So, you have read all the leaflets, looked at the websites, know the difference between Angels, Venture Capital  and loan guarantees…ready to go?

Whoa!! Stop right there! No No No!

Unless you are Dr Boffin and have just discovered a cure for cancer, in which case the following does not really, entirely and absolutely apply to you, ignore all that helpful advice. Why? Because starting any business requires you to minimise risk and maximise returns. Borrowing money increases risk – and what is at risk is you – your house, reputation, credit score and self esteem. ‘Selling’ Equity in very early stage businesses reduces returns and gives away control. Both are bad…bad, bad, bad to the bone. You may already have read Doug Richard evangelising this approach on this very  blog. So how are you going to raise money? Easy…

Neil’s first law of Starting-up: be frugal, tight and cheap.

The very best, most secure and reliable source of early stage venture funding is you. So start saving. I don’t mean saving 50 quid a month in the building society. I mean real focussed, disciplined frugality to build up that initial capital for your business.

Bin the lattes and cappuccinos, buy the supermarket value stuff, turn lights off, clip coupons, because saving is raising (money). Treat it as an exercise in Zen self awareness – mean can be fun. You will be amazed how much you will save and how quickly. Be ruthless and put it in a separate untouchable account. Tell people you are doing it and why, embrace wiki-meanness and ask other entrepreneurs and business owners for their tips… think of it as pre-marketing for your business, it shows people how serious you are. Every penny and pound you accrue gives you and your potential business more power, more time, more freedom and less risk, remember that.

On to…

Neil’s second law of Starting-up: Free is much better than cheap.

Your Granny always used to say “A pound saved is a pound earned!” Gran was on the right track but in Neil’s second law,  a pound saved is about £1.30 earned. Why? Well every penny you spend in your business will have to be administered – pay the bill, file the receipt, stick it on a spreadsheet, account for it, fill in the tax return – all of that takes time and that time has a value. Even worse, every penny you spend you have to generate more sales and work harder at the effort of fulfilling customer needs just so you can buy stuff, not even to make a profit. Sure, as your business grows you will need to spend money but in the very early stages whilst you don’t have to, embrace free, live free, evangelise free.

What do I mean by free? I mean totally free. An example, office space – nah never! Your local library is warm, well lit, full of helpful staff and probably has free internet access and workstations. If the library is full I have often found the furniture department at John Lewis is an excellent and comfortable short term office for phonecalls and e mails on the go. New laptop? You could buy it from Dell or you could find someone chucking one out. It only lasts 3 months…so…get another free one. (Just make sure you back-up.  Try one of the free online back services or keep all your stuff in Google Docs – also free) Need some furniture, or anything else for that matter…try freecycle.   

You get my drift. Actually there is a term for this approach to starting a business, it is called an “Ultralight Start-up” or Bootstrapping. It has mainly been applied to tech start-ups but the concepts of husbanding resources, collaborating and having a rigorous approach to purchasing in order to maximise shareholder value is pretty good Harvard Business School stuff.

In my next blog post I will talk about some of the people out there paid to give you money. Yes really – you are now as an aspirant entrepreneur, one of the most valued species in all of creation – the Giant Panda of the business world (without I trust the bizarre mating habits) – so I’ll outline how there are lots of people, including the taxman, trying to be nice to you….

In the mean time I’d love to hear your ultra-light, ultra-tight business tips – leave them in the comment box. Oh, and if you see someone taking a business call whilst reclining on a king-size bed in John Lewis, Cambridge, come and say hello!

Amongst other things Neil Gregory worked in Higher Education for 19 years, specialising in revenue generation and commercialisation of research. He has been Director of Business and Enterprise at the London School of Economics and is a Senior Industrial Fellow at the Institute of Manufacturing at Cambridge University. He is also a qualified as a Chartered Secretary.

Neil is currently Business Development Director of VentureNavigator where he is practising what he preaches – being Ultralight (and ultra-tight).