When I graduated from Brown University in 2011, I turned down the opportunity to make a healthy finance salary right out of college to start my own business and only make $1,000 a month. Many people thought I was crazy – and a lot still do – but seven years later, after multiple rounds of funding, my company is thriving.
I studied entrepreneurship at Brown, where I first developed the idea for my company Premama. Premama started as an alternative to delivery systems for prenatal vitamins, which historically came in as large "horse pills" that were difficult to consume and often caused nausea. Being a 22-year-old, single male with no kids, I admittedly jumped into a market I knew nothing about – but I knew there was a problem within it that needed solving. Today, Premama has 10 products and offers a staged process for conception, from a birth control cleanse, to fertility and prenatal vitamins, to products for lactation. It has helped thousands of families get their start.
The month I graduated, I was fortunate enough to win the Rhode Island Business Competition for my concept of Premama. Not only did that give me initial seed capital, it gave me the confidence to turn down a high-paying finance job in New York and put off the idea of law school so I could give entrepreneurship a try.
I was again fortunate enough to have $1,000 per month to live on, which we all know is not a lot and well below the poverty line; but I was fine because I was used to living like a college student (broke) and applied that approach to my first few years as an entrepreneur. One can actually stretch that amount pretty far if they follow some of my advice below.
How to live cheap and let your business thrive
One key to my business success, and later my personal success, was being able to put all initial capital ($50K from Business Plan winnings) into the business, and not my pocket. This allowed me to build the product and team I needed to then raise my first-round capital ($250K, of which I only took $18.5K in annual salary), which then led to more growth and later rounds in the millions of dollars.
By focusing investment and grant capital on your business, you signify to outsiders (who could be investors) that you are cash-conscious and put the business before yourself, two very attractive traits to investors. Here are a few tips I used to still enjoy life, with so little:
Do not live in a major city.
While it may be very appealing to move to a big, bustling city like New York, Chicago, San Francisco or Los Angeles, I would not suggest doing so until your startup is well funded, if ever. Moving to these cities adds value but costs the business much more. In today's world, you can run your business from anywhere, and by avoiding high-priced cities like the above, you can focus more capital on growing your business, and less on office space and salaries. I chose to keep my company in Rhode Island, where I could rent a room for $400 per month and still have $600 left over for food and fun – a lot for someone who was used to living like a college student and had maybe only $50 to their name any given week.
Avoid the "golden handcuffs."
By starting your company out of college, you won't be used to a luxurious lifestyle and will likely still enjoy eating ramen versus The Capital Grille. This will allow you to pay yourself less and put more into ensuring the business gets off the ground. The more successful the business becomes, the more money you can raise and the more you deserve to be paid down the road. If you're used to making a large salary or have a mortgage and family to take care of, it can be much more difficult to take that leap into entrepreneurship. I mentor many entrepreneurial students and often preach that the easiest time to start a company is either in college or when your kids are through college.
Roommates are your friends.
Being an entrepreneur can be very lonely. Having roommates, both in and outside of the office, will not only lower your cost of living but also surround you with positive influences and sounding boards in your life.
Stick to your budget and avoid personal debt.
I hoped my salary would increase quicker than it did, but I didn't spend money assuming it would. Having a budget is always a positive, even when you are extremely successful. By creating a strict monthly budget and sticking to it, you can avoid credit card debt and overspending. First pay for shelter, then pay for food, and use what is left for fun. Sometimes this means sacrifice, but as the business grows, while you sacrifice, this will only be a short-term problem.
By being budget-conscious, you will impress current and potential investors, grow the business quicker, and set yourself up for success. Most thriving startups are seen as an overnight success, but in reality, they've worked tirelessly in the background for years. Do not be as concerned about your personal finances today; put the business first and live frugally, and you will see a much greater return on that initial sacrifice in the future.