Bootstrapping Your Business - Is It For You?
by ChristineL, Former Moderator
- Created: December 8, 2009, 3:47 pm
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.
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