Bootstrapping your business can be a smart and effective way to go. It gives you an added level of control and independence, as you can follow your own vision (within your financial limits) and not be bound to the opinions of investors.
It will likely require a great deal of patience. Here are a few tips to get the ball rolling.
1. Get acquainted with the term "burn rate."
Know your budget better than the back of your hand. Many burgeoning entrepreneurs are too optimistic about expenses, often underestimating how much they’re actually spending and finding themselves dealing with severe budget issues.
As you engage in the budget-building process, err on the side of caution, increasing your burn rate estimate by 15 to 20 percent of your initial number. From this point forward, you can monitor your monthly spending until you can gain a clearer picture of your actual burn rate.
Additionally, you can look to cut expenses to line up with your projections. Do this in all aspects of your life, not just in business -- as a business owner, your outside financial decisions still impact your overall success.
For example, if you’re paying off a car, look into refinancing your car loan. According to Auto.Loan, there’s a good chance you can lower your monthly payments and interest rates as long as you’ve been on time with previous payments.
2. Become a C corporation.
While becoming a C corporation won’t give you the sexy LLC label, it minimizes the personal risk involved in bootstrapping a startup. As a C corp, you won’t be taxed in conjunction with your business, or rather, you and your business are separate entities.
This way, you aren’t held responsible to pay taxes on everything your startup makes, which, if business is good, can end up being quite a bit. Operating as a C corp gives you a bit more safety and motivates you to keep good track of both individual and business finances.
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3. Stay away from credit card debt.
This is where patience really becomes a virtue. Many business owners form an unhealthy reliance on credit card debt as they try to grow. Do whatever you can to avoid this. This debt will stack up, and eventually you’ll have to reckon with it.
As difficult as it can be, you’ll have to learn to operate within the bounds of the money you actually have. This is what makes bootstrapped startups rare, but it is also what makes them special.
4. Focus on becoming well-rounded.
Bootstrapping a business is not for the faint of heart nor is it for the one-dimensional businessperson. In order to successfully bootstrap your startup, you’ll have to wear many hats.
Get ready to become a financial wiz. Be prepared to earn your keep by coming up with a marketing strategy for your product. At least for the first while, it’s going to be your responsibility to fill in wherever there’s a gap.
5. Make connections.
Making a connection doesn’t necessarily mean financially getting involved with an outside party. In this case, making connections can help you find new customers and, more importantly, facilitate the learning process as you associate with established successes.
Remember: Just because you’re funding yourself doesn’t mean you can’t look for help. As you connect with experienced entrepreneurs, pick up as much knowledge from them as possible. Learn what works and what doesn’t. Take their advice on how to apply these lessons to your business. These connections will often prove just as valuable as a financial investment.
Ultimately, you’re responsible for your own success. Bootstrapping your business makes this doubly true. But, if you can patiently navigate the waters of building a startup, it will be worth all the time and effort you put into it.