How To Start A Bootstrap Startup

Should you start a bootstrap startup or should you get your new business funded? If you want to know about business funding, just click on the link. On the other hand, if you are one of those entrepreneurs who just want to keep things simple, this article is for you.

I like things easy. I have run multi-million dollar businesses for many years and I know very well that despite all the good intention to make the business a success, things often go wrong. As a matter of fact, terms like “capital injection” and “sales of rights shares” are popular in the corporate world denoting a fresh needs for cash for reasons such as expansion or survival.

In God’s Grace, I always pray for a peaceful business. A business where He is in charge and made a provision for us whom He loves. In His Wisdom, He blessed me with a model bootstrap business. Don’t get me wrong here. Running a bootstrap entity is similar to running a highly geared business. Among others, you need to know the basics like

  • selling,
  • keeping a close eye on your cash flow,
  • understanding the needs of your targeted market and
  • knowing your competition

In order to run a bootstrapping business venture, you need to:

  1. Choose A Suitable Bootstrap Startup

This article talks about easy and uncomplicated money-making businesses. If your dad happens to be Charles Southwest and he leaves it to you to spend millions to start a company, you should not be here.

Anyway, there are business models that are suitable for bootstrapping and there are some that need heavy capital expenditure (CAPEX). An online business like blogging will be the perfect poster boy of a bootstrapping business. There are some good reasons listed here on why you should create a blog to make money.

If you are not into online business, bootstrapping also helps in some offline business. Manufacturing and retailing are definitely unsuitable candidates for this strategy. Starting a manufacturing business requires heavy capital for machines and also raw materials. An elaborate plant constitutes warehouse, deliveries, among others. If you are into retailing, you need an upfront capital layout to stock up on inventories.

A business in wholesale trading for certain products is suitable for bootstrap. You could even run the business single-handed at the startup stage wearing all the hats in:

  • Sales and marketing.
  • Logistic.
  • Clerical although I advise you to hire an accountant for your book keeping and taxes.

2. Cash Flow

As a bootstrap entrepreneur, maintaining a strong cash flow should be our no. 1 priority. The company cash flow should always be in our thought the moment we wake up and at the moment before we sleep. An entrepreneur needs to apply several pointers in achieving relentless positive cash flow for his business:

  • Cash on delivery or the shortest credit term possible. Sometimes it is quite difficult to achieve COD all the time due to threats from competition but you could..
  • Have a healthy mix of customers paying you cash and a small ratio paying you in longer credit term.
  • Healthy profit margin. Avoid the temptation at all cost to fall into the trap of a price war. Walk away if you can’t match your competitor’s low ball.
  • Ensure your daily profits are able to cover your daily operational cost. Break up your company’s daily expenses like fuel, utility, maintenance, and salary to your profit for the day.

I have personally witnessed a company pivoting their business model more than 5 times without going under because of the entrepreneur’s ability to keep his cash flow healthy during the pivoting.

3.  Home Office

Forget about those advisers who asked you to rent a co-working office to portray a presentable image to your client. What a whole bunch of crap! Honestly, your client doesn’t care whether you have a plush office or a home office. All they care is that your service rocks and your products solve their problems.

If your potential client asks you for a meeting, explain your situation and offer to meet them at a cafe. If you could, you might want to use one of your rooms as your office depending on your preference. You are the boss right! As you progress, and your brand projects reliability, your client doesn’t even care if you use your car for your office and your cat as your PA.

4. Wear Many Hats

In order for your business to run successfully within a bootstrap budget, you the entrepreneur must have many skills. Utmost, you must know how to sell! Other skills you need are in keeping track of receivables and payables, delivery if you have the muscles (don’t worry, you will develop them very soon).

Imagine the money you could save from hiring sales, a truck driver and a clerk for the medium term. However, please hire if your business is growing at a rate beyond your own ability to run as a one-man operation.

5.  Outsource

As you scale your business, try to minimize your fixed cost from escalating. Do your best to outsource on any additional help or infrastructure that you need instead of adding assets into your fledgling business.

Many companies made the decision to add manpower and facilities when they got a big contract or added on new products into their portfolio. Honestly, there are no right or wrong answers when facing such business opportunities. Few entrepreneurs chose to remain small as oppose to common logic to scale as fast as possible. But you do need to make a choice onto which direction you want to take.

You could outsource many services:

  • Accounting and taxation
  • Writers for your money making blogs
  • Logistic
  • Company secretary

6.  Rent Instead of Buy

This applies to real estate and infrastructures. Again, you have to make a choice whether you want to own the property at the end of the day or you want to keep your life clear of clutters.

At the early stage where cash is scarce, do not take up the burden of buying up the property that you fancy. That warehouse, the beautiful office space across the main street. Your objective is to build up cash and liquidity. I have seen entrepreneurs who went on a buying spree and the results they hoped were sleepless nights and unprecedented anxiety attacks.

Don’t get me wrong. At the end of the day, if your business is doing well do invest in some strategic properties. Maybe a retail lot that has synergy with what you do.

7.  Strategic Partners, A Website Perhaps

Try looking for strategic collaborations as you build your business. You could only do so much on your own, but with the right partner, your services or products may reach a wider audience. This strategy works if you plan to take your business overseas. Engaging a local dealer may not be a bed of roses, but a good dealer should bring your products to the local market, thus freeing you the headache of hiring a sales team and the complication of dealing with the local legislative bodies.

I would also consider setting up a website a strategic alliance with the world wide web. A website could be your own or you might consider making use of other platforms like Amazon, eBay or Alibaba. Let the internet of things catapult your business globally.

8. Buy An Ongoing Business

If you can afford it, buy an ongoing business with good cash flow instead of starting from scratch. As a new entrepreneur can attest to the fact that it is extremely difficult to start a business from ground zero. Customers do not know you. Your new startup is hardly tested and only your parents might buy from you initially. Determine your burn rate for this final consideration because you need to weigh on all the pros and cons if you choose this path.

In a nutshell, bootstrapping your business really boils down to lots of innovation. Be creative, for your business survival and success. Skimp on the inside but be generous when you meet people.

2 comments / Add your comment below

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.