Photography: Matt McGee.
You have an idea for a startup business, but with the world’s economy already in or heading for recession, finding the funds you need is not going to be easy. Still, you can build the funds you need for your initial startup phase using a tried and tested approach known as bootstrapping.
What is Bootstrapping?
Bootstrapping is a classic entrepreneurial approach to self-financing a business. The basic principle is simple: start with whatever funds you have and reinvest all or most of the revenue your business earns. Take a very minimum of revenues for personal use. Do whatever else you have to to pay your personal expenses.
The Pitfalls of Bootstrapping
Bootstrapping is not an easy approach for most entrepreneurs. It does require sacrifices, dedication, and persistence. There’s no guarantee that it will ultimately take you towards business success, which can be frustrating, disheartening and more.
The Benefits of Bootstrapping
With bootstrapping, you’re in control. You don’t owe any one blood (family, friends) or loan (investors) money. You build incredible discipline that will stand you in good stead for your next venture. Today’s entrepreneurs have the added benefit of the Internet and being connected. That means being able to run all or parts of your business while mobile or even traveling. Oh, did we mention all the free software?
Bootstrapping Your Startup Business
Successful bootstrapping does require a certain mindset that is willing to put up with sacrifice and compromise in return for a later reward. In a very real sense, it’s the same as wealth-building mentality.
- Have a plan. Not just a business plan but also a life plan, since the two WILL be intertwined for some time to come.
- Change your habits. Minimize your personal expenses by cutting out anything you don’t need. (Told you there’d be sacrifices.) That will build up extra savings that can be put towards your startup.
- Use free software. Inexpensive and free software for desktop and web browsers abounds online. A lot of free apps are suited business use. These applications can help you manage your business, plans, finances, team, tasks, customers, and more. Take advantage of the free trial periods that many software companies now offer for their applications. Some apps are good for 7-30 day free trial, and are often fully-functioning. Through clever planning of download and installation, you just might be able to coast for several months without spending a cent on software. If your business is entirely online, it’s quite possible to create success out of literally just your time and bootstrapping principles.
- Minimize your business expenses. In some industries, you need to give the appearance of prosperity. However, buy expensive new furniture, cabinetry, computers and whatever else is not necessary for everyone. For example, don’t go overboard on your office expenses, whether it’s at home or rented somewhere. Do you even need a business office or can you work at home? If you take an office, does it have to be so large? Can you share with another entrepreneur? Are you applying a “green” approach to cut office operating costs? Never mind that “friend” calling you a cheap so and so. This is sometimes what you have to do when you bootstrap: operate lean and green.
- Decide between wants and needs. This is an extension of the last two rules. You have to decide what you absolutely need right now and be (or learn to be) disciplined enough to defer the “wants” until your business has disposable income. If you want to treat yourself, do it out of your personal income.
- Get out of debt. If you have personal debt – aside from a mortgage or car loan – consider paying it all off before you launch your startup. Get into the habit of having minimal debt, so that you apply the same mindset to your entrepreneurial endeavors.
- Increase your personal income. Your startup while slowly take over your life if you let it. If you stand firm and keep some time for yourself each week, use it to build additional personal income.
- Increase your revenue. It’s inadvisable, but if you would rather put all your free time into your business, then try to come up with ways to increase its revenue now. Try building multiple streams of income on the side to fund the long-term goals of your startup.
- Think critically. Try new methods to get to where you want to be. Apply advanced problem solving.
- Apply guerilla marketing. Thinking outside the box isn’t enough. You need to go ahead and implement your plans, and to do so while spending the minimal amount of funds. Leverage the Internet as much as possible. Learn online marketing and bootstrap your own target market. How you do this really depends on what kind of business you are building, but writing targeted articles on your company site is one possibility.
One last bit of advice: the successful bootstrapper embraces challenges with a DIY (do it yourself) attitude. It’s not always a necessity but it doesn’t hurt. That is, why pay for something if you can do it yourself? However, factor in that if your time is worth $X/hour in revenues and you can hire someone to do something for much less, there will come a point where you need to hire and delegate.