Limited sources of finance are the greatest problem facing startups nowadays. This happens to people who want to start and get big all at once. While this is not a bad idea, the challenges associated may outweigh the benefits only to leave you disappointed. But do you have to trend this path? Bootstrapping is one of the ways you can use to raise funds for your business while avoiding the pitfalls associated with methods like borrowing and venture capital funding.
When you opt to bootstrap your business you remain to be the sole source of funds to run your business until it stabilizes and returns a profit. While bootstrapping is not easy, it is a nice way to start when you want to do it your way or when other funding means are not accessible for some reason. Below we will discuss four sources of funds to bootstrap your business.
Freelance has become popular over the years and anyone with a skill can become profitable by selling their services to clients across the globe. This is a type of engagement that requires very little resources and which can turn out to even be a permanent source of income even when your business is up and running. Good freelancers choose a niche to specialise in and then seek clients to work for. If you can get freelance gigs related to your business idea it would also improve your mastery of related concepts while still earning your income.
2. Consider co-founding
Even if you want to do it by yourself you will occasionally need to consult on some issues. With a co-founder, you get somebody to share ideas without the fear of pirating. Also, co-founders will be part of the business and therefore a source of funds. The challenge lies in choosing a trustworthy co-founder who will remain committed to the growth of the business without hosting nasty ideas.
3. Leasing your assets
This is probably the easiest way to get finance to kick off your idea into a thriving business. If you have assets that are currently underutilized, you may consider leasing part of them to get the initial funds. Assets can refer to your home or a block of apartments, your car, among other tangibles. We are living in a digital world where you can easily connect to people who would need spare rooms for rent, others may need to rent a car for a trip or a garage for rent.
4. Try Crowdfunding
Have you heard about Crowdfunding before? It is a new and modern way of raising capital for a start-up without the worry of who your business connections are. Crowdfunding has gained popularity over the past few years making it the number one source of start-up funding outside personal savings. With crowdfunding air your proposal on both online and offline platforms to either a specialized group of people or millions of online platform users. If from among the millions, a person is interested in your idea they will initiate negotiation of what they get in return after offering their funds.
The benefits of bootstrapping
- Bootstrapping allows the owner of the business to try different faces of the idea since they are the bosses
- It rids the investor of the need to borrow loans whose repayment may drag down the expansion of the business.
While the business owner has full control of the business there are challenges you must be ready to face. These include the following
- Low brand visibility and credibility – businesses associated with popular investors are likely to be more visible since they have a strong funding base useful for marketing.
- Slow business growth – since the entrepreneurs or cofounders work under little or no pressure from the outside they may tend to relax or reduce their commitment to the venture leading to slow growth.
Tips on sustaining your Bootstrapped business
A large percentage of first starters indeed fail due to improper management of funds among other factors. However, several tips work well in maintaining your bootstrapped business until it is stable. Here are some of them.
- Reduce unnecessary expenses and avoid impulse buying
Having a budget is one inevitable thing for every young business. A compact budget is much better than one characterised by petty purchases that can be avoided.
- Don’t rush to do things
While this may sound obvious, a lot of young businesses are falling to the trap only to end up collapsing due to a lack of funds to support their activities. The acquisition of an office is important but not mandatory in the initial stages. Even cofounders can make arrangements to work from home especially if they are dealing with services rather than products.
- Outsource labour and consider using family
Outsourcing labour can help you cut on wages thereby leaving you with finance to use on more reasonable items. Using family members for your labour, on the other hand, implies that you pay low wages and retain finance to serve other purposes.
- Go digital
We are living in a digital world where every kind of business has the opportunity to reach the whole world through a website. Having one for your business increases your reach while at the same time creating an image for you. Businesses with websites are more likely to be found than ones without.
- Impose immediate payment to clients
Let your clients know that you need funds by imposing an immediate payment condition in your initial dealings. This is also important since you will probably deal with new clients every day. It helps your business to avoid succumbing to bad debts too early.
While bootstrapping is not an easy route, it is a great way to build your business from the ground-up and maintaining control of your venture. Other than personal savings, you can get funds through the lease of assets and crowdfunding among others. Patience and discipline are valuable assets you can have as an entrepreneur. The benefits bootstrapping outweigh the challenges in most general cases and therefore slow business growth should be taken as the learning path for your young business.