After participating in numerous startups as a business advisor, mentor and investor, I’ve seen all kinds of financial situations — from those operating on a shoestring budget to those with millions in funding. And, of all the situations, I’d always go with the ones that bootstrapped their way to success. That’s because those startups show resilience, innovative thinking and smart decision making. I’d bet on those startups more than any that received countless infusions of cash and often burned right through the money.
While it may seem scary to bootstrap at first, here are 10 top tips to make this type of model work for building out a startup that I’ve collected over the years of working with this model:
Create And Manage An Income Stream
Before you roll out your startup work, plan for ongoing income. While some founders have focused on their savings, that only goes so far and may not cover your the regular paychecks and personal costs. That’s why my top tip is to maintain a regular income stream while you are building your startup. It could mean keeping your regular job or developing hobbies or an initial product that delivers a regular income.
Develop More Skills
The ability run as many startup operations as possible at first can help you maximize those limited funds. Go online and sign up for free or cheap courses to learn basic developer skills. Also, so many tools do the technical work for you. It’s just a matter of finding them online and putting them into practice. These skills prove useful later on when you do hire people because you’ll be able to understand what they are doing and speak their language.
Leverage Free Advice
Join networking sites or developer forums and connect with those who have experience and knowledge you need. There’s nothing wrong with doing this — others want to help those like themselves. Plus, many know that this assistance can develop into a professional relationship that will pay dividends later on.
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Swap And Barter
You may not realize it, but you have knowledge, skills, resources or even contacts that other entrepreneurs may want and vice versa. Find out what other entrepreneurs need and see what you might provide them in exchange for something you are lacking on your end. Even small things like serving as a connector or swapping social media posts can make a difference and keep costs down.
Get And Stay Disciplined
For those startup founders who think they will become disciplined after getting going and faced with little money, my advice is don’t get started yet. You need to be disciplined financially first. Then, you focus on maintaining that self-control and understanding that the business is more important than those regular lattes, meals out or jet skis. Maybe those vacations abroad will have to wait for awhile. The more you can deny yourself immediate material pleasure, the better chance you’ll have of getting your business off the ground. Focus on that to stay disciplined.
Some founders have misinterpreted the idea of bootstrapping as accumulating credit card debt or line of credit debt. It’s not the same thing and should be avoided at all costs. All debt does is create monthly payments that get added to cash and will have to flow out of the business. Rather than buying yourself another thirty days to pay, you are receiving more costs in the form of interest. Plus, it may encourage you to buy things you don’t actually need. Instead, stick to the idea that you can only get it if there is enough cash on hand. Even then, justify why you must buy that item.
Create A Minimum Viable Product (MVP)
With very little money, you’ll need to ensure that your business idea is something the market wants. Before making a huge financial commitment, create and launch a minimum viable product. If it is something that will work after running a crowdfunding campaign or soft launch on social media, then you can focus on a greater investment.
Keep Personal And Business Separate
I’ve seen entrepreneurs think that because their startup is so small and they are using their personal savings that they can mix financial matters. In reality, it’s more important than ever to separate personal expenses from business costs. If you don’t, you will mismanage money and spend it at a faster rate than anticipated. Instead, keeping separate accounts and records can help you identify where you can cut unnecessary spending.
Maintain Budget Even When Business Starts Bringing Money In
It’s easy to get excited when sales start and spend accordingly to the new bottom line. However, you are still in startup mode and bootstrapping continues. It’s better to keep the mentality that you are still strapped for money. By doing so, you’ll be able to build yourself more padding in the bank account for anything unforeseen. Plus, that additional money may help go toward new expenses like a full-scale product launch or talent acquisition.
Don’t Be Cheap
Although bootstrapping means being conservative with what little money you have, there are places where you can spend more than others to ensure you get the best quality materials or the top talent when you need it the most. Or, maybe it costs a little more to get a product launched early. That time savings will get you ahead of the competition or earn you revenue that much faster. In the long run, spending a bit more here and there could result in a bigger payoff.