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Bootstrapping Your Business - Is It For You?

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Bootstrapping Your Business - Is It For You?

By ChristineL
Published: December 8, 2009

How Does Bootstrapping Work?

Instead of seeking external investors, entrepreneurs with very limited capital can find the funds to startup by reaching into their pockets and pinching together a mixture of supplemental income, credit cards, stock investments, revolving lines of credit, and loans.


As with any financing option, bootstrapping your business has its pros and cons. Many entrepreneurs choose this route because they do not want their business to be defined by the demands of external investors. At the same time, bootstrapping is risky - your personal savings, stock portfolio, and debts maybe at risk. If you are thinking about bootstrapping, consider consulting with a trusted financial advisor who specializes in small businesses.

Common Bootstrapping Practices
In bootstrapping, every dollar counts. To help save on operational costs, bootstrappers often exchange services with other local business on a barter system and find other ways to save money by getting creative:

Do Your Market Research

Good market research is beneficial for all small businesses, but especially applicable to entrepreneurs who are bootstrapping. Since you don't have a lot of capital to start with, make sure that (1) there is a demand for your business (2) you can feasibly start and run your business successfully on the amount of startup capital you have.
Take advantage of free market research data available from the government to start researching local and national consumer trends.

Start Small, Think Big

Many bootstrappers run into problems when their dream business costs a lot more than what they have. If you need to downsize your original plan to quickly generate cash flow, you can plan to revisit long term goals. Learn about expanding cash flow.

Leverage Technology

Whether you use a computer to store inventory information or a bookkeeping software program, technology can help cut downcosts and increase their efficiency. Eight technologies help small business owners save.

Find Inventive (and Cheap) Ways to Generate Buzz

Television advertising will cost a pretty penny, but guerilla marketing won't. Here are some tips for marketing in a recession that won't dent your bank account.

Related Resources

Message Edited by ChristineL on 12-08-2009 03:54 PM

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Comments:

Nowadays it's pretty tough to get a business loan from a bank.
'bootstrapping is risky' - I think that's an understatement! You have to have a lot of confidence and a pretty good investment plan to take this approach. I for one would not look at doing things this way. At least not with my own money and a family to look after!
Great post and a much needed topic to cover. Every business regardless of how small the amount of money it can spend has mandatory expenses it cannot avoid and these expenses are opportunities they can also use to start building business credit history. No matter what amount of money you’re spending right now to operate and grow your business you can benefit by having it reported on your company’s corporate credit file. Some typical expenses include website development, internet services, phone services,office supplies, postage/shipping and marketing.When you showcase your company's ability to manage its finances on a corporate credit file you can greatly increase the ability for your business to access the cash, credit, and financing it will need. To your business credit success! Marco :) ---This post was edited to remove a commercial link. Read our discussion policies for more Community best practices. Message Edited by ChristineL on 02-10-2010 10:28 AM

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