Bootstrapping is the entrepreneur’s dream. It means no investors making outrageous demands on your company. True, outside funding can boost the financial muscle of your business; however, self-funding allows you the freedom to scale and run the business your way.
While bootstrapping can be a challenging road, it is worth the struggle. It gives you autonomous control until you reach a stage where additional outside capital will not compromise your goals.
How can you bootstrap your startup without feeling overwhelmed? And what are the benefits of bootstrapping? Keep reading to find out.
You might also enjoy reading: How to start a business while still employed?
What Does Bootstrapping Mean In Business?
Bootstrapping means using only existing resources, including personal savings, personal office supplies, borrowed or invested funds from family or friends, and home space to start and grow a company. It is an excellent way to finance your small business idea by buying and using resources at your own expense, without sharing equity or borrowing vast sums of money from banks (Source: U.S. Chamber of Commerce)
Bootstrapping is building a business from scratch without asking external investors or with minimal external capital.
10 Ways To Bootstrap Your Business
Bootstrapping means you raise the seed money for your business without help from investors. You run the venture with the bit of money you have and plow back the profit to grow it.
The million-dollar question right now is how do you master the art of bootstrapping and make the process less overwhelming?
Here are 9 practical ways that will help.
1- Look For a Scalable Business That You Can Finance With Less Startup Capital
Starting a world-class advertising agency can be glamorous, right? I would love to create one. Nevertheless, such a business requires considerable capital to get off the ground.
I am not discouraging you from dreaming big. You could put that as a long-term goal. With bootstrapping, you have limited capital. You can start with one employee, partner with another digital marketer, and build a client base.
After you have grown and your revenue can accommodate expansion, you can scale to world-class status.
2- Choose a Business With Quick Returns
Bootstrapping is ideal for market-ready businesses. This way, you can begin to sell immediately after launch. Your money starts working for you, thus realizing returns right away.
You can reinvest the returns from the business and propel development to the next level for high returns.
On the other hand, a business that takes a long time before you can cash in can hold your capital and stall operations.
3- Reduce Your Expenses
One way to increase startup capital without pumping in more money is to cut expenses. I know it can be tricky for startups because you have endless items to buy at the start of a business.
- Setting up an office requires
- Office Stationeries
- Renovations
- Equipment
- Rent
- Salaries
- Systems
And the list goes on…
However, you can prioritize necessary items integral to your operations while postponing unimportant expenses.
For instance, you could soundproof your basement and turn it into an office. This way, you cut down rental fees. You can also run the business solo or with one employee until your operations kick up.
And with reduced costs, your business will rely less on outside funding as you utilize available resources optimally.
4- Tap Into Your Savings For Capital
Before launching a startup, you may have collected some startup capital. However, sometimes the money is barely enough to get you to the final stage. Where do you turn to for additional capital?
Your savings is the best way to bootstrap your business without relying on borrowed funds.
Some startup loans may have high-interest rates that eat into your profit, which means less money to plow back into the business.
Savings will come in handy when you need to sort out unexpected expenses you didn’t budget for. However, I encourage you to exercise caution not to dip into your retirement savings. It may take a while before you recover the money invested in a startup.
5- Insist On Cash Payments or a Shorter Credit Period
Offering credits is an excellent way of building long-term relationships with bulk buyers. But you want to remember that you are not yet an established enterprise.
So, to bootstrap your business, ensure all your clients pay for their purchases immediately. If you must give credit, provide short credit periods. This way, money is available to finance your daily operations.
With cash payments, you can invest money back into the business. You can use the time invested in collecting debts to grow the business and look for new clients.
6- Instead Of Hiring: Outsource Talent
Entrepreneurs are rarely a jack of all trades. You will need someone to help you develop the business website, an attorney to help with legal issues, and an accountant.
Instead of providing permanent employment to these people, you could outsource their services.
You can find talents from freelancing sites like Upwork, Fiverr, Contently, and Flexijobs.
Outsourcing allows you to pay employees hourly or daily when you need them.
7- Lease Equipment
Major purchases that will likely take up a huge chunk of your startup capital are equipment and machinery. However, leasing provides an opportunity to bootstrap your business because you spend less in the short run.
Some of these machines you rarely use, and a leasing decision is the most economically viable. It could be cheaper than buying, so evaluate your needs and make informed decisions.
8- Network
You are probably wondering how networking will help you bootstrap your business. Here is how: networking with relevant entrepreneurs helps you learn from proven examples. You can also meet potential customers and partners during networking events.
When you are launching a startup, you need all the help you can get. And successful entrepreneurs pointing you in the right direction are valuable.
Networking allows you to access startup coaching and mentorship programs. These programs give you access to like-minded entrepreneurs who bootstrap their businesses.
These friends will guide you and offer valuable insight into the industry and where you can get customers. They can also advise you on when to make changes in your startup journey.
9- Use Free Powerful Tools
Another way to bootstrap your business effectively is to take advantage of free powerful tools such as:
- Slack: For meeting and communication
- Google Docs: to share documents and instructions
- MailChimp for your collecting emails and conducting email campaigns.
- WordPress to build a simple website before upgrading.
- Wave Accounting for your accounting functions like invoicing, payment tracking, billing, financial, and payroll management.
These tools help you start a fully operational business early and realize profits.
10- Turn To Friends And Relatives
Friends and family members who believe in your course can lend you money or give you support without expecting returns.
However, before you take this route, ensure you know what the money is for. You will likely convince your friends to support you with a clear business plan and a projected outcome.
Those who share your dreams can support you when they see you know what you are doing and that your projections are realistic.
Benefits of Bootstrapping Your Business
Why avoid wooing investors into your business at an early stage? While bootstrapping a business is hard work, here are the benefits of bootstrapping your business.
1- Creative Freedom
Bootstrapping gives you priceless creative and executive freedom. You are not accountable to a nagging outside noise protecting its investment since you use your funds.
You make your own decisions. And even if you supplement with external funds later, bootstrapping provides immeasurable control over your operations.
2- Smaller Operations
Since you may have less capital, you will start small. But how is smaller operation a benefit? It allows you to test your assumptions without major financial problems before scaling. You will also know your target market, products, and customers intimately.
Starting small is also beneficial because if you make mistakes, which you will, the impact is often small. The bright side is that you will learn and become a more vigilant founder.
3- Higher Stakes With Higher Rewards
Since you are the business’s sole owner, if the company fails, so do you. On the other hand, if it succeeds, you also succeed at high multiples.
Bootstrapping makes ownership clear and manageable. No investor has a claim to the startup’s profits and decision-making process.
4- Better Products
With a limited budget, you will likely pay greater attention to your product and services. A bootstrapped company pays more attention to its customer and their needs through a superior offering.
The result? High revenue and a strong brand- helping you expand faster.
5- Good Spending Habits
Entrepreneurs bootstrapping their businesses have minimal resources and will not waste money on less important things. They will cultivate better spending habits, which many people struggle with worldwide.
One main characteristic of successful people is controlling spending or postponing additional expenses. With this mentality, you will turn your venture profitable soonest.
6- Clear Vision
Most entrepreneurs have a clear vision for their businesses when they start out. As more investors come in, you will likely deviate from the original plan and goals to incorporate divergent opinions.
Bootstrapping allows you to maintain a clear vision for your company. You can achieve your goals without someone changing your direction.
What to read next:
- How to Become a Creative Entrepreneur? (Here’s how!)
- How To Start a Laundromat Business: Here’s how!
- Top 7 Most Profitable Vending Machines.
The bottom line
Every entrepreneur has dreams and aspirations when launching a startup. However, their success depends on their ability to execute. And bootstrapping is one of the best ways to achieve this.
It requires hard work and sometimes lonely nights. Nevertheless, the returns are worth any perceived struggle.