Are you trying to grow your startup without drowning in a sea of debt or struggling with a financial albatross around your neck? If so, you need to know how to bootstrap your business.
One in five U.S. companies — that’s 20% — crash and burn within one year of opening up shop. And nearly half of U.S. businesses — 48.4% — fail by the five-year mark.
If you want to beat the odds and avoid being a statistic, you must know how to bootstrap your startup. Continue reading to learn about the three steps in the bootstrapping process you must know about.
1. Self Funding
The first step in bootstrapping your business is tapping into your own personal salary and savings. That’s one reason you shouldn’t give up your day job if you currently have one. If you have a job and want to start up a business, being all-in on the startup front doesn’t have to mean giving up your present job.
In fact, it won’t make sense to go from having a source of income to having no money coming in whatsoever. Plenty of entrepreneurial business people worked their 9-to-5 and then went home to work on their startup in their free time — and that might be the best course of action for you.
So, rely on your salary and any savings to help bootstrap your business without taking on a large debt load. To stretch your personal resources, begin with a basic service or product. It’s really about developing a proof of concept to figure out whether there’s a real need for your offering in the marketplace. Starting with a modest product or service in line with your financial wherewithal, you’ll be able to get your startup off the ground more quickly. In other words, walk before you run.
2. Client Funding
You’re ready for stage two after you’ve reached a point where you’re generating enough revenue that you no longer need to use your personal resources to keep your business up and running. Once you bring in tangible revenue from customers who’ve bought into your company’s unique value proposition, you’ll want to focus on scaling your company. The goal is to increase sales, bring in more customers, and boost profitability. If you reach this stage as a one-person business, you might consider bringing on extra help for sales, marketing, or other needs. Making strategic hires can help you achieve explosive growth.
Remember that you can successfully bootstrap your business, whether in an office building, at your kitchen table, or in your garage. Whatever you do, ensure you project a professional image at all times. That’s essential even if you’re a one-person operation. Yes, it might be tempting to wear your PJs all day if you work from home, but a professional image will make it easier to achieve professional results. That means having the right attire, footwear, and accessories like quality wallets, watches, or jewelry.
3. Credit Funding (If You Need it)
Yes, bootstrapping is about building a business without being tethered to huge loans. But by the time you’re comfortably into stage two of the bootstrapping process and have reliable and predictable cash flow, you can consider applying for a business loan.
Doing so might be the next piece of the puzzle to take your business to the next level of growth. Having the cash flow to cover payback installments will make applying for a business loan easier. You’ll find that financial institutions will look more favorably on businesses that have grown responsibly and have the financial capacity to pay back loans.
If you want to grow a successful business that defies the odds by remaining a going concern, consider these three steps in the bootstrapping process. Of course, before starting a business, you must do your research, homework, and due diligence to ensure there’s a market for what you want to offer.
Once everything checks out, the next step is to find a way to get it started and build it into a viable company.
