How to Start a Business for (Almost) Nothing

Now more than ever, it's possible to start a great company for peanuts.

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As he lay at the bottom of a hole nine fathoms deep, Baron Munchausen thought he was a goner. Then, so the tale goes, he realized he could hoist himself to safety using the sturdy straps on his leather boots. Today, bootstrapping--the art of starting a company with little or no money--is as romanticized as that 18th-century yarn. More and more entrepreneurs have come to believe that it also represents the surest route to success. During the peak of the dot-com bubble, the current thinking holds, too much funding led too many companies to misspend. In contrast, to skimp and run a business from the garage requires discipline, creativity, and a true sense of what the market wants.

What's more, bootstrapping may be easier today than it ever has been. With a DSL line and a $9 website, a business can reach customers all over the world. Just-in-time delivery helps a new business avoid sinking cash into inventory. And the proliferation of outsourcing means everyone from manufacturers to human resources specialists are willing to provide a start-up with rentable infrastructure from day one.

On the flip side, spending freely is more dangerous than ever. Interest rates are rising, and the bankruptcy law passed last year created strict consequences for companies that owe their creditors when they fail. Tough overseas competitors continue to force U.S. companies to relentlessly trim their cost structure.

In a sure sign that the world has changed, venture capitalists have begun warning entrepreneurs against taking funding. "When you have too much money, it corrupts your brain," says veteran VC Guy Kawasaki, who in January posted on his blog 11 ways companies can be bootstrapped.

So carpe the bootstraps. On the following pages, you'll find profiles of seven entrepreneurs who started their businesses with between zero and $2,000. They survived on 50-cent hot dogs and worked from cramped basement offices. A certain swashbuckling baron would be proud.

• Lesson 1: Brand It Creatively
• Lesson 2: Switch Business Models On a Dime
• Lesson 3: Work From Home
• Lesson 4: Get Paid Up Front
• Lesson 5: Use Cheap Web Tools
• Lesson 6: Get Your Suppliers to Finance You
• Lesson 7: Get to Know Your Customers Really Well
• The Billionaire Bootstrapper

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