Small Business Startup News
Bootstrapping Advice For Startup Entrepreneurs
Written by Tim Morral
Published: 11/17/2014
More and more entrepreneurs are bootstrapping their startups. Here's what you need to know to decide whether or not bootstrapping is the best way to turn your entrepreneurial dreams into reality.
Many entrepreneurs are surprised to discover how difficult it is to get a new business off the ground. In addition to the logistics of launching a new enterprise, startup entrepreneurs have to raise capital for their companies--and that often involves bootstrapping.
Although it may seem like every other startup in your space is backed by venture capital or large commercial loans, the vast majority of startups in the U.S. are bootstrapped, i.e. funded without any external assistance.
In a recent Fox Business News article, Jesse Pujji described why bootstrapping makes sense for most startups. First and foremost, bootstrapping allows entrepreneurs to retain total control of their companies during the initial startup phase. Additionally, in bootstrapped companies, clients take center stage in decision-making activities and entrepreneurs more closely manage available resources.
In some cases, bootstrapping can even accelerate startup growth. In an article at Fast Company, Rodrigo Santibanez described how bootstrapping helped demonstrate his startup's fast growth curve, enabling him and his partner to land significant funding in less than a year.
But getting there took a lot of hard work and flexibility. Some of the boostrapping tips Santibanez offered other entrepreneurs included:
- Generate cash quickly: Entrepreneurs interested in bootstrapping need to choose a business model capable of generating cash quickly. If cash isn't coming into the business, it will be difficult to demonstrate traction.
- Reduce expense and do it yourself: Bootstrapping means that you will have to reduce expenses wherever you can. Sometimes that means doing jobs that you would normally outsource to a third party.
- Be careful about chasing revenue: Although it's important to generate cash, don't chase revenue opportunities if they require you to drastically alter your operating model or long-term goals.
Finally, it's important to remember that at some point, capital requirements will outpace your bootstrapping abilities and you will need to pursue outside funding. But by bootstrapping during the initial startup phase, you can lay the groundwork for long-term success.
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