The concept of bootstrapping is just as interesting as the name itself!
Wondering what the literal meaning of “bootstrapping” is – it refers to the idea of lifting oneself up from one’s own Bootstraps – accomplishing the impossible!
The phrase nowadays is used to describe a self-sustaining process; a process that can be completed without any external inputs.
Bootstrapping refers to the concept of starting a business with no outside money. The founder/ entrepreneur in this case is the sole investor & stakeholder in the business. These businesses generally kick off with limited capital that the entrepreneur may invest from his/her own savings.
Bootstrapped businesses work by plowing the money earnt from customers back into the business!
Bootstrappers generally begin their business on a small scale and intend to grow them gradually & steadily. They intend to be associated with the business in the long run and therefore make decisions accordingly.
Unlike venture capitalists & investors who look for short term gains, bootstrappers remain patient and gradually grow the enterprise as their own.
Popular examples of enterprises that were bootstrapped include Apple, HP, Spanx, Dell, and many more!
These Multimillion-dollar MNCs were started off with nothing but passionate entrepreneurs, brilliant ideas & their personal savings.
Bootstrapped businesses though seem very much alike to other small businesses, yet they are not.
The soul concept of operation of these enterprises is Minimalism!
They kick off with limited resources & try to stretch these resources & obtain the best out of it.
The sole purpose of the operation of such businesses is long term growth & expansion of the enterprise. They do not work to satisfy any board of directors or investors who are looking for immediate returns and high profits to make gains in the short term. They work & grow patiently for the greater good.
Startups that take off with this strategy prove to be more sustainable & can have greater contribution to overall future economic development as well.
HOW TO BOOTSTRAP A BUSINESS?
Bootstrapping a business is not as easy as it seems. It requires the entrepreneur to judiciously utilize every available resource to the fullest!
Discussed below are the tactics you can turn to if you are looking to bootstrap your business!
- FIND A SUITABLE BUSINESS MODEL
Considering that you are starting with limited capital, the business model that you select would be best fit for bootstrapping if
a. Capital Requirement is Low
Only businesses requiring low capital investments can be created through bootstrapping. In case of high investment & gestation lags, one cannot depend on personal savings & would be forced to turn to outsiders for financial support, be it through issue of equity, loans, VCs, or any other medium,
b. Cashflow is Steady & Sufficient
Cashflow in simple terms refers to the inflow of revenue through the operation of a business.
An ample amount of steady cashflow is important for a bootstrapped business because inflow from customers is the source for financing day-to-day operations.
2. HAVE A PROPER BUSINESS PLAN PREPARED AFTER THOROUGH MARKET RESEARCH
Since resources are limited and intention is to firmly establish the business, a proper business plan is a prerequisite.
Business goals & targets should be preset and one should abide by them consistently.
Market research should be completed beforehand for a bootstrapped business with lean resources cannot afford to begin operations without having identified prospective customers. Incase this is overlooked, the business will face a hard time financing operations without a steady revenue.
3. INCORPORATE BUSINESS ONLINE & UTILIZE SOCIAL MEDIA
Online businesses are bound to cost less owing to reduced investment in fixed assets.
Further, when the workforce is limited, an online concern is easier to manage & operate.
It will also help the business reach a wider audience.
One can also utilize social media for the purpose of digital marketing. This can be a reliable & low-cost alternative for advertising.
4. OUTSOURCE RATHER THAN HIRE
Starting with limited capital, businesses should look at outsourcing services from freelancers. This will not only help in cost-cutting, but also improve the quality of services as they will be provided by experts in respective fields.
Further, freelancers have several other advantages as well; can be more creative & quick with their projects than regular employees that one may hire.
Similarly, equipment can be leased rather than purchased to reduce the capital expenditure.
5. CUT THE UNNECESSARY SPENDING
Reducing expenses is the key to expanding a bootstrapped business. The following hacks can be used for the same:
a. Work from Home
An Office Space requires a heavy investment. One should consider working from home for as long as possible. This will ensure comfort as well as improved productivity.
It will also help reduce the expense of staff, electricity, furniture & other things required to set up the office.
In the work from home process, one can avoid distractions through the strategies discussed here.
b. Spend Wisely
The profits earnt from business should be invested well.
The business should be given priority over the entrepreneur – rather than purchasing an office space/ luxury car, one should consider upgrading technology or diversifying the business.
Temptations should be resisted for long term growth.
6. INSIST ON RECEIVING IMMEDIATE PAYMENTS & MAKING DEFERRED PAYMENTS
Immediate payments from customers are key to a strong cashflow. Thus, one should avoid dealing in credit and insist on immediate payments initially.
Similarly, deferred payments would allow more time & thus assist the smooth functioning of the business concern.
Bootstrapping therefore starts and ends with dedication & commitment towards the business and tireless efforts to pull the enterprise through all the ups & downs on the way.