Starting a business with little or nothing is never an all-rosy experience, it isn’t exactly an easy route. You’re going to have to face down huge challenges – from limited human resources to tight budgets etc, but it is never (ever) a bad idea. The truth is, the entrepreneurial journey can be a particularly tough road for founders who bootstrap.
Bootstrapping is a term used to describe a situation in which an entrepreneur starts a business with little or no capital and funds the company from personal finances or operating revenue of the company. Bootstrappers get to retain full control of their business unlike those who get investors, but it could be a lot more demanding and poses a higher degree of risk on the startup, as the founder might have to micro manage finances and the venture. Bootstrapping is very common (studies show that more than 80% of new startup operations are funded through the founder’s’ personal finances) especially in Nigeria and Africa as a whole.
In this article I’d be sharing reasons why starting a business with little or no capital (bootstrapping) is not a bad idea, the advantages it presents and tips on how to make it work for you.
Why Bootstrapping is not a bad idea. Here are some advantages of building your company without investors.
You’d Start Small
Not having a lot of money to start with forces you to start small, and starting small gives you the opportunity to accurately test your idea, then scale up gradually. It also helps you build a strong sense of scrappiness which you would benefit from in the long run.
You’d Develop Better Products
When you do not have a loan or investor money to rely on, you likely spend more time optimising your product and or service so it can turn huge profits, rather than just focusing on trying to hit growth metrics.
Creative & Executive Freedom
This cannot be overemphasized. Once an investor puts money in your business, you no longer have 100% executive (and sometimes, creative) control. And so, building your business with your own funds gives all the freedom and flexibility to do as you wish, to take riskier (and smarter) decisions, tweak your product or service at will and helps you follow your instincts more. It also gives room for unconventional thinking.
Teaches you to Save
Knowing that money isn’t coming from anywhere else would give you the mindset of ‘strategic spending’. You’d learn how to focus on spending on only the things (and people) that matter and would be beneficial to your bottom line. You’d also be much more focused on making money.
Tips on How to Make Bootstrapping Work for You
Bootstrapping requires guts, passion, and skill; but it also brings out the best in entrepreneurs. And yes, the end product is always fulfilling. Once you scale, it would all make sense and be worth it.
Below are tips to help you build your business faster and better without investor or loan money.
Stick to a Business you Know and Love
This is, in my opinion, the first rule of entrepreneurship. Do what you know and what you love because when it gets tough (and oh it will), it is your love and belief in your idea that would keep you going. When money is short, your hands on – technical know how would keep the business running.
Build the Right Team
You are only as good as your team. So get people who believe in you and your idea to work with you in building the business. Offer them equity (it doesn’t have to be forever) if you can’t pay them at the beginning. Get a Co-Founder if you can find a great one (good isn’t enough). The point is, do not be an island. You’d need people for moral, technical, emotional, and creative support. Also, remember not to try to be everything to everybody, do what you can and outsource the rest. This would reduce the burden on you whilst still making money.
Know your industry
One of the smartest things any entrepreneur can do – especially when you are just starting out – is to research and get to know your industry like you do your palms. Find your competitors, find what they are doing wrong and stay away from those while you do better what they are doing right.
Don’t get an Office Space until you have Customers
Getting a shop or an office space is super cool, but don’t rush into it until you have active paying customers. Don’t do glam, until glam can pay for itself.
Build Relationships and Seek Mentorship
I sincerely believe that businesses thrive on relationships and retainers. It’s not just about meeting new people and acquiring new clients, you have got to learn to sustain the existing relationships that you have. From there, comes referrals. Also, seek mentorship, there is no harm in it. Find a more experienced entrepreneur (preferably in your industry) and be humble enough to learn from him/her. It would save you a lot of time and mistakes.
Leverage on Digital
Digital is the ISH right now. Lots of people are Instagram entrepreneurs. So wisen up, invest in Digital. Get a website for your business and use social media to your advantage.
Are you currently bootstrapping? Share your experience by commenting below.
Peace Itimi is an Account Manager at Webcoupers, a Lagos-based Digital Marketing agency.
Photo Credit: Dreamstime | Robert Kneschke