bootstrapping

Small businesses are bold enough to compete with large establishments and present their own products and services out into the world. For self-starting entrepreneurs with small businesses, one of the key things to get the ball rolling is by “pulling up their own bootstraps.”

Bootstrapping is when you start your business without the help of venture capital firms. Most of the time, bootstrapping comes from personal money, credit card, or a considerable loan taken out as starting capital. This strategy, however, is more than just the initial funding that goes into the foundation of your company.

Seth Godin, an American author and businessman who wrote The Bootstrapper’s Bible, says bootstrapping is a state of mind. The goal is to reach for the stars, but it takes passion and dedication to make your company’s goals happen.

Bootstrapping takes the right drive and ambition, but a successful business venture also needs the wisdom of knowing where and how to ask for outside support. Indeed, a solid plan and effective strategy are needed for small businesses to become successful. If you can pull off bootstrapping, the rewards are prosperous.

For instance, you can easily improve cash flow, fuel growth internally, and get by without outside help. However, if you find yourself struggling to maintain the business, bootstrapping might not be the wisest decision. In this article, we examine the advantages and disadvantages of bootstrapping as a guide to get you through any stage of your business journey.

The Pros and Cons of Bootstrapping Your Business

PRO: Your business is wholly owned by yourself.

Because the starting capital for your business was founded on either personal savings or a bank loan you made, the ownership is solely yours. If you choose to have partnerships soon, this means your share of equity is more extensive compared to that of your partners, and your share may even worth more.

CON:
If the strategy fails, there is higher chance of bankruptcy or that your money will run out.

The disadvantage of owning the majority of the shares is that when your business model fails or your business isn’t seeing any profit, there is a higher chance of bankruptcy. Your business will likely experience shortages in cash flow, and it will need careful and meticulous budgeting to get your business back on track.

PRO: You have direct control over the direction of your business.

When you bootstrap your business, you get to decide which direction it goes. There is little to no external pressure to accomplish things that are not aligned with your business goals.

CON: Yet, the lack of outside capital can mean you are limited in your capacity to advertise and market your services, which can stunt growth.

Without extra budget allocated for marketing and promotions, it’s possible that your business will have limited visibility and that growth can be stunted. You also won’t be able to assemble a team of creatives and innovative thinkers who can help polish your marketing strategies.

PRO: There’s a sense of accomplishment that comes with knowing that you built your business from scratch.

Self-made millionaires are always lauded and praised for their rags to riches story. There is a deep sense of fulfillment and accomplishment with knowing that you’ve worked so hard to steer the direction of your business into a success.

CON: Going at it alone can mean you carry all the burden of making the business profitable and successful.

With significant outside capital, however, you can enlist the help of professional experts as your board members, shareholders, and influencers. Enlisting top-level help can improve operations, boost profit, and exceed expectations.

PRO: Because you only have to rely on the material and resources that you currently have, you will be forced to create an effective business model.

If successful, your business model could actually be pirated by other startups and used as a blueprint for success. This means the risk is ultra-high, and the results may either be a flop or soar. Keep in mind that the goal is to produce a steady cash flow that will maintain your business.

CON: You’re going to have to work a lot harder compared to others because your resources are limited.

Bootstrapping your business isn’t an easy task. You’re going to have to put in more work and hustle a lot harder. The good news is that other entrepreneurs have already accomplished what you’re seeking out to do. It’s a challenge, but it’s not impossible.

After reading up about the good and the bad of business bootstrapping, doing the same is a choice that is entirely up to you. The key is to maximize your strengths, acknowledge your weaknesses, and work hard to improve operations. You may be shooting for the stars, but keep your feet on the ground. That way, you’ll reach even greater heights.

Barbara Davidson is a writer and contributor to various business & finance blogs. Some of the blogs that she regularly writes are for NetCredit and The Business Backer.

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