In order to start a business, you need time or money – and in some cases, both. But the good news is that the old mantra, “it takes money to make money,” isn’t always true. There are some situations in which you can start a business with very little overhead or upfront investment and still bring in sizable revenue.
What Constitutes a Low Overhead Business?
The failure rate for small businesses and startups is overwhelmingly high. You have to do a lot of things right to make sure you’re on the path to financial success, not failure. And while there are many causes for failure, one of the biggest problems entrepreneurs face is the threat of negative cash flow.
A variety of elements play into the cash flow equation, but overhead is one of the more important aspects. You can find a lot of different definitions for the term, but Investopedia has one of the clearest.
“Overhead is an accounting term that refers to all ongoing business expenses not including or related to direct labor, direct materials or third-party expenses that are billed directly to customers,” Investopedia explains. “A company must pay overhead on an ongoing basis, regardless of whether the company is doing a high or low volume of business.””
For an entrepreneur with little business experience, it’s easiest to think about overhead in terms of two major categories: fixed and variable. Much in the same way that you have fixed and variable expenses in your own personal budget, there are some business expenses that remain the same on a monthly basis and some that change on a month to month basis.
Running a low overhead business means different things to different people; but generally speaking, it involves reducing or avoiding rent (working from home), taking a DIY approach to things like marketing and advertising, paying contractors instead of hiring employees, being efficient with utilities, adopting scalable tools and solutions, etc.
6 Low Overhead Business Ideas
While there are some low overhead strategies you can adopt in just about any industry or business model, certain niches are more conducive to maintaining low overhead than others. There are literally hundreds of different ideas, but we’ll analyze a few of the most promising ideas for your convenience.
1. Home Childcare
When babysitting comes to mind, you may think back to your days as a broke teenager. But there’s an industry that exists far beyond this. Home-based childcare is actually a swiftly growing trend and you may be able to turn it into a profitable profession.
While you have to be very careful with state rules regarding caring for children in your home – and you’ll need a healthy amount of insurance – there aren’t a whole lot of expenses that go along with this sort of operation. If you only care for one or two children at a time, you may even be able to work out of other people’s homes.
You aren’t going to get rich doing childcare, but it’s especially nice if it allows you to care for your own child at the same time (thereby, eliminating the need to pay for your own daycare).
2. Tour Guiding
The less you rely on others, the better your chances of keeping the majority of your revenue. Each time you add a supply chain partner, you have to give away a cut of your profits. Sometimes the amount you forfeit is well worth the value you receive, but other times it’s not essential to the success of your business.
Tour guiding is one business concept that eliminates the need for almost anyone else. If you live in a big city – or an area that’s known for something in particular – you could start a tour guide business.
Strawberry Tours, which now operates all over the world, is a great example. Consider this Harry Potter Tour in London, which is one of the company’s most profitable ventures. There’s no need for a physical location, the tour utilizes public resources, and the only major expense is paying their contracted tour guides. That means the vast majority of the revenue turns into bottom line profit.
Is there some sort of public attraction, historical site, or nature-based site that people flock to in your area? You could build a business based on nothing but your own knowledge and interpersonal skills.
3. Teaching and Consulting
Are you particularly skilled in a certain area? Do you have lots of experience in a certain industry? You may be able to parlay these talents into a career in the form of teaching or consulting.
It’s a lot easier to run a low overhead business when you’re selling a service, as opposed to a physical product that requires you to pay for materials and manufacturing. For example, let’s say you used to be a high school science teacher. You could run an after-school tutoring program for students who need help with biology and chemistry, or are looking for SAT prep. There’s virtually no overhead and you’re simply using a skill you already possess.
4. Handyman Work
While the old saying says, “there’s nothing certain but death and taxes,” this isn’t necessarily true. If you’re a homeowner, you can add repair needs to the list. Whether it’s broken windows, clogged gutters, faulty appliances, or anything else, Murphy’s Law always prevails in home ownership.
If you have handyman skills, someone else’s loss is your gain. By running a handyman business in your area, you can pick up a steady stream of work without needing to sell a physical product or even have a physical location.
A handyman business works particularly well if you already have a large network of people you know. Depending on the size of your neighborhood, you may even be able to find steady work right around the block. Just make sure you look into things like licensure and insurance.
5. Freelance Writing
Any time you can work from home, you’re generally able to avoid spending a lot on overhead. This is especially true when it comes to freelance writing, which is growing in popularity and profitability.
If you’re a skilled writer who has a knack for being able to quickly research topics and develop content, you may be able to start a business in this area. Content marketing is a competitive niche, but the money is there for those who are willing to put in the work. Expense-wise, you’re looking at nothing more than a business website, computer, internet, and your time.
6. Hobby-Based Business Venture
Do you currently have a hobby that you enjoy? Have you ever considered that the hobby may be monetizable? The great thing about turning a hobby into a business is that you typically already possess the knowledge and resources needed to begin making money.
Take woodworking, for example. If you’re a woodworker, you already have a bunch of tools that you’ve purchased out of your discretionary income. These tools could easily be used to build items that could then be sold to local stores or customers. Not only will you make money, but you’ll have fun in the process.
Keep More of Your Revenue
There’s nothing more frustrating than bringing in a high volume of sales and enjoying big revenue numbers, only to see all of the profits dwindle away at the hands of superfluous expenses. If you want to keep more of your money, you should be focused on driving down overhead expenses.
Technically speaking, it’s possible to run a low overhead business in any industry. However, some industries and niches – such as the ones alluded to in this article – are much more conducive to lean operations than others.
If you can find a way to start up a venture in one of these areas, you’ll have unlimited opportunities to build a thriving (and highly profitable) business.
Analysis Photo via Shutterstock
This article, “6 Low Overhead Businesses You Can Start Before the End of the Year” was first published on Small Business Trends