Bootstrapping your way to business success
It’s become almost de rigueur to see entrepreneurs talk about landing an angel investor, their latest funding round or a crowdfunding campaign. Modern businesses have more financing opportunities open to them than ever before, but this can leave a lot of would-be entrepreneurs thinking the only way to success is through outside investment.
Despite this, bootstrapping – that is, self-financing your business through organic growth – has been the mainstay of successful entrepreneurs for a very long time. Highly successful companies such as Apple, Microsoft and Coca-Cola began as small, bootstrapped start-ups, each with a motivated entrepreneur behind them.
Is bootstrapping right for you?
The idea of incurring possible personal debt perhaps makes bootstrapping a daunting option for many potential business owners, but approached in the right way, it can open the door to launching a business without the need to seek external investment.
That said, growing a successful business will still require enough working capital to get an initial vision or idea off the ground. With bootstrapping, this might mean using personal savings, taking out a line of credit, or selling off assets to raise enough funding to launch the business. Without the financial security of external investors, entrepreneurs who take this route need to get comfortable with taking a lean approach to the business and knowing when and where to cut costs.
The key to successful self-funding is maximising how far that initial capital takes you, and getting revenue flowing back into the business as quickly as possible, while reinvesting wisely to establish steady, sustainable growth.
Perhaps one of the most appealing factors to bootstrapping is retaining equity and control of the business. With no external investors, the business remains undiluted, giving the founder/s complete autonomy in direction, pace, and decision-making, ensuring the business conforms to an initial vision and set of values.
Additionally, retaining full control allows owners to set a pace for growth that makes sense for them and the business, without the external pressure of rapid, unsustainable growth.
This is a double-edged sword, as while retaining control is generally a good thing, it does come with an immense amount of responsibility and pressure. Founders must be able to make savvy, financially responsible decisions, sometimes under challenging circumstances, and with limited resources at their disposal.
Entrepreneurs who decide to self-fund their business often develop a very particular mindset. They tend to retain a much closer knowledge of the day-to-day running of the business, along with a strong grasp of the numbers and, crucially, the profits.
With all funds coming from customers, bootstrapped businesses very quickly become pros at putting their product development, customer service and marketing first, as well as establishing sustainable cash-flow early-on. With little in the way of funds, especially at the initial stages of the business, self-funded entrepreneurs must get creative if they are to be successful. Doing more with less, and developing lean processes are vital for stretching scarce resources. With the early focus on making money, the business must inevitably be structured in a cost-effective way. While these may sound like limitations, these restrictions make for a highly resilient business long-term.
Though external investment can provide a bourgeoning start-up with a healthy cash injection early on, securing such investment is often a lengthy, complicated and time-consuming process. Many entrepreneurs, especially those beginning their business journey, typically opt for bootstrapping as it allows them to immediately jump into running a business without many of the formal skills needed to secure investment.
Inexperienced business owners can develop a huge amount of real-life experience without risking external funding, as well as both hard and soft business skills. Making a self-funded business a success not only requires an entrepreneur to develop their own personal skills, but to also recognise the areas that require outside expertise. Such entrepreneurs tend to become resourceful, resilient business owners.
While it takes a great deal of dedication, hard work and sound judgement to bootstrap a business, the ability it offers to shape the direction and pace of both your business growth and your own personal growth as an entrepreneur is unmatched.
Taking this path means developing and perfecting the business basics early-on, and having a keen eye for new and creative ways to improve and grow – without ever having to compromise on your business vision.