Bootstrapping 101: How To Build Up Your Company With Self-Funding

As more and more entrepreneurial spirits are inspired to start their own businesses in the digital age, the term ‘bootstrapping’ has gained significant attention in recent years. ‘Bootstrapping’ is effectively a business development strategy where an entrepreneur builds up a company from scratch with only minimal independent capital.

Bootstrapping typically involves business owners relying on their own personal savings or resources instead of basing their business development plans on securing external investments.

Although building up a business using only your own money sounds like a strategy for the ultra-wealthy, it’s important to keep in mind that most of the entrepreneurs out there who are bootstrapping are just trying to be as resourceful as possible.

In fact, some methods to help grow your company funds faster include maximising financial resources by using some of the best business credit cards for earning rewards or points. Other methods of bootstrapping involve crowdfunding or reducing overhead costs (including your own salary, if required) to ensure that your business development strategies have the capital they need.

The Three Stages of Bootstrapping

A successful bootstrapped business typically includes securing funding from three different avenues. Developing one of these avenues can in turn help generate others, which is why these distinct funding streams are often referred to as the ‘three stages’ of bootstrapping.

Here’s each stage in a little more detail:

Stage #1 – Self-Funding

In the earliest days of all start-ups, you’re likely to see a lot of entrepreneurs engaging in self-funding. This is the process of funding your enterprise using your own personal savings and financial assets. In doing so, you ensure that you will have sufficient investment on building up your own product or service for the new business.

A good example here (as we said) is taking out a business credit card to buy any preliminary assets on credit, and then using your future projected earnings to pay off those credit debts once your card’s zero interest rate period ends. You can also estimate your initial startup costs and financial projections to further bolster your credit spending. This will help you plan and manage your budget effectively throughout the business launch and growth phases.

And if you’re transitioning into entrepreneurship after enjoying a long and illustrious corporate career, you may have all the independent capital you need to lay a strong foundation for your business. This method can be a great way to keep your startup finances streamlined in your enterprise’s earliest days.

Stage #2 – Customer-Focused Revenue

As we suggested, the second stage of bootstrapping will start once you have received and generated a certain amount of meaningful revenue from your customers following your self-funding. Simply put, customer-focused revenue is where you no longer require investing your personal funding.

The most crucial thing to keep in mind in order to reach (and maintain) this stage is to secure consistent income streams which allows your business to grow organically. In other words, you will have to make your business as profitable as it can be. And once you reach a level of profitability that you can sustain comfortably or perhaps even grow consistently, then you can begin to hire employees to fill in the gaps and further support your business growth.

Stage #3 – Credit

If you’ve arrived at this last stage, then that means you’ve finally reached a point where you have the capital to manage your business but may not be generating profit at a fast enough rate to jump on all the time-sensitive growth opportunities that are available to you. This includes growth opportunities like retail sales periods or even just opportunities within commercial real estate to secure an office space. 

If you do have an opportunity you’d like to take and don’t want to wait to generate your own capital, then taking out a business loan or even utilising a business credit card, can help bridge the gap and ensure that you’re ready to respond to any growth opportunities that come your way. 

Other alternatives to securing credit through banks include working with venture capitalists to find investors, or even by going public and selling company shares on the stock market. The most common way to secure additional capital at this stage of your development is to take out a business loan or look into an IPO, which gives you access to a larger amount of capital.

Top Tips for Bootstrapping Effectively

Now that we’ve outlined the three stages of bootstrapping, let’s look at some of the top tips that all startup managers should keep in mind when looking to bootstrap effectively.

1. Maximise the financial resources

As we’ve briefly touched upon throughout this guide, using the right tools to expand your company capital is crucial in ensuring that your startup is built on a firm foundation.

And one of the easiest methods for building up your company’s financial resources is to invest in a business credit card. These credit cards can help you earn extra rewards or bonus points that allows you to reinvest in your business. Some other benefits include unauthorised transaction insurance (in the event that you fall victim to fraud) and different visa offers. 

Another way to maximise your company’s financial resources is to go after funding opportunities. This involves looking for any business grants, loans, and alternative funding methods like debt financing or revenue-based financing. It may also be beneficial to utilise crowdfunding platforms to promote your own projects and find potential customers and investors.

2. Minimise your costs

Cost minimisation is a cornerstone of successful bootstrapping. When you are making your business plan, you should evaluate every expense carefully and explore alternatives that can lower your cost.

There are several things that you could potentially do to minimise your cost: negotiate with your suppliers, find a shared workspace instead of an individual office, and use updated technology to assist you. Always remember that the lower you’re able to keep your overhead costs, the more financial resources will be available to your business.

3. Embrace adaptability

In the dynamic and ever-changing world of entrepreneurship, it’s crucial that you stay ready to adapt to different situations. As the market is constantly changing, this means the products and services that you provide may either be replaced or even just improved on very quickly. 

So keep an eye on your competitors, and stay ready to respond if they make any big moves that encroach on your own USPs (unique selling points).

4. Cultivate (and utilise) a strong industry network

Networking can act as a powerful tool for new entrepreneurs. One of the benefits of connecting with other entrepreneurs is that you’ll be better positioned to seize collaboration opportunities, or perhaps even cost-saving partnerships (i.e. special deals on project management software, or opportunities to outsource your work to highly experienced freelance professionals). Networking can also allow you to gain valuable insights on how to improve your business through interacting with other entrepreneurs.

So be sure to keep actively attending industry events, joining and participating in online communities, and engaging in conversations to expand your network.

Is Bootstrapping the Right Strategy for your Business?

At this point, you probably have plenty to think about with regards to funding your startup enterprise. So get to grips with this basic definition of bootstrapping and then start putting together your own game plan for getting your boots on and rolling up your sleeves, so to speak. 

With the right bootstrapping methods implemented for your business, you should be able to build up your capital and maintain the resources you need to respond to all the growth opportunities that come your way.