Bootstrapping Your Business
In my last blog post, Maximizing Your Resources, I talked about some non-monetary resources that you could utilize to get your business going. But, funding is always going to be an issue at some point, and often people’s first instinct is to try to get a loan or find an investor.
WBCUtah Executive Director Ann Marie Wallace says, “Bootstrapping should always be your first choice to fund a business. Your family and friends believe in you and may be willing and able to help, sometimes interest free!”
Why Should You Use Your Own Money First?
“Our business plans can be so big that we feel that we have no other option to seek out a loan or an investor to even get it started. This is a tough place to be because banks, investors, and organizations don’t like to invest money in untested ideas and people that they do not financially know,” says Deborah Marzano, Program and Special Events Manager at the WBC, who also owns her own business.
“This means that we need to get our business up and running by using our own funds and maybe some help from family and friends. This is what we refer to as bootstrapping.”
- It sets you up for future funding – Bootstrapping your business proves to future investors and banks that you are committed to your business idea and are willing to risk your own money, as mentioned in this week’s Tip Tuesday video.
- It allows you to maintain control over your company – Accepting money from an investor will come with some sort of tradeoff and waiting to find an investor will allow you to shape the company the way you envision it.
- It will force you to focus on cash flow – Without investors or loan money to fall back on, you will have to stay on top of how you are spending your money.
Methods of Bootstrapping
In this article by the SBA, they list several methods of bootstrapping your business. Here are the top three:
- Barter and Trade – Find companies or individuals willing to trade their goods or services for yours. You can find more information about this on the International Reciprocal Trade Association website.
- Keep responsibilities in-house – Rather than hiring someone outside of your business, utilize your own talents or the talents of your staff to handle tasks you need completed (i.e. graphic design, content writing, accounting, etc.).
- Use low-cost marketing methods – There are a variety of ways to market your business that are relatively inexpensive or free, such as completing your business listing on Google My Business, Bing Places for Business, and Yelp for Business.
In my case, I didn’t need a lot of funds to get started as an illustrator because I was converting an existing hobby into a business. This meant that I already had most of the materials I needed to get started. When I needed to get additional equipment, I used my own money and borrowed some from family. I also have a background in graphic design and web development so I am putting those skills to work in designing my own logo and website rather than having someone else create them for me.
Every business and industry will have different funding needs to get started but bootstrapping should always be your go-to method for starting your business.