The Basics of Bootstrapping

The Basics of Bootstrapping

Wells-Fargo considers Utah’s economy as one of the most thriving in the United States. It’s all due to a young labor force, mixed economy, and collaboration between the business sector and the government. If there’s a right time to start a business, it’s today. What if you don’t have enough cash with you? This is where bootstrapping comes in. Read the facts to learn more about it and how it can benefit your business.

What Is Bootstrapping?

It is a method of starting a business with little to no money. Most people rely on their existing resources, which can include savings, pension, and income from previous investments. Others can apply for a loan, but unlike regular ones, they are usually small. The purpose of borrowing is also mostly to maintain the operations, not to spend on capital expenditures such as equipment.

What Are the Advantages and Disadvantages of Bootstrapping?

Bootstrapping is popular in the startup scene for two reasons. One, they want to avoid having to rely on venture capitalists. These companies have the tendency to exercise significant control over the direction and operations of the business in exchange for a huge amount of money.

Second, even if they want to work with a venture capitalist, they might only face rejection. Most of these investors choose those that already operate for some time. The business can already present forecasts and historical data. Bootstrapping saves you from getting into debt. Loans can siphon profits and reduce your cash flow. In the end, growth will still be slow.

The biggest disadvantage is that you absorb all the risks. If the business won’t work, you’ll be left with no savings or even retirement money.

woman pointing at a graph on the tablet

What Are the Biggest Expenses?

Businesses usually have at least four biggest expenses: equipment, labor, rental, and marketing. Here are ideas to cut costs:

Equipment – If you need a vehicle, you can opt for a new Mercedes Benz Sprinter in Utah. Although this is a less affordable van, it also retains huge resale value. You can also work with the dealer for a rental setup. It means you can rent the vehicle until you have enough cash to buy it.

Labor – During the initial phases of the business, you need to learn how to do the dirty work. Be ready to spend more than 10 hours a day. Another option is to invite family and friends to invest in the business in exchange for an equity stake. Because of the lucrative offer, they are more likely to work as hard as you.

Rental – Be like the founders of Google and Apple: start in the garage. If you don’t have one, create a makeshift home office.

Marketing – Maximize the power of the word of mouth. Keep in mind people tend to trust the recommendations from the people they know. Start with your circle of friends and family and expand in your community. Combine online and offline marketing. Even paid search gives you excellent control over your marketing expenses.

Everybody needs to start somewhere, and as a fledgling business, bootstrapping is the way to go, especially if you have idle cash lying around.