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Young, Entrepreneurial -- and Broke

By Mark Csordos

He explained that he didn't want to give up a percentage of ownership in his company, which is what venture capitalists would have wanted, and instead decided to take cash advances. The credit cards would never ask him about sales figures, the competition, his business plan and so on. As long as he kept his credit good and made the minimum payments, he could keep on borrowing. If what I saw was any evidence, he no longer carries any balances. The lesson? Credit cards are probably the easiest way for a young entrepreneur to raise money outside of the family. The danger is that if you can't pay back what you owe, you could hurt your credit rating or maybe even need to file for bankruptcy.

Corporate Headquarters: Kitchen Table. Or in a spare bedroom, as mine was, advancing to the master bedroom, and eventually, three years later, into a modest office out of my house. The landlord said there was a desk and file cabinet in the basement if I wanted them, and I said, "Wow, a furnished office!" Seriously, one way to narrow the gap between how much money you have and how much you think you will need is to need less money in the first place.

Countless businesses have been launched around the founder's table. Jeff Bezos got going from the garage of a house he and his wife were renting. To show that your home is a tried and true entrepreneurial practice, consider that way back in 1939, Bill Hewlett and Dave Packard started Hewlett-Packard in a garage in Palo Alto, California. At the other extreme, many Internet companies spent large amounts of their seed money on beautiful offices in upscale parts of town. They were fantastically furnished, which was fine until the founders needed money for something important, like keeping the business running.

There are ways to take a small amount of money and stretch it, and one of the best ways is not paying rent or buying office furniture. A caveat: Don't overdue the penny-pinching. In the early days, I spent too much time shopping for clients in order to avoid paying someone else to do it for $15 an hour. What I should have done was use that time to solidify client relationships.

One Last Thought. It would be nice if other people would lend you their money, but in reality, most young entrepreneurs with ideas for modest businesses and few contacts get the seed capital from a combination of the sources I have mentioned. You take some money from your bank account. You charge that new computer on a credit card. Your parents give you an interest-free loan that you agree to pay back "someday." And you become a "bootstrapper," the term for people that take a small amount of money and stretch it as far as they can by spending it on only what they need.

You certainly don't need to be broke if you are young and entrepreneurial. So don't get caught up in the mistake that many first-time entrepreneurs make: that the more money you have to start the better off your company will be. Sometimes, having less money forces you to be more creative and focus on your product and customers instead of having money to burn, like so many of the dot-coms did. Think of it this way: One of the most successful businesses of all times, Microsoft, was started by a young entrepreneur -- and during a bad economy, too. It takes more than money to make a business successful.

Mark D. Csordos, 31, founded and served as president of C&S Mystery Shoppers, Inc., from its inception in 1995 to its sale in 1999.

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