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:
- 4 Ways Technology Helps You Run Your Business
- How to Use your Tablet Computer as a Small Business Tool
- Cloud Computing – What Can It Do for Your Small Business?
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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