There was a time when boots had straps to pull them on and ‘pulling oneself up by your bootstraps’ meant getting ahead on your own with little or no assistance.
Today, the term ‘bootstrapping’ means starting with very little capital and putting all revenues back into the company to help it grow.
If you don’t have access to money or investors, bootstrapping might be the only viable way to get started. Here are some tips for bootstrapping a business.
1. Start small in the beginning
When you have very little capital, you are not going to be able to open a large retail shop or a restaurant. In both cases, you need to start small. Instead of the retail shop, you could sell products online with very low overheads. If you don’t have the funds to open a restaurant, start small with a food cart serving festivals and events (we’ve financed a number of food carts and vans for our clients!). This will enable you to build up experience and test the market. In both cases, you can reinvest your profits until you have enough money to take the next step.
2. Don’t spend money on an office space until you can generate enough revenue to cover it
If you are starting a new service business, it can be tempting to rent office space. To keep your costs low, however, you can work from home or hot desk in a co-working space. If you need to have meetings with clients, you can get together in a public venue, such as a café, or hire a meeting room in a co-working space.
3. Don’t quit your job until you’re ready
A new small business might not generate income for you, so working in another role will enable you to earn an income while you are building your venture. Depending on your circumstances, you could work evenings and weekends in a job while you work in your new venture during business hours.
You might need to use your personal savings, shares and other assets to finance your business. Consider any valuable assets you own – art, cars and collectibles – that you could sell to raise funds to start your business.
5. Think about the return on investment when buying equipment
For example, do you need an expensive laptop if you are starting a mobile food cart business? Probably not. You will want to buy equipment that generates revenue for your business. However, if you plan to start a mobile bookkeeping service and a quality laptop is an important tool of your trade, it probably is the right investment because it plays a key role in generating income.
6. Find and hire low-cost staff
In the beginning, you won’t want to spend a lot on staff. In this case, you can outsource to freelancers when you need work done. In today’s virtual economy, there are many online sources you can use to find the services you need as you build your business.
7. Keep track of your cash flow
Set up an accounting program and keep track of your income, expenses, receivables and payables. Having a clear picture of where you stand will enable you to make better decisions now and in the future.
8. Save money on marketing
Save money by using social media and other free forms of marketing to get the word out about your business. Ask satisfied customers for reviews and testimonials that you can share with your online networks. Word of mouth marketing can be a powerful tool for building your business, so ask your customers to tell others about your business.
Before cash, barter was the only form of exchange. Look for other businesses that will want to trade their products or services for yours. With a range of online barter networks available, you are likely to find what you need without having to spend cash.
10. Focus on easy wins
Look for ways that you can make quick sales with minimal expenses, generate cash and build up your bank balance. Larger and more complicated projects could take more time to bring in and develop, which will delay cash flow.