When starting a business, you must figure out how you plan to finance it. There are tons of options such as:
- Bank Loans
- Private & Angel Investors
- Government Assistance
- and Bootstrapping
This is just a sample of the many ways a person can finance their new business. Today, we’re going to discuss bootstrapping a bit. The term “bootstrapping” is derived from the phrase “pull yourself up by your bootstraps” and that is essentially the idea behind it.
Rather than seeking outside funding for you business, you have the opportunity to finance it yourself. Now, if you’re attempting to start an electric company, or build an oil rig, I’ve got bad news for you.
Lean Mean Entrepreneur Machine
Unless you’re Richie Rich, you probably don’t have the deepest pockets for bootstrapping your startup. In this very common scenario, it is best to start your business in as lean a manner as possible. When doing this though, it is important to avoid:
- Lowering the product quality
- Lowering the selection
- Lowering the atmosphere quality too much
Essentially, a good rule of thumb is to cut as much stuff “behind the scenes” as possible, before affecting what is facing your customers. If you run a restaurant, your customers won’t care if you drive a beat up 1980s Honda, use off brand stationary & pens, use a bargain box computer for accounting, and wear a suit you bought on sale. They will care about small portions, cheap food, lack of staff, bad atmosphere, and the overall quality of the experience.
Avoid impacting your customers as much as possible with your lean startup. You do have a little margin to work with in that area, but be sure you’ve cut all that you can “behind the scenes” first.
Big Money Mistakes
The biggest reason for business failure is because of under capitalization. SBA & SCORE.org advise new business owners to have at least 6 months worth of expenses saved up in order to better ensure success. Often, people will start a business expecting customers to rush the doors, only to hear crickets and watch the minutes crawl by.
Bootstrapping your business is great, but there is a difference between bootstrapping a business with adequate capital, and starting a business with your fingers crossed. If you can’t adequately capitalize your business, then wait longer, and save your money until you can.
Entrepreneur.com has an excellent article about Bootstrapping your business.