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Dealing With Cash Constraints? Tighten Your Belt and Fight Back With Bootstrapping

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Dealing With Cash Constraints? Tighten Your Belt and Fight Back With Bootstrapping

By Caron_Beesley, Contributor
Published: January 23, 2012 Updated: May 21, 2012

Heard of bootstrapping? Well, it’s not just for startups anymore.  If your business is strapped for cash, you might consider bootstrapping to get you through it. 

What is Bootstrapping?

Bootstrapping is the process of starting a business with little investment or funding of your own. Many small business owners and entrepreneurs start out this way.

Even if you are well beyond the startup phase, however, the principles of bootstrapping can still make sense handy if your business is facing cash constraints.

How Can Bootstrapping Help Cash-Strapped Businesses?

Bootstrapping is about using resources creatively, bargaining, negotiating, optimizing cash flow, and using technology to save money.

If your business is cutting back or looking to save money, these principles are worth another look. Here are seven bootstrapping techniques worth considering:

1) Cut your business expenses – It sounds obvious, but a review of all your outgoing expenses can point the way to quick savings. Create a list of necessary expenses and optional expenses. Pay close attention to how your employees spend your money. Look for savings or limits you can set on how they spend.

2) Cut corners wisely – If you need to cut back, be sure to do it wisely. You’re still operating a business and trying to make money, so don’t make rash decisions that may sacrifice key functions or elements of your business plan in an effort to cut costs. If you do, you risk slowing your growth and putting a bigger burden on your own shoulders. Instead, be smart and creative:

  • Could you cut your own salary so you can keep staff until things turn around?
  • What about renegotiating supplier and customer payment terms so that cash comes in quicker and goes out slower?
  • Can you adjust your business plan to focus on growing your sales to existing customers rather than branching out into new markets?
  • What about re-negotiating your commercial lease or moving back into home office?

3) In-source rather than outsource – This is a tough one for small businesses that often outsource key business functions to save money or circumvent a lack of staff skills.  Can you mine hidden talents of your own or among your staff to take simple graphic design, writing, marketing, or even accounting work in-house? What about family or friends? If you simply can’t do without outsourced help, try negotiating a better rate for a limited period. Many contractors will be willing to cut their rates if it means keeping your business for the long term.

4) Look into how technology can save you money – Could you make better use of technology to save money? Perhaps you could cut back on business travel and other communication expenses by using free web conferencing tools like Skype. What about cloud computing? Migrating business functions online (or to the cloud) can realize big savings. Cloud-based solutions take the burden of costly software solutions off your hands because the vendor handles all maintenance and upgrades. Even your tablet computer can help you cut staffing costs! These blog posts offer more tips:

5) Reduce inventory and drop-ship instead – If you operate an online business or a retail store, you may be able to cut costs by reducing your inventory and drop-shipping instead. You can still keep display items in-stock, but purchases would be shipped directly from your wholesaler to your customers. Drop-shipping is best suited to businesses that sell big ticket items or products in bulk.

6) Barter – Bartering (the act of offering goods and services in exchange for services rendered) is a tried and tested bootstrapping and startup strategy. It can work well for complementary businesses. For example, if you run a small marketing firm and need the services of a copywriter, but can’t afford to pay them at cost, can you work out a win-win situation for both parties? Perhaps you can agree to offer the copywriter a free website overhaul or other marketing services.

7) Step up your community marketing efforts – Just because cash is tight, it’s no time to stop marketing your business. Focusing on cutting costs is important, but you also need to ensure you are doing all you can to generate revenue. Concentrating on community marketing will put your business and its wares directly in front of your target customers and keep you at the top of their lists for a relatively low dollar investment.  Activities such as sponsoring charitable events in your community or setting up your own fundraiser for a good cause can generate great exposure for your business. 

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About the Author:

Caron Beesley

Contributor

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley

Comments:

Trade credit is one way to maximize your financial resources for the short term. Normally, suppliers extend credit to regular customers for 30, 60 or 90 days, without charging interest. If you want to venture to advertising and need to save money.. look for affordable but well skilled copywriters to help you out. This is the best copywriter website I would like to recommend [This post was edited to remove a link. Please review our Community Best Practices]
Agree with you, personally funding issue is certain to have if you do not want to think about the worst case. This many people have been
Bootstrapping Help Cash-Strapped Businesses .I have been looking for this for months. Thank you so much for this great list!!!
Bootstrapping could be the process involving starting the business enterprise along with small purchase. Thank you for revealing this information and facts. This is really helpful personally. Caron‘s write-up includes a few outstanding details.
Bootstrapping is not utilized as often as it could be. It can be tough to find investors when you go this route. But still this article contains some excellent information.
Do you have any recommended dropshippers? How do we protect ourselves from scammers?
I agree, many businesses especially small ones start by financing or funding at their own. Thanks for the the tips, Caron. Indeed a business entrepreneurs must learn how to tighten belt and less the experience for help to easily bring back his funds. Apartment for Rent, Condos for Rent.

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