Getting Started with Bootstrapping Your Business
On the wishlist of every entrepreneur is the power to have full control over their business. By limiting the borrowing of funds, and making use of the resources available at hand, this can be achieved by bootstrapping your business.
What is Bootstrapping?
Bootstrapping is a form of entrepreneurial financing where you start and run your business with little, if any, external financing. This is usually done by self-financing your operations from your own saving account, putting in sweat equity, or borrowing against personal assets. One of the main advantages of bootstrapping your business is there is an opportunity that control may remain with the entrepreneur and you are not indebted to outside investors.
Here are 9 things to consider when bootstrapping your business:
1. Start a Business That Generate Fast Cash
As an entrepreneur, you may not have a large amount of capital to set up your business. Thus, it is recommended to use the capital you have and invest it in a market-ready business( a business that is ready for introduction to the market), something that can drive revenue quickly. As an entrepreneur that is bootstrapping, look for a business that will give you immediate returns so you can reinvest the profits back into your business. This will help to collect funds for a larger business.
2. Have a Proper Business Plan
A business plan serves as a roadmap for how your business will grow, and the steps you plan to take. At WISE, we help our clients create a business plan specific to their needs.
3. Look for a Business with Lower Start Up Costs
As an entrepreneur, access to capital is one of the most challenging things. For this purpose, it is recommended to look for a business that requires less startup capital For instance, starting your own restaurant sounds like a great idea but the capital investments it requires are heavy. Therefore, it is important to think of this as a long-term goal and presently focus on projects/ ideas that may require less capital.
4. Testing the Waters
New entrepreneurs often make the mistake of dropping all their priorities to start their venture. While this might be a committed move, it is important to remember that success doesn't come overnight. To avoid disappointment, start your business idea as a part time venture, analyse the progress and then make it full time if and when you’re ready. Many entrepreneurs work a full time job to finance their new and growing businesses - this is a very common form of bootstrapping.
5. Cut Down Fixed Costs
Lower fixed costs lead to an increase in the operating income of your business. Operating leverage is a cost-accounting formula that measures the degree to which a firm or project can increase operating income by increasing revenue.
Companies with high operating leverage must cover a larger amount of fixed costs each month regardless of whether they sell any units of product. The higher the degree of operating leverage, the more sensitive changes to the revenue. A more sensitive operating leverage is more risky as it makes profits margins less secure as time passes.
6. Make a Partnership
Starting your venture as “part-time” may be a good idea. With this, you can look around for partners who have the skills and experience you don't. This is an easy way of running a small business without high expenses.
7. Push for Immediate Payments
What also impacts cash flow is the timing of payments. Making all clients pay for their product purchases instantly like through a point of sale system instead of issuing invoices can help you bootstrap successfully as it improves cash flow. This will make it easier for you as an entrepreneur to make other purchases sooner and keep investing money back into your business. Time is money and cash is king, so the earlier the payments, the better.
8. Lease Equipment instead of Buying
If and when your business is in need of certain machinery or equipment that you’ll use infrequently, it is often preferable to lease them from another company for a limited time as that is cheaper than buying. Likewise, if you already own equipment, consider leasing it out to others to generate another source of revenue.
9. Social Media Marketing
Social media has a wide reach and can help you reach more customers. To bootstrap successfully, make sure your business has a well-established online presence.
For more information on how to Bootstrap, check out these links, below!