6 Bootstrapping Tips From an Entrepreneur Who Turned $3,000 Into Millions
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While it’s often thought that you need a significant amount of capital to start a business, this isn’t always the case.
Yes, many successful companies were launched with a significant amount of funding, but it’s important to realize that the chances of a business’ success are not directly related to the amount of capital that the company was started with. You really need less money than you think.
If you’re discouraged by lack of funding, don’t be. While it may sound counterintuitive, in many cases, starting with a small amount of capital is preferable to launching with a large chunk of cash.
When starting out with limited resources, you’re forced to use this money wisely. I started my first company with just $3,000 -- a loan from my dad that I used to take a real estate course. This was a pivotal starting point for me, and what enabled me to go on to found my company, Renters Warehouse. It wasn’t a huge amount of money, but it was what just I needed, and it was well spent.
If you’re considering starting a business, a small amount of money can go a long way towards building your future success. Here’s how entrepreneurs who are big on ideas, but short on cash can get started:
1. Bootstrap for as long as possible.
Bootstrapping prevents you from having to give up valuable equity in your company. If you don’t need outside funding to start, don’t take it.
Many startups will reach a point where it becomes necessary to seek outside funding, but securing backing too soon is a mistake. Seeking funding too early results in dilution, and the sooner you become subject to this, the less equity you will have in your company in the future.
Bootstrapping for as long as possible gives your product or service time to gain traction and catch on. Only when you can demonstrate to investors that a new influx of capital will go towards clearly defined milestones should you look for funding.
2. Watch out for debt.
New office furniture is nice, but is it necessary at this stage? Do you really need a $20,000 marketing budget at this point in the game?
Of course, if you’re trying to start a factory or go into the retail business, that’s another story, but the vast majority of startups often require less capital than they think. Rushing out and putting everything on credit cards may be tempting, but in most cases this is a bad idea.
A successful business is the result of making the most of available opportunities. It’s about using what you have to make things happen and ensuring that you make the right decisions for the stage you’re at.
3. Be prepared to put in the time.
Hard work is the prerequisite for any small business, especially when you don’t have the luxury of purchasing extra resources, or hiring additional help right away. What you don’t have in capital, you’ll have to make up for in sweat.
Be prepared for long days and sleepless nights when starting up a small business, and don’t be afraid to wear a number of different hats in the beginning. You’ll have to be your own receptionist, bookkeeper, marketing director and financial director when you first start out.
4. Take opportunities when they come.
One important key to business success is learning to recognize opportunities as they come up. This is true no matter how much capital you’re starting out with. Identify gaps in the market. If you can find a need, and figure out how to fulfill it, you’ll be on your way.
One excellent example of gauging the market and seizing opportunities as they arise is one of Renters Warehouse’s franchises that is operating in Phoenix. This franchise is three years old, and it’s on course to do $2.5 million in revenue this year.
The owner started out just like me, with just $3,000 -- and he’s now the owner of four property management franchises. He bought one and loved it so much and it’s growing so well for him that’s he jumped on the opportunity to buy three more, and has since then diversified himself into major markets.
5. Take action.
There’s a phrase that’s often used in upper management: “Don’t talk about it, be about it.” Good ideas are worthless. Your ability to execute them will bring value. This is true no matter how much capital you have to invest into your business.
Taking action is what brings your ideas to life. Set your goals, outline a course of action and then get started. Do something! Will it be perfect? No, but few things are. Remember, done is better than perfect, so fill up your calendar and start making things happen.
6. Be passionate.
No amount of capital can make up for a lack of passion. If you truly believe in your idea, take the risk and dive in. Remember why you’re doing this, and don’t let anything stop you from achieving your goals. You will need that drive and passion to remind yourself that all of your sacrifices are worth it, and to help you to stay the course.
If you have a great idea for a company, don’t let a lack of funding hold you back. These days, it’s becoming easier and easier to start out a company with less than what was needed in previous years. Many companies today are founded with little more than a laptop, a simple website and a registered domain name.
Conversely, many companies that receive hundreds of thousands in venture capital fizzle out and go bust. The point is that capital, even a significant amount, will never be adequate enough to compensate for a bad idea, or a good idea that’s poorly executed.
The future is open to those who are able to spot opportunities as they arise. Success will always belong to those who are willing make sacrifices and work hard towards their goals.
Share your story. Are you a budding entrepreneur with a great idea but limited capital? Or do you have a success story of your own to share? I’d love to hear from you in the comments section below.