Starting Your Business: It All Comes Down To Making Money And Saving Money
Bootstrapping in the context of business start-ups refers to the use of creative financing approaches, such as leveraging personal savings, credit card debt, loans from friends and family, bartering, and other means to start a business. Some business founders use bootstrapping because they have no other choice. Almost anyone who has approached a bank has learned that “only established businesses should apply.” Bankers generally look for cash flow, assets, an established customer base, and a track record of success on the part of the business seeking an initial loan. Obviously, this is a short list that is impossible to stick to when you are just starting out.
While many aspiring business owners develop a sincere sense of disgust upon learning these financial facts of life when dealing with bankers, bankers have a very good reason for making decisions the way they do. When you think about it, what does the bank stand to gain? In the best case scenario, the bank will get your money back, plus interest. Contrast this with the viewpoint of an investor or co-owner whose position includes owning a “share of the stock” if the business grows. In other words, the bankers have no advantage. How much is the advantage worth? Well, a lot, if you’re someone who was on the ground floor of a company like Microsoft or FedEx.
Bootstrapping is not necessarily a tool used only by the “have-nots” in the business community. Some entrepreneurs are terribly proud of the money they save (and the money they make). Not many people brag, “Hey, I paid full price for my [company or personal] because, and I’m damned proud of it! And when the dealer added $1347.00 for administration and coating fees [which the car already had from the factory]I said ‘sure, no problem.'” For some of us, it’s not simply about having enough money to spend or not. Rather, there’s a mindset that says, “I want fair value for my dollar, and I hate feeling ripped off.” paying ‘much more’ than something is worth.
In many ways, freelancers develop their personal knowledge and skill sets and use their skills as a substitute for cash. There is also a certain satisfaction that comes from becoming more self-sufficient. After facing a very expensive building renovation estimate from a contractor to convert a commercial space into a bookstore, a new businesswoman and her husband reacted by visiting a local home improvement store. A few home improvement books, a sledgehammer and a reciprocating saw saved these budding entrepreneurs thousands, and she said it was actually fun to knock down walls! “It’s a great stress reducer.”
The enterprising couple also purchased a set of simple shelving plans, courtesy of the book dealer who would become the store’s supplier, and built 100 production-line shelving units for $40.00 each, compared to an original estimate of more than $200.00 each. The book dealer then stocked his store and provided generous payment terms. The savings the couple accumulated through techniques such as the above allowed them to reduce what had been an initial estimate of $200,000 to the cost of a typical mid-priced car, an amount they could afford over several years. savings to start your business.
In a nutshell, there are only two basic methods bootstrappers employ: 1) find ways to gain control of resources, and 2) use what they can get effectively. In other words, it all boils down to making money and saving money (inflows and outflows). There are some important considerations when choosing a business model that is compatible with bootstrapping. Entrepreneurs without capital should seriously think about selecting a business that involves compensation before the delivery of a product or service. For example, consulting, mail order, or a niche-oriented Internet business; All of these examples do not require significant infrastructure or capital outlay. Other options could be an agency or brokerage business: if you can connect a part you need to sell, with a part you need to buy, at a markup for yourself as a broker, you may have a viable business model.
When most people think of entrepreneurship, they tend to conjure up a “one size fits all” picture. In other words, the idea of a big business, and only a business, comes to mind. There’s nothing wrong with making money from a variety of sources: trading cars, selling online through your own websites or turnkey, selling from a company catalog, dabbling in real estate, publishing reports, earning speaking fees Consulting occasionally and investing in other people’s startups (either with cash or sweaty labor) could be a pretty good combination. Regardless of your particular list of sources, you can rest easy knowing that many wealthy people became that way by diversifying.
By trading with skills, beginners can also band together to stretch the limited dollars. For example, cohabitation could create a very logical arrangement: a desk editor, a photographer, a publicist, and a small ad agency might all do well by sharing office space. The possibilities are practically endless for a creative thinker.
One potential problem that can arise from consistently taking a do-it-yourself approach is that the founder of the business may not make good decisions and delegate tasks that should be handled by someone else or a vendor. If meeting with a potential client could lead to a significant sale, yet the entrepreneur is busy with other tasks that could and should be outsourced, the business may never reach its full potential.
A concept that very few startup guides do not emphasize enough has to do with timing. Have you thought about starting a business in seven years? With seven years to “play”, you could start collecting office supplies in your basement, doing research, introducing yourself to vendors, buying 100 books on your subject, reading every trade magazine in your chosen industry (for years), and whatnot. “know what you’re doing” as well as having all your other ducks in a row. Just remember, falling down usually happens much faster than getting up. Give yourself the gift of time, keep the faith and develop yourself as the number one asset of your future business.