Bootstrapping is a term which describes starting a business using your own financial and personal resources along with sales to sustain and grow your business versus using the financial resources of external investors. The art of building a business with little or no money is by far the most common way Americans build businesses. While bootstrapping involves a risk for the founders, the absence of any other stakeholder gives the founders more financial control of the company. Many successful companies including Dell Computers were founded this way. The majority of small businesses are bootstrapped as opposed to financed by external investors.
Techniques to bootstrapping Your Business with Your Own Financial Resources
- Keep your full time job for as long as possible while starting your business during your off time
- Draw down your savings
- Careful use of credit cards
- Secure a home equity loan
- Do consulting to provide cash flow
Generating Sales to Fund Your Business
- Make Sales Your Number One Priority
- Talk with numerous potential customers to understand your market
- Rush your product to market to provide early revenues and earnings
- Be aggressive and quickly learn how to make your first critical sales
Operate Your New Business Frugally
- Postpone paying yourself
- Be frugal everywhere, for example driving rather than flying
- Lease or borrow equipment you need
- Keep records of all out-of-pocket expenses. Once you secure the revenue, you may be able to reimburse yourself first as opposed to taking a salary to lessen your tax bite.
Bootstrap: Lessons Learned Building a Successful Company from Scratch
Find out about another great book on bootstrapping— Bootstrap: Lessons Learned Building a Successful Company from Scratch. Author Ken Hess bootstrapped Banner Blue Software, the company that produced Family Tree Maker, and grew it to over 100 employees and $23 million in sales before selling it to Broderbund Software. Site also includes excerpts from the book, start up resources and detailed info on the author.