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Episode 35 - Bootstrapping your business

What Is Bootstrapping?

Bootstrapping is building a business from the ground up with nothing but personal savings and the cash coming in from your first sales.

The word bootstrapping has come to be used for a variety of other self-starting processes.

Bootstrapping has its origin in the early 19th century with the expression “pulling up by one’s own bootstraps.” Initially, it implied an obviously impossible feat. Later, it became a metaphor for achieving success with no outside assistance.

There are some great reasons to go down the bootstrapped pathway, instead of seeking venture capital – the biggest reason being that you retain full ownership, and answer to no one but yourself.

 

Here are my tips for bootstrapping your business.

 

1. Pick a Co-Founder or Business Partner wisely

Having two perspectives heading the business can be critical. When bootstrapping, the vast majority of the work is done internally, so co-founders need to complement each other’s skillsets. If you’re good at different things, you have a better shot at being able to do everything between the two of you, keeping expenses low.

But is Co-founder always the right choice? Make sure your both equally invested, and absolutely get a formal contract drawn up. You might decide a partner of co-founder isn’t for you – that where tip number 2 comes in.

 

  1. Find a Mentor that knows your business pathway

Finding mentors and advisors that can help lead you on the journey is helpful. But not if they did it with a ton of capital to help them. You need someone familiar with Bootstrapping.

They can be friends and family or even co-workers, but you’ll need to look for somebody that has more expertise in starting a business than you do. They don’t even need to have been that successful. Learn from their mistakes, as well as their wins.

 

  1. Design a business model that generates cash quickly

Not all businesses are right for bootstrapping. The most successful bootstrapped companies have a business model that generates cash as quickly as possible. Without any cash inflow, you’ll burn your reserves before gaining any real traction.

If your idea involves a ton of tech, perhaps an app, and you don’t have the expertise or funds to get it going, you may need to start off trading your own time for money. Hopefully, it’s in the same field as you want your app to be sold in. But its not always crucial. Find your Minimum Viable product and use its sales to fund your app.

 

  1. Plan EVERYTHING

Plan your business down to the cent. You won’t have money to throw at ads on all social platforms. So, concentrate on one to start with. Know your target market and know for sure there is a market to sell your product. And make sure your business is viable. No point selling if you have to sell at a loss.

 

  1. Watch your cash closely

Create a separate bank account and only transfer in what you can afford to lose. Plan every expenditure and find items second hand where you can. Step away from that brand-new MacBook air, you don’t need it. And asses what return you are going to get on your spending. If it’s not going to help you make more money – don’t buy it.

And avoid the credit card! Racking up credit card debt is the fastest way to get in a hole. You may never recover. Instead, talk to suppliers and ask for extended payment terms. This can keep the cash you have in your bank longer, and you may be able to generate income from the items you have on that account. Credit cards should only be used when you are absolutely sure you will be able to pay it back. Maybe you know you have a good 6 months track record of sales and need a little more to buy from your supplier in bulk. You know with 90% accuracy the items will sell, and the money you save buying in bulk will get you ahead. This is when a credit card can come in handy. Not on the roll of a dice first launch.

Or maybe you need to start with pre-sales. Offer items at a cheaper rate in exchange for customers waiting for delivery. It’s also a great way to test the waters with your product.

 

  1. Cut Personal Expenses

You’re not going to be taking a wage for some time. In fact, you are going to be putting your own money into the business. Call the mobile phone company and move to a cheaper plan. Cut off Netflix, reduce your internet plan. All the little re-occurring expenses add up.

If you own a flashy expensive car, consider selling it and purchasing a cheaper one o fund your business and keep you afloat. Reduce as, much personal spending as you can.

 

  1. Don’t outsource jobs you can do yourself

Unless you absolutely do not have the skills, outsourcing should be the last thing on your business plan. Nothing is impossible to learn. You just need to know what things are worth your time learning, and which are not.

Now accounting is a great example. No, you shouldn’t take the time to learn how to do a tax return. Absolutely outsource that. But you can learn to take care of your own bookwork. Paying to have your accounting program set up correctly, and a bit of training can save you a tone of $ down the track. And you need your financials up to date at all times to assess where you’re at. You do not need to outsource to a bookkeeper.

Where you can, barter. Maybe you know a good accountant, and they need something you can do. You can exchange services and barter with each other to get the job done. Just make sure it’s something that is going to get your business ahead. And don’t barter with everyone – you don’t make any money that way.

 

  1. Don’t take no for an answer

When your small and starting out, some vendors and suppliers won’t want to work with you. Sometimes though, getting to know them and forming a relationship goes a long way. Start now before you need them and create a genuine connection.

Share your story with everyone you meet. Sometimes it’s ho you know that makes all the difference.

Be persistent. Use your charm and personality to get what you want. It will not be easy at first, but once you establish connections, they will be more than happy to accommodate you.

 

Bootstrapping a business is difficult, but it’s by no means impossible. With the right amount of hard work, collaboration, and passion you can make it work. Bootstrapping may take you longer, but it may provide the best outcome for you in the long run.