Bootstrapping for a business is defined as “the process of starting a business, marketing a business, and growing a business by using limited resources.” Bootstrappers plan extensively on building self-sustaining businesses on a shoestring budget. Successful bootstrapping demands frugality, creativity, and extensive planning.
The founder(s) must be prepared to stretch their limited capital, realizing that they will compete with businesses carrying much larger budgets. This is a challenge that only the most passionate, creative, and dedicated entrepreneurs meet.
As you learned from our paraphrased definition of bootstrapping a business, you’ll want to start, market, and grow your new business efficiently on a limited budget.
As an example, should you need to spend money on initial advertising, you’ll need to carefully choose the channels you’ll use to announce your launch and market the new venture without robbing other operations from needed funds.
Evaluate Initial Funding Options
Your first step is to plan your initial strategy, including potential funding options. Your options include attracting investors, receiving debt financing (loans), and alternative funding solutions(eg. crowd sourcing).
Side note: know where each dime will be spent. You’ll encounter numerous roadblocks if you attempt to create a bootstrapping budget without funding projections.
Often your best options are alternative funding options. If you’ve already explored the investor and loan options without success, consider alternative funding sources. Remember, when you’re starting a business with very little capital, you are bootstrapping whether you want to or not.
Here are some suggestions for bootstrapping your startup objectives with alternative funding plans.
- Become a Minimalist. Decide how you’ll spend your capital, whatever the level. A true minimalist considers low-cost email marketing and social media launches over print, TV and other traditional advertising. Can you do without the newest cutting-edge hardware or can you “make do” with pre-owned last generation technology?
- If you’ve been going solo, consider partnering up. You’ve probably read or heard that partnerships are the worst forms of business ownership structures. However, involving one or more partners that have more freed-up capital than you can have a major positive impact on your budget – and, therefore, your new business.
- Seek Out Small Business Grants. Often, state governments and/or private foundations offer grants to help worthy entrepreneurs bootstrap their startups. Completing grant applications and the interminable wait for decisions can heighten your stress level, but the time commitment will be worthwhile if you receive the money you need.
- Consider Crowdfunding. As crowdfunding becomes more popular, the challenges become fewer. If you have a winning business idea, you may be successful appealing to the general public for monetary support. The result of your frugal thought process may create the need for less money than you originally assumed.
These suggestions are not new or ground-breaking news – but they do work.
As you create your bootstrap budget, you must be frugal anyway you can. Yet, you cannot start your business with too little capital to reach break-even. Frugality is a necessary component, but don’t underestimate your money needs by too large a percentage.
Remember, you’re committed to have your business “see the light of day.” You’ll need, at least, a set minimum amount of capital for a successful startup. As a matter of fact, a minimum amount that you must accumulate in order to assume a green light on starting any actions that involve spending.
Steps to Creating and Implementing a Bootstrap Plan
Your initial business budget will focus on frugality mixed with reality. Follow these steps closely as you also can use them to implement your operations strategy, since you can use them after you launch your business. Consider these tips as the foundation of your initial and subsequent budgets.
- Get or Remain Organized and Focused. Prioritize your action plans and initial spending requirements. Stay focused during the total process.
- Prepare to Track All Line Items, However Small. Be sure all projected spending is necessary. Tracking every dollar that goes out and comes in gives you confidence, clarity, and a truer picture of your financial position to measure your performance.
- Research Tirelessly. Researching expenditures motivates you to avoid snap decisions, which are seldom cost effective. Research low-cost technology solutions to increase your knowledge base, improve your frugality, and streamline operations. Researching your competition to become a mini-expert on their strategies is equally valuable.
- Strategize and Brainstorm Regularly. Do you believe your initial strategy will be cost-effective and successful? It’s difficult to tell before you put your strategy into action. New businesses tend to be “fluid” regarding strategies; You should prepare to move quickly to trash a non-working strategy and replace it. Brainstorming often uncovers better strategies when your business needs an infusion of creativity.
- Create a Realistic Sales and Expense Forecast. While your heart may support your dream or vision, use your brain to design sales and expense forecasts based on reality.
- Generate a “To Do” List, Including Tasks to Reach Your Goals. When you’re bootstrapping a startup business, you need a complete list of “To Do’s,” including detailed tasks to reach your objectives. State your expected completion dates for each task to complement your plan.
- Plan for and Forecast Your Cash Flow. Whether you’re using your own or investor money, cash flow is more important than bottom line profit at the beginning. Your budget should include an estimate (realistic, please) of when you should reach break-even after launching your business.
- Design a Business and Marketing Plan. Many “rookie” entrepreneurs believe business or marketing plans are only focused on raising capital, whether debt or investment. However, a thoughtful business plan can offer you a road map to follow to reach business goals. Take it out of that drawer you stuffed it in, after showing it to sources of bootstrapping capital.
You probably don’t need millions to bootstrap your business. If you know some accounting techniques, you can build a realistic budget and forecast. If you don’t, retain a trusted accountant to translate your budget thoughts into dollars.
Your overall bootstrapping plan, combining dollars with vision, is for you to follow. If it makes sense to you, it also should please investors. It’s essential that your bootstrapping plan is based in reality, not wishful thinking.
When you’re committed to succeed and have created a viable plan, most will agree that investing in you (and your business) is a wise move.