What is bootstrapping? How can I make it work for me?

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What is bootstrapping? How can I make it work for me?

Have you ever heard a successful entrepreneur say that they “started from scratch?” Or maybe that they “came from nothing?” What they’re referring to is called bootstrapping. Bootstrapping means someone started their business from scratch financially–that they had little to no funding from outside sources. Sounds intimidating, right? But with the right mentality and tools, bootstrapping isn’t as scary as it sounds.

Pros of bootstrapping

Bootstrapping is a great place for new entrepreneurs to begin when starting their own businesses. When you have others investing in your business, they will have a say in how their money is used. So if you use only your own funds, you get complete control of what the money is used for in your business. While your own resources might be a bit more limited than if you have venture capital or angel investors, you’ll be forced to get creative with your budget and how you’ll use your time to grow your business.

A word of caution: challenges of bootstrapping

Starting any business, whether bootstrapping or not, will be a financial risk. With bootstrapping, using only your own money might mean drawing from your personal savings, taking a loan from the bank, or having to put in long, unpaid hours to build your business. It might take longer for your business to “break even,” or to start seeing a net profit. But taking risks is not a bad thing! Here are some ways to combat some of the challenges of bootstrapping to maximize your odds of success.

How to employ bootstrapping successfully

Create a business plan

Before you do anything with your new business idea, sit down and think about what you want to achieve with this business. What kind of problem will your product or service solve? What kind of people will want your product or service?

Make both long and short-term goals.

The long-term goal will be the ultimate goal, the one that says, if you reach it, that you’ve succeeded. The short-term goals will be the stepping stones of how you’ll get there. Be realistic and patient as you consider what you can accomplish using your own money and time.

Check out the Basics page of our website to learn more about creating your business plan.

Create a budget (and stick to it)

While bootstrapping requires some courageous risk-taking, you can still plan a budget to minimize financial damage. Determine where you’re willing to take risks and where you’re not. Consider spending boundaries or limits you might set for yourself.

You will also need to plan where your spending money will come from. You might consider requesting a deposit or full payment before delivering your service or product. You can work a side job to build up your personal savings.

Find ways to cut costs

While it is important to not undervalue your time and efforts in your business, it is crucial to identify ways to build your business that do not require financial investment. These things can be referred to as “sweat equity,” which refers to the unpaid time and labor that goes toward building your business.

Some examples of “sweat equity” and cost control can include (but are not limited to):

• Creating and maintaining a social media account for your brand
• Encouraging your customers to tell their friends about your business (this is called “word of mouth” marketing)
• Limiting your services to your local area (to avoid costs of traveling or shipping for deliveries)

The list could go on and on. Get creative! Have fun with it! Starting your business from scratch can be scary, but it can also be an exciting time for growth.