Bootstrapping your startup might have a lot of long-term benefits.
Dell computers, GoPro, Cisco Systems, and Coca-Cola; do you know what they all have in common? All these successful companies had humble beginnings by bootstrapping their startups.
If you are also thinking about bootstrapping your startup – building a business without the financial support of investors or a substantial amount of capital – the success stories of these companies should inspire you to move forward with your startup.
But, bootstrapped startups also have a high risk of failure, and the biggest reason behind it is a lack of revenue. So, what makes the difference between a successful bootstrapped enterprise and an unsuccessful one? That’s what we are going to cover in this blog post.
In this article, we’re going to discuss:
- What Is Bootstrapping?
- The Things To Keep In Mind When You Are Bootstrapping Your Business
- The Pros And Cons Of Bootstrapping
- Be Relentless To Achieve Long-Term Success
What Is Bootstrapping Your Startup?
Bootstrapping means finding funds for your startup or small enterprise through personal means without relying on venture capital or investors. Instead, you may have to tap into your personal savings or business revenue to grow your startup. Bootstrapping a business takes great dedication, determination, and risk tolerance. But you’ll learn the business inside out, about what works and what doesn’t. Then, you’ll be able to plan your business strategies with that expertise and only focus on ideas that work.
When you bootstrap your startup, you have complete autonomy over your startup. But then, you may have to work harder with no profits or lack of funds for some time before you can attract a substantial cash flow. The risk factors are high because if there is no cash flow for some time, your enterprise can no longer survive. Also, you’ll have to work extra hard before you can afford to hire other members to help you run your startup.
The Things To Keep In Mind When You Are Bootstrapping Your Startup
Now, let us look at the essential factors that affect the success of a bootstrapped startup. Identifying and resolving the issues at the right time can help you as an entrepreneur avoid wasting money, time, and effort.
A Business Model That Doesn’t Take Long To Generate Cash
The success rate of a bootstrapped business depends on how quickly it can generate cash. Of course, you’ll need cash flow to carry on the day-to-day functions of your startup.
If you don’t make money fast enough, the business can become threatened. It would be best to have a negative cash conversion cycle – it takes longer for you to pay your suppliers than to sell your products and collect cash from your sales.
It becomes easy to pay for your daily functions with the money you get from selling your products and not from any external means. As long as your business idea has a lucrative selling point, you won’t have issues with bootstrapping your startup.
Are You The Only Entrepreneur In The Startup?
If you have co-founded your enterprise with someone else, they should have a varied yet complementary skill set. That way, you can work together by delegating tasks to the person better suited to them. In addition, you won’t lose cash by outsourcing a significant portion of the requirements.
Prioritize Where You Spend Your Money
Bootstrapping a business means there will be a cash shortage, one way or the other. So, cut down on spending, be it for your personal or your company’s needs. Try to save as much money as possible and invest it in your business. There is a reason Apple and Tesla Motors began in basements. While you are confident in your business model and its success, avoid spending too much before it shows potential for long-term growth.
Secondly, be aware of where you invest in the business. The first objective of your startup is to convert your efforts into sales. So, your focus should be on attracting customers and making good products. Invest where there is a possibility of returns in some time and customer satisfaction.
Social media is a cost-friendly way of attracting traction to your startup. Once you find customers, acquire their loyalty by providing excellent customer service and delivering your promises. This will increase customer retention and referrals, a great way to plunge your business to greater heights without a lot of investment.
Keep An Eye On Your Spending
One cannot be too careful about spending money, primarily when your business depends on your savings. Be sure to create a separate bank account for your business to keep track of your spending and earnings when it comes to the business. This step is only as effective as how you follow that last one: spending carefully.
Mint is a great tool that will help you keep track of your accounts. When you find an area where you can save some money, don’t hesitate. You may want to spend it somewhere more critical, and if you are not careful, you may lose that opportunity.
Should You Outsource Or Not?
Outsourcing jobs has its pros and cons. So, consider all sides before deciding how to operate your business in its initial stages.
If you can do something by yourself, outsourcing is a waste of capital. That is true, even if it’s time-consuming. However, if you are bootstrapping your business, you have to put more effort into sustaining the startup on less cash flow.
Don’t be hesitant to learn new skills that you can apply to your startup. That experience will be an asset even after your startup reaches tremendous growth. For example, most entrepreneurs learn how to code or set up a blog, basic animation, and illustration for social media and promotion.
Be thrifty about finding resources at the beginning. Choose free options of critical software and online tools, opt for used and refurbished hardware and equipment, and avail free services whenever you can. You’ll turn out to be quite innovative and flexible in how you conduct business and form great connections.
You can also pick freelancers instead of permanent employees if you need new talent for your startup. But hire the right talent for the job with good recommendations.
Be Patient And Receptive To Your Small Enterprise
Growth will be slow for your startup in the initial stages when the revenue and investments are low. However, let it not deter you from your goals as an entrepreneur. The prime focus should be on forming relationships with your target audience and getting your story out there.
Highlight the positives of being a small enterprise and focus on your customer’s unique needs and benefits from choosing your product. As a small business, you can act upon your feedback quickly and make your products more cater to the needs of your market.
The slow growth of your startup also enables you to appraise and revamp your goals and business model strategically. As a result, you will be able to create something genuinely sustainable and consumer-friendly in time.
To Sum Up: The Pros And Cons Of Bootstrapping
Pros Of Bootstrapping
- Autonomy over your enterprise: Since all the funding is coming from you, you call the shots in your business. This is not the case for businesses that have the aid of venture capital or investments. Your products and services can reflect who you are and what you aim to do in the market. Be it your values, cultural ethos, or social implications.
- Building the business: Building the financial foundations of your business by yourself is a massive attraction to your future investors because it shows your dedication and commitment to your startup. You have already proved that your business idea is marketable and viable by completing the initial stages.
Cons Of Bootstrapping
- Cash flow issues: If your startup doesn’t generate enough cash flow in the initial stages, it cannot continue using bootstrapping as a funding strategy.
- Internal issues in management: If there is more than one founder in your startup, there will be inequity of capital and status. There will be an imbalance between co-founders regarding investment, experience, and time spent on the startup.
- Risk of failure is high: Lack of revenue is the primary reason bootstrapped startups fail. Income may come short of covering all the expenses. Also, you may have to put in a more significant effort as there are no employees or marketing team in place.
- Stress levels increase: Starting a business is not easy. Shouldering all the responsibilities of a new business is even more difficult. Unless you can handle the stress and setbacks that come along the way, you may not be able to cope with this huge responsibility. Proper research, a solid business strategy, and practical communication skills will be your saviours.
Secret – Be Relentless To Achieve Long-Term Success
Never take no for an answer – This should be your motto when self-funding your startup. As an entrepreneur, this is the biggest hurdle you can jump. But the treasure trove of expertise and skills it gives you is unparalleled. Once you have reached this milestone of building your business by yourself, there is nothing that can stop you.
You can turn your business idea into a sought-after business venture with commitment, hard work, and determination. Look at bootstrapping as an investment in yourself that will convert into substantial returns in the future.
You can avail the services of experts in the field with Voila Experts. Check it out here.