Most entrepreneurs spend a lot of time dealing with the financial aspects of the business: tracking the cash flow, sales forecasts and other indicators given that money is one of the most common problems up-and-coming entrepreneurs encounter.
A solid financial planning can help you prevent uncomfortable situations. The most important aspect pertains to the cashflow, regardless of how profitable the business is on paper. The money you have in the account is responsible for ensuring your daily activities run smoothly.
What is bootstrapping? It is a collection of methods and ways by which you can reduce the outside investments. This will help you avoid losing control of your business or creating excessive debt to some investors. Practically, it is a way in which you can optimize the internal processes to make business using little money and only personal resources.
This does not mean you will have to make use of cash inflows when you want to take your business to the next level, but rather delay it until the business becomes both functional and profitable, thus becoming more attractive in the eyes of a potential investor.
Bootstrapping is common for start-up companies mainly because:
- This way your business stays focused on the products or services which are going to be developed and not on adapting the concept to investors’ expectations and requests;
- While investing your own money or that of your family, you will be more motivated and determined to make things work;
- The start-up phase is often a stage in which the concept of the business is tested. Several changes may appear between the initial product or service and the end-product or service. This way, the business concept becomes clear cut and starts to mature.
- This is where you test the market reaction to the product or service that is going to be developed.
How can you benefit from bootstrapping in your business?
Financing the business:
- Invest your financial resources in your business but avoid at all cost to excessively indebt yourself. You can use your savings or you could ask for a loan. Moreover, ask your friends and family to see whether they want a piece of the company.
- Start your business on a part-time basis, maintaining your current job. This way you will earn some money that will help you cover the day to day costs of your company. When your company become to develop, your 100% undivided attention and involvement will be needed. That is the moment you can quit your job. Moreover, this way you won’t need to take money out of the business for your personal expenses, thus being able to reinvest it in your company.
- Realistically plan your costs. Given the fact that you don’t want to use external resources, it is important that you do your math as accurately as possible. By doing this you will always know how much money you need so that all the activities run smoothly and what money you can rely on.
- Invest in the productive aspects of your business. Before buying something, just ask yourself: “Will this help me make more money?” So many new entrepreneurs, despite the fact that they do not possess unlimited financial resources, tend to make fruitless investments: a better car, nicer office furniture, high-end office equipment, etc. Instead of purchasing new equipment, consider renting or buying them from a second-hand retailer at a significantly lower price.
- Make use of the barter system. Be creative, use this exchange method as often as you can.
- Negotiate with suppliers longer payment terms.
- Negotiate with clients shorter payment terms, offering them discounts for the service.
- Sell your product and service. It may sound weird, but there are a lot of entrepreneurs out there that delay the launch of a product or service simply because it isn’t perfect. Don’t expect perfection, just launch it and you’ll benefit from this in two ways. Firstly, you get money out of selling it, and secondly you’re getting the market reaction to your product or service.
- Moreover, you can make it clear for the first customers that this is not the final product/service, but rather you need their feedback, recommendations and opinions to make it perfect. This way you are able gain some die-hard customers given the fact that they feel like they are a part of the evolution of the product or service.
- Start the business at home. This way you are able to save the rent money, decorating the office space and the money you would usually spend on transportation.
- Rent an office space along with someone else or subrent a smaller space for meetings.
- Don’t overspend when it comes to decorating the office space.
- Before you rent an office space you should study the market to see if there is a need for your product. Before actually having a headquarters you could start small by opening an online store.
- Avoid hiring in the first stages. Rather, take more responsibilities so that you can fill the positions you master.
- Should you decide to hire, work with students and graduates given that they will expect a smaller cheque than employees with prolonged experience. Also, they are in dire need of work experience and their enthusiasm and motivation can add extra value to your business.
- Another alternative would be to hire members of your family especially if your business activities mainly happen from the comfort of your home.
- Use outsourcing for the activities that do not require a full-time employee such as: accounting, legal, marketing, design, etc.
Along all the aspects presented above, continuously invest in your entrepreneurial education: read as much books regarding the planning stage and how to manage a business. Also, discuss with successful entrepreneurs and see how they managed to surpass the beginning phase of the business.
For more tips on bootstrapping visit THIS section.
Hope all these tips will come in handy and we wish you good luck!