Why Bootstrapping Your Business Is The Way To Go

There Are Many Benefits To Bootstrapping Your Business

This my argument for bootstrapping a business as opposed to going out and soliciting funding for it from the “get-go”. What I mean when I say “bootstrap” is that you’re focusing on funding the business mostly yourself. Maybe your parents or significant other throw in a few bucks to help get you started, you get a personal loan from the bank, but largely, the expenses are your own to bare. In other words, you’re not going through rounds and rounds of funding to set up your business. You’re not accepting investors and giving away equity just to get it off the ground.

Now, I’m not saying that it’s wrong to set it up using investor money, and it’s highly popular right now. If you pay attention to business news, you hear every day of start-ups doing exactly that. There’s enormous amounts of venture capital money and investors looking for a bargain. There are pros to doing things this way. It’s a quick way to get a business up and running. It’s a quick way of getting your feet wet in the business world. It’s quick, quick, quick. And because you suddenly have lots of money, you can hire the best people to do the things that you don’t know how to do.

However…it’s my opinion that the cons to getting massive funding for your project can far outweigh the benefits, depending on the situation. I would say, especially for your first business, it’s better to try and go at it alone.

Experience

By accepting large sums of money to fund a fledgling business, you’re screwing yourself out of important experience. By all accounts, running a successful business is really, really hard work. Even when you have a lot of money to fund a business, it’s unlikely to succeed because of the enormous amount of work, the long hours, the number of people you’ll be expected to manage, etc.

For starters, I think it’s important to develop the ridiculous work ethic it takes to run a business, let alone a company (if that’s your goal). You might as well learn how to wake up early and go to bed late, working all hours in between, before you’re responsible for other people’s money and employees’ livelihoods. Learn how to grind on your own time.

You can also learn a number of business principles while you’re trying to find your way in the business world. By running the business by yourself. Some of the things you may be forced to learn are how to make connections, how to source products, how to find trustworthy manufacturers, how to keep track of inventory, how to be profitable, how to do taxes for your business, and so on.

There are tons of lessons to be learned, and because you’re funding it yourself, you’ll have to learn and learn quickly if you’re inexperienced in these areas. However, obviously it’s recommended that you do your homework prior to starting any business, but either way, you’ll have to learn yourself. The information is likely to stick.

Another upside, is that once you’re profitable enough to hire someone and you’ve got more business than you can handle, you can slowly hire employees. Instead of having to learn how to manage a large number of employees right away, you can slowly hire your staff, so that once you start getting a larger staff, you’ll be well versed in how to handle people. This is especially important for those who don’t have prior management experience, considering your employees will be your biggest asset. Creating your company’s culture will be less daunting than trying to do it on the fly.

Keep Your Equity

Far and away the most popular response I’ve heard to the question of why people want to start their own businesses is that people want to work for themselves. In an article that attempts to answer that very question, the website Legal Zoom cites a worldwide survey that also found that to be the case. When you accept money from investment firms, you’re likely having to sell precious equity in exchange. The more equity others own, the less power you have within your own business, and the more you’re having to answer to other people.

As is most often the case, the first time you accept outside investment you’ll be selling equity at somewhat of a discounted rate. Then, once you get it up and running and you’ve proven that there’s really something there, you’ll be able to command more for the same ratio of money to percentage of equity. As Cat Stevens once said, “The first cut is the deepest”. I’ve always thought that song was about running your own business.

If you’re in need of even more capital after the initial round of investments, the amount of equity you actually own of your own enterprise can dwindle really quickly. Before you know it, you’re working for someone else and the main reason you got into the game in the first place is no longer relevant.

Become A Master Of Improv

Another thing you’ll quickly become keen at is improvising when things aren’t going your way. When you’re bootstrapping your business, you’re sure to run into some “dead ends”. I put dead ends in quotes there because there’s usually an alternate route that’s not as obvious, because it’s not often one that’s taken. Instead of just throwing money at a problem to bulldoze your way from point A to point B, if you’re the business’s main source of funding, you’re much more likely to force yourself to get creative and find that alternate route.

You’ll likely do anything to avoid having to shell out more money or max out another credit card. As tired as I am of hearing the term, I’ll use it here: you’ll learn how to hustle for your business. Hustling is simply the art of improvisation. Not only will it build greater levels of creativity, it will also make you and your business more resilient, which is an invaluable trait to have.

You’ll investigate every alternative you can come up with to keep things running and running cheaply, and you’ll also find yourself getting better and better at it. By the time your business has grown to a substantial level, you won’t fazed in the slightest when you’re hit with an issue. It’ll either be something you’ve seen before, or if it isn’t, you will have developed a knack for dealing with such issues when it really matters and finding a way to make things work.

So Many Learning Opportunities

I feel like I haven’t even come close to scratching the surface of the valuable lessons that can be learned by bootstrapping your business. Bootstrapping is a master class in business 101, innovation, creativity, and learning how to hustle your ass off. It also provides greater opportunity for greater profit.

However, if someone hands you a bunch of money to start up your business, that’s great. I’m not trying to talk you out of accepting it. Maybe you want to start one up real quick and then sell it off and make some quick money. I wouldn’t blame you. But if you really want to create and run your “baby”, then stop and think before accepting outside funding. The benefits can be really astounding.

For some simple ways to spend less bootstrapping your business, check out Rabblry’s article Web Development Resources. It’s geared towards web developers, but it can be used by anyone who wants to self-fund their future empire.

Featured image courtesy of Andrew Neel