How to Start a Business Without Outside Funding

By Kiely Kuligowski,
business.com writer
|
Apr 24, 2020
Image Credit: Ralwel / Getty Images

Shama Patel launched a successful skin care company with no outside funding. Here's how she did it.

When Shama Patel was an attorney in her 20s, she continually experienced blemishes and issues with her skin. She wasn't aware of all the external factors that contributed to her skin's health, like diet, stress and exposure to Chicago's pollution.

On top of that, she was a busy professional with little time to devote to an extensive skin care regimen and lacked the knowledge to properly care for her skin. These experiences inspired her to launch Clean Your Dirty Face, a facial bar and skin care line that aims to educate clients about skin care and provide clean, effective products.

"My skin care company is made for today's professional men and women who have limited time in their day but still want clear, healthy skin," Patel said.

Patel's seven facial bars – located in Austin, Texas; Los Angeles; Chicago; Boulder, Colorado; and Charlotte, North Carolina – offer 30-minute facials that eliminate the frills commonly associated with facial treatments, focusing solely on the steps that will help clients achieve their unique skin care goals. Her skin care line features 18 straightforward products for acne, anti-aging and toning.

What makes Patel's story especially unique is that she launched Clean Your Dirty Face without any outside funding, allowing the business to grow without the burden of debt.

The benefits of not using outside funding

"I got an SBA loan to start my first business, AIR Aerial Fitness," said Patel, "and it wasn't until I had grown AIR into four locations that I was able to take a chance on Clean Your Dirty Face."

Patel opened her first CYDF pop-up shop in 2015 for $25,000. She made all of her money back in the first month and has organically grown the business from there.

"Not receiving outside funding in the beginning stages while I was still perfecting the business model was the best decision," said Patel. "It allowed me to have control, and to grow a strong business model that is now prime for scaling."

There has been an increase in startup companies choosing to bootstrap instead of seeking outside funding, and many young companies say that it has helped them on their journeys as small business owners. These are some potential benefits of choosing to bootstrap instead of looking for funding:

  • It will more accurately validate your company. If your product works and people like it, you will know, and you'll also know if they don't. Venture capitalists sometimes give business owners an inflated sense of validation or value, which can put your company at a disadvantage when you take it to market.

  • It helps you save your equity. External funding can be extremely helpful and a big accomplishment, but it often comes at the price of equity in your company. You may have to give up control of certain business decisions, and it requires you to enter into a partnership of sorts with the investors.

  • It saves you valuable time. Fundraising is an intense and time-consuming process, taking away from the time you could spend making sales. The rejection rate is high for startups – getting funding can take months or even years. If you're able, this time might be better spent growing your business on your own.

  • It teaches you valuable budgeting lessons. Having limited funds as a young business can push you to be savvier and more creative with your money, keeping you from spending money on things your company does not need. It can also help you get organic feedback from other entrepreneurs, friends, or family as opposed to using a fancy marketing team or sales reps.

This is not to say that bootstrapping is easy.

"[The hardest part about not having [outside funding] was seeing competitors open locations built to the nines from the outset," said Patel. When she first launched CYDF, she stayed true to her brand and kept her facial bars clean and simple, with no frills.

"I consider myself a pretty direct person," she said. "There's no second-guessing about what we do here – we simply clean your dirty face."

How to start a business without outside funding

If you're thinking of starting a business without outside funding, Patel recommends looking on the bright side. Every dollar matters, so you can't try different things until you find something that sticks. Instead, you'll have to quickly figure out what areas of the business drive your revenue and continue to invest in those areas to drive even more revenue.

Patel also recommends following simple, tried-and-true business principles when starting out.

"I don't think the steps I took [when founding CYDF] were really that unique," she said. "My philosophy is simple in that I abide by business fundamentals."

These are Patel's fundamentals:

  • Have more money coming in than going out.
  • Reinvest revenue back into the business.
  • Focus on strong unit economics. Don't focus solely on top-line revenue; all locations should be profitable.

It can be difficult to know when to take the plunge and actually start your business, especially if you're in another career, as Patel was.

"There wasn't a defining moment when I decided it was time to quit," she said. "Rather, I felt like the writing was on the wall once I felt that my creative energy was being suppressed."

Patel said the key for her was knowing herself and having the confidence that she could do it, especially because she'd already found success with her previous company. "Having that self-awareness is what gave me the confidence to quit something that made me feel trapped."

For entrepreneurs who actively seek to start their own business without funding, Patel reiterated that sticking to business fundamentals is the way to go.

"Take the opportunity [of having no funding] to have laser focus on your business," she said. "Work incredibly hard, and build your business with the mentality that you will own it forever. That's the only way you will build something of extreme value and beat out every competitor in your field."

Kiely is a staff writer based in New York City. She worked as a marketing copywriter after graduating with her bachelor’s in English from Miami University (OH) and is now embracing her hipster side as a new resident of Brooklyn. You can reach her on Twitter or by email.
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