What is Bootstrapping in Business?
A number of young professionals, home-makers and even hardened executives in India are increasingly taking the leap to being their own boss. Have a business idea, have some money saved in the bank – why not bootstrap and embark on the entrepreneurial path? Investopedia defines business bootstrapping as the “situation in which an entrepreneur starts a company with little capital.
An individual is said to be bootstrapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company”. Bootstrapping, therefore, essentially means to use your own savings in order to take-off your business idea.
This is all too common in the start-up world as it is often difficult to get funds from venture capitalists or even loans from banks at the ‘starting-up’ stage.
Also, you may want to test your idea, see if it has the potential to take-off and assess the timeline within which the business can start making money. Hence, you may want to call the shots at this stage and take your own decisions. Bootstrapping is the way to go for you.
What are the Basics of Business Bootstrapping?
Have a Strong Business Plan: Of no use is bootstrapping if you have not thought through your business idea, assessed its viability after tying in possible loop-holes, and drawing up a basic business model replete with the revenue source/expectancy.
Hence • Identify a person from your circle of friends/network who you think can give you impartial views and confide in him/her about your business plan. He may be able to do some straight-talking with you, pinpoint the weaknesses in your business plan and help you draw a stronger model.
One often turns to family-members for such reviews, but remember, family members/friends can either get too critical or too supportive thereby not providing you with the real picture.
• Take in a business partner (Here’s how you can choose a good business partner). If you identify a friend/family member who shares your vision and itch to start-up, get together!! With a good partner, you can build on each other’s strengths and launch your own ‘dream company’.
Start Saving Money:
This is the holy grail of bootstrapping. In case you have a business model in mind, make a statement of expected initial investment and start putting aside some money from your current income.
If you have already started the business with your personal finances, make sure you continue the good habit of creating a reserve for your on-going fund requirements.
Stay Cost Effective: “Penny saved is a penny earned” – make this phrase your guiding light!
• In the start-up phase, try to do everything on your own so that you can save on salaries. If you have a partner, list out each other’s strengths and capitalize on them such that you don’t have to hire an outsider to do a particular job.
So while one of you may don the ‘Operations Manager’s’ cap, the other can take charge of marketing and selling.
• Depending on the nature of your business, try to keep rental expenses low or nil. That’s the reason why most people start from their homes/ garages.
• Take the help of guerrilla marketing and social media marketing (like blog marketing, online marketing buzz, etc) in order to keep your marketing expenses as low as possible. Should you need a website for your business, see if you get a freelancer to do it, such that the costs are low.
• The internet is a great resource that can help with information on how to do things on your own. So in case you need to make flyers/business cards/ letterheads, go online to read how you could do them on your own.
Buy the required stationery from a local store and make your own stationery with a little creativity thereby saving on stationery expenses! What else comes to your mind when you think of business bootstrapping? Share with us in this forum so that many like us can benefit.