Contrary to popular belief, you CAN start a business with little to no funds. Welcome to Bootstrapping: Maximizing human capital first and using existing and/or self-generated funds second, to take an idea or company from one point to the other without referring to investors or banks.
With advancements made over the internet in the past 20 years, the costs associated with being noticed in an ever growing digital world have decreased drastically. Where you once would need to hire a developer to build your online presence, there are do-it-yourself website builders like Wix and Weebly that can create a modern site at a fraction of the price. Need tips and tricks for marketing your business? No problem — Youtube has plenty of free content from experts on the topic.
Though there are a ton of great platforms available for you to develop your business digitally that weren’t so easy to come by 10, 15 or 20 years ago, there are tried and true methods to decreasing the overall need for up-front cash to develop the business of your dreams — and yes, you can learn about them right now!
Start Small — Grow Quickly
It’s so easy to envision your business taking off and becoming that one thing your customers just can’t live without. But, within those thoughts, sometimes we tend to get the cart in front of the horse… so to speak. For example, you are wanting to start a world-class restaurant. You will have a large dining space, kitchen, staff, and to-die-for cuisine. However, this will be highly capital intensive, prospective locations aren’t available at this time, and you aren’t sure if your customers will like the food you are offering.
IDEA: Invest in a food truck you can take to all of the local farmers markets to both test and generate revenue while finalizing your business plan, menu, location and more.
The truth is, not all of us want to start the next best restaurant in Iowa (or even beyond). However, we all need to start somewhere! That somewhere, might just be a scaled down version of your end goal. So, in essence, figure out what YOUR food truck is, and go all in!
Start a Business That Generates Fast Cash
By now, we all have heard of the vacation home rental juggernaut AirBnB
— but what not everybody knows, is the ingenious way their founders raised enough funds
to pay off their debt and save their company. And no, it wasn’t by renting more homes. You guessed it: Cereal.
Brian Chesky and Joe Gebbia, the founders of the company, had racked up $20k worth of credit card debt each and were running out of options. In desperation, the pair traveled around San Francisco to purchase 1,000 $1 cereal boxes. After buying their supply of boxes, re-configuring them, printing a new design to reflect the 2008 Presidential Election, and listing them for sale, they sold out of their supply within 3 days and finally were able to pay off their debt.
Now, not every idea we come up with will be an instant success — but the principal is still the same. How can you DO THINGS NOW to generate funds for the actual business you want to start or expand? If you can answer that question, you are a true entrepreneur!
Oh, you thought the story about AirBnB was over? Wrong! We left out an important detail about how the founders were able to print a new design on all those boxes with no money in their accounts. They identified a local shop who said they would print 1,000 boxes for them as long as they received a cut of the sales. A no brainer for the founders, they took up the deal and went right to work — The rest is history!
Bartering is a practice that isn’t seen often these days. Typically, in business, we use cash in exchange for goods and services. But, that shouldn’t deter you from trying to work out a deal with others that doesn’t include a straight cash exchange. Just make sure what you are exchanging is of equal or more value to you!
Taste The Waters
Despite what you may see on Shark Tank, sometimes it isn’t feasible to quit your day job and dive into your startup completely. Perhaps you have loans you can’t defer, a family that is in need of a stable income, or maybe you just aren’t sure your idea will take off right away. This scenario is more common than you think, and you may have to re-think how your business is started.
IDEA: Try starting as a part-time business. This will allow you to keep your full-time job, and the stability that comes from it, while you work on your business in the evenings and weekends. During this time, you can improve your business model, and save up money to invest in your full-time commitment later on.
Cut Down On Your Expenses
Spending money doesn’t necessarily mean the opposite of bootstrapping, but it does mean spending less whenever possible. Rather than finding a storefront to sell your goods, perhaps you strike up a deal to use someone else's. Rather than paying for an office space, you work out of your home's spare bedroom or garage. Rather than going out for lunch a few times per week, perhaps you bring your own or stay home. Regardless of what you do, even when you’re not bootstrapping, saving money is always a good thing in the business world!
Make a Partnership
Constantly paying someone to take on tasks/jobs you aren’t skilled at in your business can be costly, especially if you are just starting out. An option you should look into is partnering with that person, or finding someone who has an opposite skill set to yours, in order to both reduce day-to-day responsibilities you have, as well as reduce the upfront cost of receiving that assistance.
The downfall to this message, mostly, is you will end up owning less equity in the business. But, if you are strapped for cash, and have found a high quality individual you believe can help you take the business to the next level and beyond, this might be a great option for you!
Use Your Savings As Capital
When looking for options regarding financial investments in your business, sometimes you need to look at what you currently have. Ask yourself, how much of my savings can I afford to invest in the business? What items can I sell in order to start? To grow? This type of control is great because it allows you to be in control of running all the costs involved in the business. Just make sure you really think about dipping into your retirement savings as there is no guarantee you will get the money back out of the business.
Insist on Immediate Payments
Another great idea to bootstrap your business is to ensure that all your clients pay for their product purchases instantly instead of financing their purchase. This will make it easier for you to make other purchases sooner than later and keep investing money back into the business. Time is money and hence the earlier the payments, the better.
Contracting out to work to a freelancer could be a good option for a reasonable rate. Services available, like Fiverr, can help you find freelance workers online and for reasonable rates.
Request a favor from friends and family, rather than hiring someone who is expecting payment at the end of the day. Though this could be a great option when you are starting out, the more you ask, the more likely you will receive a no or expectation of payment.
There comes a time when your business could be in need of certain machinery. Since these machines could be used once in a while in your business, it is better to lease them from another company since it is cheaper than buying.
Cash Advances from Credit Cards
This an easy and quick way to gain access to cash, but if used for long-term financing, they can be much more expensive. Credit card interest rates typically are much higher than rates you would pay for other types of funding – meaning you may be paying much more in the long-run.