How to start a business with no money: a guide for product sellers

How to start a business with no money, in short

Starting a product business with no money means paying for nothing until a customer has paid you. Three choices make that possible: what you sell, where you sell it, and how much of the legal setup you do on day one.

Sell something you already own, can make from materials you have, or can buy only after an order arrives. List it on a marketplace or store builder with no monthly fee, so the platform is paid from each sale instead of in advance. Start as a sole proprietor under your own name, which the legal section below explains.

The costs that remain come with each listing or sale, such as fees, packaging and shipping, or depend on where you live, such as a seller's permit or a local license. Check those before the first sale.

What a product business costs to start, and what can be free

The table lists the costs most new product sellers in the US meet, what each one costs at the low end, and whether you can put it off. Amounts come from each company's or agency's own page.

Stock is not in the table because its cost depends on what you sell. The next section covers ways to sell before you buy.

Steps to start a product business with no money

These steps assume you sell physical products online from home in the US, and that you want to spend nothing before the first order is paid.

1. Pick a product you can sell before you buy it

   Good no-money products are things you already own and can resell, things you make from materials on hand, or made-to-order items you start only when someone pays. Avoid anything that needs a large first order from a supplier.

2. Check what your product needs legally

   The SBA says most small businesses need a combination of licenses and permits from both federal and state agencies. Look up the rules for your product type, state and city before you sell, so you know about any permit fee before the first order.

3. Choose a place to sell with no monthly fee

   A marketplace such as Etsy or eBay brings its own shoppers and takes its fees from listings and sales. A free store plan such as Square Online gives you your own store but no shoppers of its own.

4. Take your own photos and write your own listings

   A phone, daylight from a window and a plain background are enough for first listings. Write what the item is, its size, its materials and how long it takes to make or ship.

5. Price so each sale covers its own costs

   Add up materials, packaging, shipping and the platform's fees on one sale, then price above that. The fee comparison below shows what each platform keeps from a $24 sale.

6. Find the first buyers for free

   Tell people you know, post the item on your own social accounts, and ask the first buyers for a photo you can share. Paid ads can wait until you know which products sell.

7. Put the first profits back in

   Spend the first sales on materials for the next orders, then on packaging. Add optional upgrades, such as an LLC or a paid plan, once they save or protect more than they cost.

Ways to get stock without paying for it first

Stock bought before anyone orders is money spent before a customer pays. These models move the cost of stock to after the sale, or remove it.

• Made to order: list a sample, take payment, then make the item. State the making time clearly in the listing so buyers know when to expect it.
• Pre-orders: show a finished prototype and take orders for a batch with a stated ship date. Buy materials once the batch is paid for.
• Reselling what you own: clothes, books and household items you no longer use are stock you already paid for.
• Print on demand: a supplier prints and ships a design only after a customer orders. The supplier's price comes out of each sale, so the margin is thinner.
• Small batches: make a handful of items from materials on hand, sell them, and size the next batch from what sold.

What each platform keeps from one sale

Without a monthly fee, the platform is paid from each sale. This is the same $24 sale on three places with no monthly fee and on Shopify's Basic plan, using each platform's own published rates.

Marketplace or free store: where to start with no money

A marketplace suits a start with no budget because it already has shoppers. Etsy's fee policy says that to open a shop you may be required to pay a one-time set-up fee, and that any such fee is displayed and charged as part of the shop set-up process. eBay gives 250 free listings a month and takes 13.6% of a sale in most categories, plus $0.40 per order over $10 ($0.30 at $10 or less).

A free store plan gives you your own store at no monthly cost. Square Online's free plan charges 3.3% + 30¢ on online card sales, but the store brings no shoppers of its own, so you have to send them there.

You can start on a marketplace to get the first orders, then add your own store for repeat buyers. A paid plan such as Shopify Basic at $39 a month makes sense once the monthly fee is a small share of monthly sales.

The legal setup, and which parts are free

This section is general information, not legal or tax advice. Rules vary by state, county and city, so check with your state and local offices before you sell.

The structure and tax steps below come from the IRS and the SBA. Permits and licenses come from your state, county or city, and for some regulated products from a federal agency.

• Business structure: the SBA says you are automatically considered to be a sole proprietorship if you do business activities but don’t register as any other kind of business. The trade-off is that you can be held personally liable for the debts and obligations of the business.
• LLC: the SBA says LLCs protect you from personal liability in most instances. Registering a business with the state costs less than $300 in most cases, according to the SBA, but fees vary by state.
• Business name: the SBA says a DBA (doing business as) name lets you conduct business under a different identity from your own personal name or your formal business entity name, and that most states require you to register your DBA if you use one.
• EIN: an EIN from the IRS is free, and the IRS says you never have to pay a fee for an EIN. Approved online applications get the number immediately online.
• Seller's permit: the SBA says sales tax and other taxes can vary significantly from place to place, so permit rules depend on your state. In Texas the permit has no fee, though you may be required to post a security bond.
• Local licenses: the SBA says license requirements and fees vary based on your business activities, location, and government rules. Ask your city or county whether a home-based seller needs one.

For federal income tax, the IRS says you have to file a return if you had net earnings from self-employment of $400 or more, and the self-employment tax rate is 15.3%. Set part of each sale aside for tax from the start.

Free help, and small loans if you need some money

SCORE, an SBA resource partner, has mentors who offer advice at no cost by email, phone and video, including on financing and business planning.

If a product needs some money up front, such as a permit fee or a batch of materials, the SBA Microloan program lends up to $50,000 through intermediary lenders, which the SBA says are nonprofit community-based organizations. The SBA says the average microloan is about $13,000. A loan is debt, so it suits a product that already has buyers more than an idea you have not tested.

Where Nation fits

Questions about starting a business with no money