Bootstrapping For Startups

You may have seen the term 'bootstrapping' being thrown around a lot in venture. Bootstrapping is simply when a startup or business launches on a limited budget, without taking in any funding from outside sources.

Now you may be wondering how exactly you raise money without any outside funding. When a business decides to bootstrap, usually the people who are most invested in the business’ success leverage their own funds to start up the business.

There are different variations of bootstrapping depending on who you ask. For instance, some may consider the act of bringing in money from people close to you as bootstrapping, while others will disagree since you are still technically taking in outside financing.

In the end, though, it really comes down to using your own funds to finance your business during its initial stages.

For a startup, this will effectively teach you a lot of different lessons in cash flow management. By not taking in any outside financing for your business, you will have to be much more prepared, which will force you to plan for the future.

You need to learn how to effectively cut costs, how to negotiate with suppliers & manufacturers, and ultimately, how to succeed without a 'life raft' of outside investors there to bail you out if you're in trouble. Even if you happen to eventually take in funding from outside sources at some point, or in the sad event that one of your business ventures fails, you will be able to leverage the lessons you learned from bootstrapping your business, which are invaluable.

It is one of the best ways to give yourself the head start to learning how to run a business. Because of this, it is a good idea for any entrepreneur to consider. Prior to going out trying to raise funding, you may want to take a shot at bootstrapping your business instead.

If you are aiming to bootstrap your business, you want to have preparations in place. The fact is, bootstrapping isn't something you want to dive headfirst into. No matter what early stage of the process you are in, you will want to utilize some of the following tips in order to ensure your business is fully ready for it. 

Minimize Expenses Using Creativity

There are plenty of ways to reduce the total amount you have to spend. Try to learn from other startups by reading case studies. You can always cut overhead by starting your business in your home, which is very easy these days due to limited options because of COVID! If you are unable to do something, look for freelancers on websites like UpWork or Graphite you can hire.

Thinking outside the box and being creative will always present opportunities to save money.

Fund Your Startup With Purpose 

Just because you've decided to bootstrap your business doesn't mean you are supposed to waste your personal money. Putting all of your life's savings into your startup is way too risky. After all, if it doesn't make money, you will lose everything.

Rather, you want to talk about your finances with your co-founders and even a professional financial advisor. That way, you can figure out how much you can realistically spend to fund your business without going overboard. Ideally, you want to avoid credit cards with high-interest rates to fund your business. 

You may be able to search for and apply for grants — we wrote a blog all about this a few weeks ago. Every little bit can help if you are not taking in outside investors.

Choose The Right Co-founder

While you can certainly get away with bootstrapping as a solo-entrepreneur, you want to try to get someone that can be your co-founder. Having a co-founder will end up helping you get the in-house funds you need to kick-start your business without having to turn to external investors.

Along with this, starting up a business with limited funding is difficult enough as it is and you are likely going to be wearing many hats in the business. Having a co-founder will enable you to spread the work around evenly and to get a fresh perspective for better decision making.

Additionally, you can add a lot of skills to the equation by bringing someone on board. By choosing a co-founder who has the skills you lack, you will be able to avoid having to learn it yourself or reach to outside sources which are sure to take up from your available funding. Finding co-founders that have complementary skills is one of the best things you can do no matter if you are bootstrapping or not.

Take The Lean Startup Approach & Make revenues asap

If you've been interested in entrepreneurship, you've likely already heard about the 'lean startup' previously. If not, it became popular due to the publication of "Lean Startup" written by Eric Ries. The entire idea of the method is to move as quickly as possible. You want to go from concept to getting a viable product out as early as you can. Once it's out there, respond to any consumer demands or needs with swift alterations.

There are a lot of different things that you are going to need to do to use this method with success. First and foremost, you need a minimum viable product to do it. This is a product that is nowhere near finished, but one that has enough design elements and features that makes it worthy of putting into customers' hands.

As soon as your product is live, you will be able to see what the market is saying about your product, figure out what works and what doesn't work, and improve from it on your second iteration to improve customer satisfaction. 

This model is very popular among start-up businesses who are bootstrapping because it coincides with the philosophy of bootstrapping which is to spend as little time and money on research and development, create cash flow as early as possible, and to tweak based on real customer feedback.

Bootstrapping May Be For You

If you have a business idea, it doesn't mean you have to take on outside funding in the form of debt or equity. Instead, try to bootstrap your business. Not only does it help you retain your equity in your business, but it can help you learn how to start and run a business the right way without a safety net to fall back on.