Being a Bootstrap entrepreneur is definitely a strategy to consider when exploring funding options for entrepreneurship.
Yes, there are different funding options available.
Each with its pros and cons.
Here, we explore bootstrapping in entrepreneurship.
Therefore, stay with us until the end to find out what it means and how it impacts your life as an entrepreneur/entrepreneur wannabe.
What Does Bootstrap Mean?
As a startup business owner/entrepreneur, bootstrap means relying solely on your personal money (savings) as your business startup funds.
To put it in another way, it means to build your business from the ground up with no external financial support from anyone or anywhere.
This practice is called bootstrapping.
Bootstrapping is a method of financing your small business by acquiring and using your personal funds without borrowing or seeking financial help.
This is an essential business skill every entrepreneur/business owner should have.
It teaches problem-solving and self-dependency.
Furthermore, bootstrapping is in phases; let’s discover what these are.
These are the important phases that you’ll encounter while bootstrapping.
This phase has to do with starting up with your savings, borrowed, or invested money from friends.
An example is when you start your business while you are still working your main job.
In this phase, you run your business operations with its revenue (i.e., money from clients/customers).
At this stage, your business can no longer depend on your personal funds or internally generated revenue.
This could be because of an increased customer base or the inability to keep up with business operations, such as upgrading equipment, hiring staff, etc.
You would have to get loans or seek out risk capital for your business expansion at this phase.
Hence the reason it is called the credit phase.
In the next section, we’ll answer the question, why bootstrapping?
This is to enable you fully understand the concept.
Bootstrap Entrepreneur Strategy And Funding For Entrepreneurship – Why Bootstrapping?
As a startup entrepreneur, bootstrapping might be the ideal choice for you.
This is because it gives you the rare opportunity to build your business from the ground up even without the help of an investor, which is what not many entrepreneurs can boast of.
Hence, here are several reasons you should opt for bootstrapping as a startup entrepreneur; they are.
- Your lack of experience in entrepreneurship and business plan formulation.
- Your lack of skills to promote products.
- You lack knowledge on how to generate funds.
- You do not like the idea of hunting for investors.
As a startup business owner/entrepreneur, you rarely have any experience running a business.
Therefore, starting your business with funds from investors puts you at risk of running into debt should you encounter any form of failure or setback.
However, when you bootstrap, you only stand the risk of losing your personal finances.
That would be a great loss as well.
However, you only have to worry about picking yourself up, learning your lessons, and starting again more intelligently rather than worrying about how to pay up loans from investors and credit facilities.
Overall, bootstrapping offers you a safer entry into the business world as a start-up entrepreneur.
Moving forward, bootstrapping is an important part of entrepreneurship, and it has its advantages.
Let’s consider what these are.
Advantages of Bootstrapping
Still, on the subject of Bootstrap Entrepreneur Strategy And Funding For Entrepreneurship, these are some of the advantages of using bootstrapping:
- When you bootstrap, you get experiences at the expense of your money alone.
This means that should the business fails, you would not have to pay anyone their money back.
If the business is successful, you will be able to save your capital and attract investors.
Therefore, your business will flourish.
- Your business development and the ideas used will be rightly yours.
No investor can claim any shares to your business.
- You would be able to make decisions independently and be free of investor opinions.
This will allow you to test your strength, realize your dream and create your unique brand.
- You would be able to center your energy on the vital aspect of your business instead of spending time seeking external funding, which tends to be time-consuming and stressful.
- You would be able to provide value to your client/customer through your services and products.
Despite these many advantages of using the Bootstrap Entrepreneur Strategy as a Funding option For Entrepreneurship, there are some downsides.
It’s also essential to consider what these are.
Disadvantages Of Bootstrapping
Here are some of the disadvantages.
- If demands surpass your company’s capability to supply products or services, it will affect your business growth.
- You are the only one taking the financial risk.
- You might find it hard to handle some unexpected problems, which will stress you emotionally, mentally, and physically.
As a result, harming your productivity and efficiency.
- Your business would likely suffer from limited capital
Despite these downsides, you might decide bootstrapping is more beneficial to you as a startup entrepreneur.
More so, if you go about it the right way (using the right strategies), it’s much more rewarding and self-satisfactory.
Therefore, let’s consider some of the best bootstrapping strategies for you as a startup entrepreneur.
Bootstrap Entrepreneur Strategy And Funding For Entrepreneurship
If you must succeed in business, you must have a well-developed plan and strategy.
Therefore, here are some of the best bootstrapping strategies to implement as a start-up entrepreneur.
Your Business Shouldn’t Require Big Capital Start-Up
Bootstrapping works well with business ideas that are not so capital intensive.
Therefore as a startup entrepreneur, your business ideas must not be capital intensive if you intend to bootstrap.
Unless of course, you have large amounts of money at your disposal.
For instance, having plans to own a five-star hotel is great.
However, if you have little funds you should probably start small.
You can always start owning a small hotel and kick off from there until you get enough capital to establish your plans.
Your Business Idea Should Also Be A Fast Cash Generating Business
Since you cannot afford the financial means of starting a large-scale business, investing your capital in a small business with great profit margins might be a good option.
Therefore, you should seek out a lucrative business that will generate fast cash that you can return to your business.
This will help you would help you gather more finances to fund your small business and expand it eventually.
Try it Out – Evaluate Progress
This is another important bootstrapping strategy you should keep close to your heart as a startup entrepreneur.
Do not be so quick to resign from your present job, expecting you to succeed immediately in your new business.
This is one big mistake you shouldn’t make to prevent disappointment.
In all, it’s best to start and run your new business on the side while working your full-time job.
Meanwhile, make sure to evaluate the progress before going full-time later.
Trade By Barter Method
This is a smart way of saving your capital when you want to start a new business.
You can switch goods that you do not need for goods you need from some other person.
However, ensure that the goods you are exchanging are valuable and useful to your business.
This is an option to consider when exploring the Bootstrap Entrepreneur Strategy And Funding For Entrepreneurship.
Reduce Your Expenses
This is another essential thing you must do as a bootstrapping startup entrepreneur.
If you want to bootstrap successfully, you must reduce your expenses because you’ll be working with limited finances.
For instance, you could start your business from your home to avoid paying monthly rent for an office space.
Also, you could skip some luxuries to save money to run your business from your personal finances.
There are things you can forgo for your new business.
Set Up A Partnership
If you’ll be working part-time in your new business, you can have a business partner that will help you run the business.
With this partnership, your partner can be available to run the business when you’re not.
This partner must be skilled and able to handle the business effectively.
This makes running your small business easy and with fewer expenses.
A partner also has the advantage of bringing new ideas.
In fact, if you come up with a business idea in conjunction with a partner, you could bootstrap the business together.
This is definitely an option to consider when exploring the Bootstrap Entrepreneur Strategy And Funding For Entrepreneurship.
Carry Out Market Research
You should run thorough research on the market you want to sell to.
This will help you understand how your business operates and what it entails.
Thereby helping you gather the necessary information to run your business and limiting your chances of failure.
Your Business Capital Comes From Your Savings
The key concept of Bootstrap Entrepreneur Strategy And Funding For Entrepreneurship is that bootstrapping is all about funding your business personally.
Therefore, get your start-up capital from your savings instead of borrowing funds.
This will make it simple for you, as you would depend on yourself to cover the costs of all your business needs.
Have A Fitting Business Plan
A Business plan is a roadmap or guideline for how you intend to run your business and everything you hope to achieve.
It also shows or proves the feasibility of your business idea.
Hence, when bootstrapping your startup, having a business idea isn’t enough.
Endeavor to have a solid and workable business plan.
This is to increase your chances of success and prevent wasting your personal funds on a business that’s bound to fail from the onset.
Run Your Business From Home
As a startup entrepreneur, you do not need to hurry to get an office when starting your business, especially if it’s an online business.
The only reason why you can do so is if your product is in high demand.
In a new office, you’ll need office furniture, new equipment and probably an additional staff which will all be added to expenses.
Likewise, paying monthly rent is something you must not put yourself through at the initial stage of your business.
Therefore, you can work from the comfort of your home while providing all the required services to your clients; this way, you can conserve cash.
Request For Immediate Payments
As a startup, avoid selling on credits.
It could make you run into loss and ruin your start-up before it gets the chance to get off the ground.
Hence, it’s best to request for and ensure that your clients/customers make immediate payments for the products or services provided.
This way, it will not be difficult to make a purchase quickly and reinvest the money into your business to keep it running.
Monitor and Manage Your Business Finances Accurately
In exploring the Bootstrap Entrepreneur Strategy And Funding For Entrepreneurship, be aware that there various aspects of your business finances.
However, pay particular attention to your cash flow and invoices because these two have the most impact on your startup.
Your startup will flourish and expand when it is stable financially.
Hence, it is important to monitor the inflow and outflow of cash in your business.
This will help you identify what comes in and goes out of your business.
More so, monitor your start-up receivables and invoices.
This one is also essential to prevent you from falling into bad debts.
Outsource Instead Of Hiring
This is another money-saving tip you must implement when bootstrapping for your start-up.
From time to time, you would want someone to work on something none of your staff can do.
An example is website designing; it is not advisable to permanently employ that person to get the work done.
The ideal thing to do is outsource such tasks to professionals in that field and pay them per project.
This also applies if you have no employees and do most of the tasks yourself.
Leverage Family Members
Instead of hiring and paying someone to do a job you know a family member can do, reach out to that relative and ask to help you out.
This will help save your funds, as you sometimes would not have to pay for the favor offered by your family member.
Take Advantage Of Digital Marketing
Traditional methods of advertisements such as TV stations and radio are almost out of use and very expensive.
The new wave, social media, happens to be where you can access a large target market.
Hence, take advantage of digital marketing by using various social media platforms to promote your products and services effectively and affordably.
Utilize Profits Effectively
This is another thing you must know when exploring the Bootstrap Entrepreneur Strategy And Funding For Entrepreneurship.
You must be disciplined with how you utilize the profits you get from your business.
Do not spend your profits on buying cars or expensive office furniture to impress people if you are bootstrapping.
Instead of doing that, invest your profits strategically in things that yield positive results and improves your business.
Defer Payments To Your Vendors
The rule of ensuring that the money coming is more than the money going out must be applied and followed properly if you want your business startup process to be successful.
One method of reducing your cash outflow is to pay your supplier after making sales.
This is quite possible; all you need to do is negotiate with your supplier.
However, ensure to pay the debts off after selling the products so as not to accumulate debt.
This is another effective bootstrapping strategy you should implement in your start-up.
Depending on the nature of your business, you might need certain equipment.
Also, this equipment might be expensive to buy, especially with your limited business finances.
Leasing is less costly than buying, and it helps save funds
Prepare For The Future
Your startup is the foundation on which you’ll build and grow your business.
Have strategic plans for future ventures creates room for extension in your business.
So, do not ever limit yourself to your small business.
While it’s good to start small, it’s always better to grow beyond that point.
In all, start small but prepare to go big in the future.
That’s it on some of the effective strategies you should know when bootstrapping as a startup entrepreneur.
Bootstrapping is a sure way to secure funding for your startup with low risks and stress.
However, beyond that, there are other ways of securing funding for entrepreneurship.
Let’s consider what these are.
Funding For Entrepreneurship
There are several ways to get funds for entrepreneurship.
Not all can work for you, but most of them are feasible ways.
Hence, here are some methods of funding for Entrepreneurship:
This is when you, as an entrepreneur, save up funds, as we’ve considered above, then invest in a business of your own.
You are bootstrapping with this method of funding.
You can invest in your business any time you choose.
Also, your funds are limited by how much you have saved up before starting up your business.
This is seen as a primary funding base, as the money is coming from the founder’s pocket.
Family And Friends
These are the group of people you know personally and can invest in your business.
With them, you would not necessarily need to pitch your business idea before they fund your business.
They mostly do this out of love and faith in your business idea.
Business Angels/Angel Investors
These investors are experienced private entrepreneurs with available funds.
They make investments in new businesses to boost the success of startup entrepreneurs like yourself.
Business angels tend to invest a lot of money and sometimes invest as a group.
This is when a community (mostly an online community) invests or donates towards a project.
Here a group of individuals pulls together a small amount of money to make up the capital for a project.
Hence, if you have a great business idea, you could avail this source of funding to finance your start-up.
Debt Financing – Bootstrap Entrepreneur: Bootstrap Strategy, Funding for Entrepreneurship
This involves going to commercial banks to secure loans.
Although there are more chances for a bank to invest in small and medium businesses than large businesses.
This is because of the risk level.
However, having collateral will also enhance your chance of getting the loan.
Grants for Small Business (Private and Government)
Sometimes the government or non-governmental organization provides grants for small business.
The government and non-governmental organizations make grants more available to businesses supporting the economic growth of a particular place or the country by solving problems or developing new technologies.
Hence, you would have to meet up some specific criteria before you are eligible for such grants.
The government and non-governmental organizations do not require that you refund the grants awarded to you if the business fails.
So, this is a great advantage for you.
This program gives developing businesses access to investors, mentorship, and other supports to ensure their stability and self-sufficiency in the coming times.
It is a great method to develop your new business.
However, a huge drawback to this is transitioning from being highly supported to becoming completely autonomous.
This might make it difficult for you to manage your business on your own and increase your chances of failure.
Venture capitalists are professionals who are responsible for growing and investing in some world-known innovative companies.
VC awards fund mostly to advanced technology businesses.
They do not expect you to refund their investment in the business even if the business fails.
Participating in business competitions is another way to secure finances for your business.
Some organizations reward entrepreneurs as winners for great business ideas during competitions they sponsor.
They usually offer funds, support, and mentorship to these competitions’ winners to start their businesses.
The sponsoring organization mostly offers the prizes in a lump sum.
However, it depends on their capabilities.
Overall, this is another source of financing you could explore if you have a brilliant and innovative business idea.
Conclusion On Bootstrap Entrepreneur Strategy And Funding For Entrepreneurship
That’s it on bootstrapping as an entrepreneur.
Bootstrapping is one of the quickest, easiest, and risk-free ways to finance your start-up.
However, you need to do this the right way if you want to be successful.
This is why we’ve shared these bootstrapping strategies with you here.
In all, you can get funds for your entrepreneur through the different methods aforementioned.
However, be sure to use a method that works well for your business.
Best of luck with your business.