Starting a new business is exciting. However, it’s also daunting. This is particularly the case if you are considering getting investors or loans on board. The alternative is to bootstrap your start-up: fund it yourself, or use very minimal funds to get it going.
This isn’t possible for all businesses. Some of you won’t have a choice but to borrow or rely on investors to help you meet start-up costs for things such as machinery or cash flow for materials. However, for many service based businesses it is a real possibility. It is hard work, but you are then very much your own boss, not tied to anyone. So how do you do it?
Be realistic about your costs
Before you even get started, sit down and work out your costs. It is impossible to ascertain if you’ll need to seek additional funding unless you have a clear idea what your costs will be, at least in the short term. Consider the following:
Materials or stock
Website creation and domain
Don’t forget that you also need to factor in your individual living costs until the business is making enough to pay you. You don’t want to have to give up because you need to seek employment just to live.
If in doubt, overestimate.
Understand cash flow
Cash flow is the available money (cash) you have which you can use for the business. A healthy cash flow is essential for your business to operate and grow. For example, it’s no good winning a large contract if you don’t have the cash to pay the staff you’d need to complete it, or to buy the software package you need.
Ultimately, you will build a healthy cash flow through invoices being paid. However, you will likely need a certain amount of cash to get to that point.
When bootstrapping a business you have to be considerably more patient than you would be if you had a ready source of funds. It is likely that the business will take longer to grow. For example, you may not be able to invest in your ideal marketing campaign until you’ve brought in enough business to pay for it.
You therefore need to think creatively about the early days and how to get your name out there. However, plan carefully and be patient and it will begin to come together.
Put profits back in
If you’ve used investment or a loan then you will be able to start drawing on profits sooner. However, when starting from scratch you need to plough this money back in to the business. Use those profits to invest in machinery which will speed up processes and improve efficiency and service offerings, or to pay for staff to enable you to grow.
It can be helpful to write down your list of priorities for how you will invest back in the business. Then, when the funds are available, you clearly know your next step.
Don’t be scared of advice
Investors, and even loans to some degree, usually bring with them advice and guidance. Just because you haven’t got this, doesn’t mean you should be afraid to seek it out. Speak to other entrepreneurs and business advice centres and seek support.
It may be hard to bootstrap a business in the short term. However, longer-term you’re rewarded by freedom as well as the knowledge that you built something from nothing.
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About The Author
A content writer specialising in business, finance, software, and beyond. I'm a wordsmith with a penchant for puns and making complex subjects accessible. Learn more about Elizabeth.