I started my business back in 2010 with absolutely no money. The first month I decided to try freelancing I made $5.
Granted, back then, freelancing was still seen as something you did when you couldn’t find a job and blogging wasn’t really a trend yet. Regardless, I started a business from nothing and have been bootstrapping my way up ever since.
It’s possible to start a business from scratch without taking money from anyone, taking out a loan or getting into credit card debt. Here’s how you, too, can bootstrap your business from the ground up.
What exactly is bootstrapping a business?
Bootstrapping a business is when you use a portion of the revenue your business is earning to reinvest and keep growing. It can also refer to an individual starting a business from their own personal finances.
Essentially, rather than taking on investors or leveraging debt, business owners who decide to bootstrap work with whatever money their business is bringing in.
Bootstrapping a business has become a popular option for several different types of businesses because it allows the business owner to have complete control over the direction of the business. They don’t have to worry about issuing equity or watering down the ownership of the business among investors.
Additionally, you don’t have to worry about traditional forms of business debt. If they do use debt, it’s likely from personal sources like credit cards, not a business loan.
While there’s nothing wrong with taking investor money or using a loan to build a business, some people aren’t comfortable with either option and prefer to bootstrap.
While bootstrapping is certainly a viable option for many business owners, there are some things to keep in mind if you plan to take the bootstrapping route.
Your ability to bootstrap may depend on your industry
I started as a freelancer and blogger. Since then, I’ve added on consulting services, and I’m currently moving into selling digital courses and a membership site. None of this requires high overhead on my part, which is why bootstrapping a business has worked out so well for me.
On the other hand, if my business model required a lot of people (additional staff members), major investments into product development, building out online platforms or inventory, it would be much harder to bootstrap.
That’s why your ability to bootstrap often depends on what kind of business you have. While it may work for some businesses, it may be nearly impossible for others (unless of course, the business owner happens to have a giant pile of cash in the bank).
You may have to (occasionally) rely on credit cards
Unless you happen to have a lot of cash, bootstrappers may find themselves using credit cards to hold them over while they wait for revenue to come in.
Here’s what I mean. You may use a credit card to keep the business running, but may not get all of your revenue for that month until a couple of weeks later.
Nearly every bootstrapper I know has done this at some point or another. The credit card keeps things running and gives them a three-week buffer as they wait for the money to come in. They may keep this going until the business has more predictable revenue.
Granted, this is how some business owners can get into trouble with personal credit cards. They may choose to invest a lot all at once and then find themselves unable to pay off the credit card.
The idea is not to go overboard, but rather use credit cards wisely while layering in investments over time. Bonus points if you’re using a rewards card and can score free items like flights that can be used for future business travel.
Growth is probably going to be slow
Because boostrappers may need to layer in investments over time as their revenue grows, it may take some time for the business to become really profitable.
That’s just the name of the game here. Don’t expect to be raking in a million dollars quickly if you don’t have much capital to begin with.
The good news is that bootstrapping a business is a pretty stable way of building revenue to support future investments. It can also provide the business with a safety net that may not otherwise be available through venture capital or a business loan.
Get ready to use your own money
If you’re not seeking venture capital and you’re not taking out a business loan, then your only option for capital to start a business is your own personal money or a credit card tied to your own personal credit.
There may be times where you need to pull from your own savings to get your business off the ground. When your business is experiencing a lean month, you may have to pull from your personal money, as well.
This is why I make the argument that business owners need to have a much bigger emergency fund than those who are regularly employed. We take on more risk than the Average Joe, which means we need to make sure we’re covered when things aren’t working out. This extra cushion of savings will really come in handy should you have issues with clients not paying invoices on time or any other unexpected holdups.
You’ll be glad to have that extra savings to hold you over until you can replace the money you borrowed.
Final thoughts on bootstrapping a business
Bootstrapping is a great option for business owners that don’t require a lot of overhead and want to keep control of business decisions. If done well, it’s actually a solid way to grow a business. Just keep in mind that your progress may be slow and you’ll be taking on more risk with your personal money.