What Is Bootstrapping? How to Tell If It’s Right for Your Small Business

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ExecutiveChronicles.comIf you have heard about a self-funded startup, your most likely know what bootstrapping means already. Bootstrapping a business means using your own personal savings to fund your company from start to finish with the hope you will prosper and earn enough revenue to put back into the business. 

Most startups start by bootstrapping their business until they run out of funds, forced to look for investors to help build their company to greater heights. Choosing to bootstrap your business means working through the hard times with the ability to own 100% of your business. 

Even though bootstrapping has shown success in well-known companies like SPANX, GoPro, GitHub, and Patagonia, this funding method isn’t as easy as many think. 

Pros and Cons to Bootstrapping Your Business

Bootstrapping, just like every other funding model, has its pros and cons to be weighed before making a final decision. As successful companies have had tremendous success using this business strategy, it isn’t the easiest thing to master right out of the gate — especially when the hard times hit. Fundera has nailed down the top pros and cons of this funding source. 

You’re the boss, but your own finances are at risk. 

Think about it. If you invest all of your personal savings into one project and it fails, you won’t be able to get that money back. Take into consideration how much your business may cost to startup and how much you will have to put at stake to be your own boss and control everything about your company. 

You pick the focus, but might lack a personal network. 

One pro of gaining funding through investors is the endless connections they have within your industry. Without those connects, this may take time away from work to get out and build your own business network. If you choose to do so, I highly recommend reading our tips on upscaling your LinkedIn profile to meet others in your industry and attend networking events.

You maintain responsibility, but you might lack business credibility. 

As this is your business 100%, it is your responsibility. You must do everything in your power to keep your business afloat. An upside to having investors by your side with strong connections already established is the credibility they already have established. Building your own credibility in the industry can be shown through sensitivity, honesty, knowledge, and confidence within your niche. 

You have the full rein of innovation, but experience slow and (sometimes) steady growth. 

The best part of being your own boss and controller of your company is the ability to do whatever you want with it. You are able to weigh in on all your thoughts and aspirations for your business and take action without having to seek permission before doing so. Keep in mind, doing so limits growth. You will need to be consistent with your company operations and know growth could take months up to years. 

How to Successfully Bootstrap Your Business

When first considering a startup you may think you need stacks on stacks of unused cash sitting around. Yet, in reality, self-funding your own business can be started off just $10,000. If that is everything you have in your savings, this pill might be a hard one to swallow. Dipping into your savings can save you stress and time when compared to seeking investors. You will be able to skip pitching to business professionals, and the stress of being prepared for every question shot your way. 

Even though bootstrapping your business can be a rather nail-biting business move, many companies have made it a long way starting in the same place as you. 

If you have a go-getter attitude and are weighing the pros and cons of this funding method, Fundera created an easy go-to infographic for everything you may want to know.

What Is Bootstrapping?