*Note: This was written by a Yahoo! contributor. Do you have a small business story that you'd like to share? Sign up with the Yahoo! Contributor Network to start publishing your own finance articles.
Starting a business is scary, especially without any money to get it off the ground. At least that's what everyone told me. When I started my first business I was told by friends, family and several business associates I needed a lot more cash than $250 to start the company.
As any good entrepreneur, I chose not to listen to the critics who never started their own companies before and ventured out on my own with just $250. What I discovered contradicted the advice to start with a lot of money. I read about bootstrapping and knew that's what I wanted to do rather than dump thousands of dollars into a business I wasn't sure was going to take off or not.
I found three advantages to starting with little money.
Keep expenses low.
I was forced to keep expenses as low as possible. As the business grew, I continued to keep expenses down and didn't splurge on unnecessary items. A few business owners I met over the first couple of years I was in business had started at about the same time and by then were struggling. They started with expensive offices, brand name furniture, high tech flat screen TVs in the lobby and professionally designed stationary. Just three years later both were out of business and I was on my way to our first year over one million in revenue.
Reinvest the profit.
As revenue started to roll in it was necessary to keep that money in the business and reinvest in growing the company. I didn't take a paycheck for two and a half years . The business started with just $250. However, I kept some savings and my wife was working in order to cover our personal expenses. I was able to focus on growing the business by not relying on the business to cover my living expenses. In addition, I didn't have the stress of making sure there was enough profit in the business to pay myself each month.
Free marketing methods.
I found alternative marketing methods that didn't cost money upfront. One of the highest expenses in most businesses is marketing. To keep the marketing costs low, I created new advertising strategies to grow the company. I hired a commission-only sales rep to find other companies willing to sell our programs. The other companies, also known as affiliates, paid us when they made the sale. We then paid the sales rep from that revenue. Three affiliates in the first two years accounted for nearly 90% of our revenue and helped us launch the company to a multi-million dollar business.
If I had started a retail store or a restaurant, this approach probably wouldn't have worked. Instead, my business was online and offered consulting services. I was able to work from home until we started to hire employees and did all of our communicating with clients by phone.
Based on my experience, I won't start another company with more than $5,000 in cash.