In business terms, bootstrapping refers to starting a business without external aid from others, from both a personal and financial perspective. It’s a good thing the technique exists, as so many of us have the desire to start our own businesses but have very little capital on which to draw from. I have been in business with brand new startup owners and I have learnt that it’s far, far easier to spend money, than to make it. There are ways however, of starting a business on next to no budget.
Most of us have dreamt of starting our own business. You may well know the requirements of starting up but fear the next steps. Getting investors on board can seem like a mountain to climb. Especially if you do not have close friends or family with the means to back you up. For anyone who has started their own business the difficulties involved with getting interest and more importantly, investment, are more often beyond that of which, we as normal human-beings can manage. Bootstrapping a business can take away the stress of getting investors on board, by managing everything yourself and limiting your spending you may be able to kick-start your new business, stay lean and ultimately succeed all by yourself.
“Most of us have dreamt of starting our own business. You may well know the requirements of starting up but fear the next steps. Getting investors on board can seem like a mountain to climb.”
Don’t go in blind, stick to what you know.
For those who have experience working in startups, it’s often advised that budding entrepreneurs work in an industry that they already know. Familiarity with a niche domain, and by that I mean your specific business sector, is considered obligatory.
We wrote about this in an earlier article this year, our Top 5 Tips For Startups, but it’s important to reiterate this point. Starting a business without specific industry experience can be a killer from the get go.
Attempt to learn your craft first. Working in your chosen industry can give you the relevant experience and an in depth understanding of its prerequisites. Starting your business without first hand industry experience can be considered detrimental to your future success. By working within your industry, not only will you become more knowledgeable about industry trends, but you will build up insight concerning your competitors and you will have the chance to build relationships with key individuals. Individuals who may be able to give you a leg up when you need it most.
If you are reading this, it’s most likely that you have already started your business or are on the verge of doing so. Being told to get a job in your chosen industry may seem like a taking a step back, or at least a distraction from your own business venture. However, you can gain industry insight in a number of ways.
We are lucky today in that we have access to unlimited resource from the internet and most online social communities are incredibly friendly and willing to help. So get on Reddit, get in Facebook groups and get on Twitter to shout for help. Some experts may even be willing to lend you their time face-to-face.
You could also join a co-working space like central-working. You may find yourself surrounded by entrepreneurs who have the same difficulties as you or even those who have learnt to surpass them. Don’t go in blind and certainly not alone.
Planning for spending
O.K, so I have just spoken about how Bootstrapping your business can be beneficial as it usually means no cost. The reality is that there is no such thing as a purely bootstrapped business. The aim here would be to limit your spending as much as possible. Stay lean.
Gain a considered understanding of what your costs might be. The services you require, advertising, labour and design. If you’re manufacturing, what costs might you be subject to? Consider any penalties or administrative costs as well. It’s best to overestimate here. Once you know what you might be spending on you will be able to go through your ‘shopping list’ and determine which services you may be able to negotiate on and which individuals may be able to help you with either free help or significantly reduced costing. Taking steps like this is great business practise. You can download a free business plan template from the princess trust. Use it to form your business practices and get an idea of what your costs might be. If you have a friend who works in finance, now would be the time to communicate with them.
Getting set up with a physical address
You may have the urge to get set-up with a physical office location. Having a place to work outside of your home can be really tempting when you first start out. There are certainly advantages to renting an office. You can make use of printers, phones, computers and have a clean and neat environment which ultimately might help you to stay focused. Not to mention the additional space for a studio or simply your new employees.
And it’s a big BUT. The cost of a physical office can be huge. Paying rent and office admin fees may take away all of your profit and if you are first starting out, the last thing you want to do is to spend your hard earned cash on assets that do not bring immediate return to your business. If you are still determined to get an office make sure you have customers first, running into problems with cash flow early on can paralyse your business and may end up leaving it dead in the water.
However, there are always alternatives to renting an office. You may already be aware but if you aren’t, it’s important to know that most services you expect from a rented office can be hired at a significantly reduced fee. Instead of renting an office with a physical location you can use the service provided by a virtual office provider.
A virtual office includes;
A Trading Address. This is used for trading purposes, you can send and receive mail with this address.
This means any spam mail can be filtered here and important mail won’t go missing as you can get your provider to notify you about certain letters you may be expecting.
You will also get that mail forwarded to an address of your choice.
Some services allow for email and text notifications when you receive new mail.
Any mail you do receive can get sent to your home computer or mobile phone. Your provider can open your mail with your consent and proceed with making a digital scan which can be sent to your electronic devices.
An address in a prime location may be used to represent your business and can often impress clients.
Crowdfunding can be a great way to kick-start your business. It’s the practice of funding a project or new business venture by raising small amounts of money from a large amount of people. Crowdfunding can be achieved in a number of ways, through mail-order subscriptions or benefit events but the term usually refers to a method via internet related registries. Crowdfunding has been popular for a number of years and has contributed to the rise of a number of amazing projects that otherwise couldn’t have been possible without it.
There are a number of crowdfunding platforms available today. Some include;
Some of the most successful businesses in the past few years have been a result of crowdfunding. One project, a crowdfunded video game called Star Citizen created by Wing Commander boss Chris Roberts, made history by becoming one of the largest crowdfunding projects to date raising $163 million. This meant that funding had surpassed that of most triple A video games from larger studios. Star Citizen began its funding on KickStarter. More recently a digital currency by the name of Filecoin, a blockchain virtual currency from the Ethereum platform, became the largest ever crowdfunded project, raising over $257 million dollars!
Crowdfunding has proved itself as a viable method of lean business design. However, if you are going to get people to buy into your business you must make sure you deliver on your promise, failure to do so will result in disaster and a collection of angry customers.
Find a co-founder. You can’t undertake this journey alone. Having an extra pair of hands to help you out, with an extra set of eyes to watch over you can be extremely valuable when you are first starting out. If you are bootstrapping your business, most of your work will be done internally. Your co-founder should bring additional funding but your skill sets should also compliment each other. If you can cover a broad range of skills between the two of you, you will have less chance of needing to outsource those projects to external specialist which will prove costly. Maintain the philosophy of low-spending.
Focused on yourself as well as your business.
Ask yourself these questions;
Are you hiring the right people? Are you being efficient with your spending? Could you learn skills that you need rather than outsourcing them? Remember, nothing is impossible to learn, if you can manage your time you may well be able to add to your skill set and save some serious cash.
We hope you found these tips helpful and we wish you the best of luck in your new venture!