, so it needs to remain as strong as ever. Continue to take actions and make changes as needed, and don’t let your big dreams compromise your everyday success.
• Avoid over-extending. If expansion seems to be going well, it is tempting to branch out a little further. However, this impulse should be stifled as much as possible. Complete one step before you embark on another. After all, one person can only do so much! Also, funding is an issue for many small businesses looking to expand. If there is only enough funding for one location (or two, or three…) wait until you have a better opportunity. It’s tempting to ride the small business success wave as far as it will take you, but you can’t afford to wipe out.

There was a time when a small business was a physical store with a shopkeeper/owner ever present. Now, however, the norm has changed. Many small businesses begin as part time ventures, often on the internet or run from home. Small business owners have the chance to build their brand and build their profits while still keeping a job outside their new company. This brings up an interesting question that many small business owners must deal with at some time: when is it time to quit your day job?

If you have a day job that pays well and provides decent benefits, you are one of the lucky ones. However, it can be difficult to leave this positive situation even when it is truly time to do so. Here are a few ways to decide if and when this is right for your unique situation.

Working Outside your Business: The Advantages

There is one obvious benefit to your day job that cannot be ignored: the income. This income can be used not only to support your family, but to invest in your new business. Having an alternative source of income allows you to experiment with different approaches and brands, and ultimately find the one that works best for you.

Working Outside your Business: The Disadvantages

There are so many disadvantages to working while running a business that it is difficult to name them all! You will often find that the majority of your time and energy are spent making profit for someone else, while your own small business may desperately need attention. It can be difficult to ‘switch on’ when it comes time to move between jobs, especially if exhaustion or burnout begins to set in.

You may also find that you lose valuable opportunities as you struggle to keep your two lives together, compromising both sources of income. Another good point: who will believe in your business if you don’t?

It’s a delicate balance for sure, but we still recommend that you keep your day job at least until your business makes enough to support it. Most economic experts agree with us. First, the economy is just too volatile right now; if you have reliable means of employment, hold on for dear life. Second, even the best business ideas take a short (or long) time interval before they begin to earn money. How long can your family live without income? Do you even want to find out the answer to that question? Benefits are another issue; they are prohibitively expensive for most small business owners but included with a variety of jobs.

However, continue to plug away at building your small business brand in your off-time. Come up with a reasonable schedule that allows you to work, run your business, have a minimal social life, and sleep. Too many people give up on their dreams because they get tired of the high demand lifestyle. Your small business dreams can come true if you give them a chance to flower. Just don’t quit your day job… yet.

Psychology has huge potential for influencing people’s behavior. Although we all like to think that we are independent individuals, the fact is that there are experts who can predict our behavior with shocking accuracy. Knowing how people operate and how to communicate best with them can help you to build your brand and entice customers to become conversions. Here are a few sales tips gleaned from the science of the human mind:

1. Include pictures and figures. People are largely visual. If you want them to choose your product or service over that of the competition, you need to show them why. Show pictures of your product packaging and your logo. Make sure both are clear and memorable, easily associated with your small business brand in color and other visual cues. Psychologists have found that the best results come when you show the package rather than the product, and when you show the package by itself rather than with people using it.

2. Make comparisons. People are more likely to choose you if they see that you win when compared side-by-side with the competition. Tables and charts that compare you to competitors and show a marked advantage are especially helpful because they make a comparison while also tapping into that visual preference discussed above. You know that you are better than Brand X; find a way to quantify that.

3. Avoid discussing the competition. While it’s okay to refer to the competition in a vague way, you never want to say their name or show their logo design or packaging. This is because these will make an impression on the customer and create confusion with your own images. There’s a reason you see so many detergents compared with ‘Brand X’ in television commercial. These companies know that giving their competitors even a second of their marketing time would only be free advertising.

4. Talk about your customers. Instead of talking about your brand and your products, talk about your customers. Use the word ‘you’ a lot and tell them how your small business is going to benefit them. People register this subconsciously as being true and are also automatically more interested. This is easier than it sounds. Instead of telling what your product does, tell customers how much they’ll3love what it does. This is a subtle distinction that makes all the difference.

5. Be beautiful. Every aspect of your business, from its website to its logo design to (hopefully) its employees should be as attractive as possible. People automatically prefer more attractive people and items. In fact, psychologists have found that even newborn babies have this preference for beauty. If your advertisements and other materials are attractive and well-designed, they’ll get more eye contact than an ugly or plain alternative. So, make sure all of your visual elements are top-notch.

These are just five ways that psychology can help your business succeed. There is a whole field that specializes in knowing how various shapes and colors affect the human mind. Because most logo designers are intimately familiar with this topic, they are the best people to consult when trying to make psychology work for you.

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Running a small business can be more difficult than it initially seems. Many people get a great idea for a business, but get intimidated by the planning phases. Luckily, there are ways to plan that will help set you up for success. I get a great new idea every day but only 0.01% of those ideas ever make it to the real world! But even 0.01% is not a bad percentage. Here are five tips that will help your inspiration become your reality.

Plan your brand. Many people build their entire business from scratch and then start thinking about branding and marketing. However, this is a backward approach. Your idea, whether it is for a new business or for a new product for an existing business, should be the basis of your small business brand. All other aspects of your business should then be developed with this brand in mind. Does your brand affect your location? Absolutely. Does it affect your marketing plan? Of course it does. Your brand will affect every aspect of your business, so this is the first detail you should deal with. This is the reason I started a branding company and continue to run it with passion.

Analyze. Once you have a brand along with visual brand elements such as stationery and logo design, your next step should be to analyze your business. The most effective way of doing this is called SWOT analysis—Strengths, Weaknesses, Opportunities and Threats. Identifying these elements will help you plan for a successful future, maximizing the strong points and opportunities while minimizing weaknesses and threats. Write these down and keep them in mind in the next steps.

Stay true to your vision. Hopefully your great idea was already very unique. However, many unique ideas get watered down in the steps of forming a business. Part of this is due to everyday pressure to conform, but part comes from wanting to offer the same structure and services that make your competitors successful. Don’t let this happen to you; remember what sets you apart from your competition and stay true to it.

Budget. Lean business models are becoming the norm in modern small business, so don’t let a lack of money stop you from reaching for your dreams. The most important thing is not how big your budget is, but that you have one. Knowing ahead of time how much money you have will help you spend it in the ways that are most important. Burying your head in the sand rarely works when it comes to money and financing. If necessary, put off expenses that don’t affect your product or marketing (like office equipment) until you are bringing in profit.

Move quickly. It’s easy to get bogged down in the planning stages, but planning does not bring in profit. It’s essential to give each step the time it needs and not a second more. Many people dream of turning their great idea into a living, but most never achieve it because they don’t act. After a while, someone else has the same great idea and the opportunity is lost. Don’t let this happen to you; take the steps to give your brand the chance it deserves.

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Working at home is one of the more popular arrangements of our times, and it is easy to see why. It eliminates time spent in getting ready and getting to the office, but the quality of work and the pay remain the same. It seems like the best of both worlds… until you try it. Unfortunately, many small business owners have trouble finding that necessary work-life balance. Either they are working 24/7, or they get so distracted by their home environment that it is difficult to get anything done. Here are a few tips for making it work.

Set clear boundaries.
Many people think that working from home means sitting on your couch with a laptop while your kids play at your feet. This simply will not work. Just as with any job, you need to set boundaries regarding when and where you will work. Your family and/or roommates will simply have to respect your work time the same way they would if you worked outside of the home.

Be a mean boss. We’ve all had that boss—the one who is always cracking the whip, sending you back to work after the teeniest coffee break, and counting the minutes on your lunch hour. Well, in the absence of a boss, you need to actually be the boss, and a strict one at that! Set goals and schedules and hold yourself to them.

Schedule quiet times. In a traditional office, quiet time is almost all the time. In a home environment, you will have to plan ahead for these times, which are perfect opportunities to get detailed work done, call or Skype customers, and perform other tasks that require peace and quiet. Arrange for childcare at these times and, if possible, to be completely alone in the house. You’ll be surprised at how much you can get done in a few quiet minutes!

Work smart, not hard. Automate tasks wherever you can, and organize work in a logical way. It is so easy to spend your day going in circles without ever getting anything done. No small business owner can afford to let that happen.

Turn off. Setting boundaries doesn’t just mean keeping your work safe from your home life; it also includes keeping your home life safe from your work. The temptation when you work from home is to get in a few minutes’ worth of work wherever you can. However, this quickly leads to workaholism and a really annoyed family. Work your set number of hours, then turn off the laptop and turn off your inner worker.

These rules may seem strict, but they are essential for working from home. In fact, there is no way for you to make a nontraditional working arrangement successful without taking these types of measures. Even working in the most stifling office is preferable to getting nothing done or else becoming a 24/7 work machine. Many people have trouble finding the right work-life balance, and setting a few rules can help you move closer to the perfect combination for you.

Many people assume that you need a lot of capital in order to start a small business. They search for investors, talk to an endless lineup of banks, and get turned down at every corner. It’s a common story in this economy, and one that shuts down many small business ideas before they ever see the light of day.

However, many entrepreneurs are not willing to take no for an answer when it comes to their small business dreams. For these people, a lean startup is the only viable option.

What is a lean startup? In short, it is a way for businesses to begin with a smaller than average investment of time, money, and other resources. The lean startup is more agile and fluid, responding quickly to changes in the market and in the customer base. There are certain things that distinguish a lean startup from other new businesses. Here are just a few.

1. Start small. Whether you are looking at locations or batches of products, a lean startup starts small. Many lean startups begin selling products on the internet or out of the owner’s home, and initial product runs are kept as small as possible until the entrepreneur can safely predict their sales. This allows you to hone your products and your business plan until they match your customers’ needs exactly. In every business decision, keep your initial investment (and risk) as low as possible.
2. Do it yourself—unless you can’t. One of the sacred rules of a lean startup is that you should never hire someone to perform a job you can do yourself. As a lean entrepreneur, you will be shop-girl, housekeeper, and press release writer, often in the same twenty-four hour period. Outside of skilled work (such as logo design or web design) or jobs that require special equipment (such as manufacturing), you should never hire consultants or employees before they are absolutely necessary and completely funded by your profits.
3. Learn from success and failure alike. One of the real benefits of a lean startup is that it is flexible. You can change at a moment’s notice. This makes it all the more important to be in the process of constantly re-evaluating yourself. Make every sale a learning experience and every failure a chance to do a little better.
4. Don’t assume you know your customer. In fact, don’t assume anything. One of the biggest mistakes that an entrepreneur can make in their lean startup is assuming that they know better and that the numbers must be lying. In most cases, the metrics are completely accurate and the owner is merely presuming more than they should.
5. Go free whenever you can. In many cases, there are free or very low cost options to services that many entrepreneurs pay for. Instead of buying ad space, drive traffic to your site with nontraditional advertising such as link exchanges and social networking. Because shelling out a single cent, ask yourself if you will get your money’s worth and whether there is a cheaper way to get the same result.