Gathering enough funds to start a business is no easy endeavor. In fact, funding is one of the greatest challenges faced by new entrepreneurs. While lending alternatives like OnDeck and merchant account providers like First American Merchant have made business funding more accessible, some entrepreneurs choose the bootstrapping option.
Bootstrapping is when an entrepreneur funds their business solely from their own pocket. This can be done either through personal savings or the sale of one’s own individual assets.
Through bootstrapping, business owners get complete financial control over their businesses. There are no lending institutions looking to demand loan payments each end of the month, nor are there power-hungry equity shareholders dictating your every move.
Of course, bootstrapping has its downside. For instance, the working capital of your business is limited to your own personal finances and how well you can manage them. To make it work, financial discipline is key.
Here are a few tips on how you can ensure the success of your startup with bootstrapping.
- Lower your operating costs to a minimum by having as few employees as possible.
One area that can really eat up your invested capital is employee payments.
Minimizing the number of people working under you requires you to be conversant with all aspects of your business so that you are able to do most of the work yourself. This will give you the flexibility to build a revenue-generating foundation without incurring unaffordable fixed costs right at the start.
If there are tasks you really don’t have the time or the skill to do yourself, consider freelancers and contractors as opposed to permanent employees
- Create a scalable business routine that works.
Bootstrappers do not have the luxury of splurging money for the attractive and lucrative opportunities which have the potential of high returns. Instead, a bootstrapper’s limited finances forces them to concentrate on what they do and do it well.
Creating a business routine based on the most fundamental aspects of your business without becoming victim of unprecedented distractions is a sure way to succeed.
- Save, save, save
Bootstrapping a business can demand a lot from an entrepreneur. Therefore, saving personal funds before the launch of a business as well as investing profits back into the business when in operation is the way to go, if you envision growth in your startup. You never want to start a business initiative, only for it to hit a wall because of inadequate funding.