By The Bootstraps: The Pros And Cons Of Going The Bootstrapped Way
As John D. Rockefeller said: "Don't be afraid to give up the good to go for the great."
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When I started my business in 2001, the startup scene in Dubai, or the whole Middle East for that matter, was not startup friendly. You either got funding from outside the region, where there were incubators, angel investors, and so on, or you did bootstrapping, which is what I did. However, the mental debate continues: should I or shouldn't I have got funding to make life a tad bit easier for me.
So, for the sake of some new startups pondering the same question, I thought I would use my own experience to create a pros and cons post. I hope it helps you.
Personally, I think if you have a service-related business and are not in a hurry (read: raging ambition) to grow or expand your business, then you might consider bootstrapping. This is especially true for a business like mine that is in PR/communications and needs very little in terms of initial investment -these days you can get freelancer licenses too- except for a laptop, internet, a phone and lots of drive. Plus, of course web site and social media. If you are lucky, you have a network of people that will support you with some of these resources and ensure your success.
I was lucky. My ex-employer (may he rest in peace) allowed me to start my business while I was working for him. So, I could invest and grow and move out when I could support my own bills.
This means that:
- You are not bogged down with huge overheads, you can start small and afford to make mistakes that can be controlled and managed.
- You can leverage freelance resources as and when you need them and invest in these resources as and when the business grows and multiplies, or so it works in theory.
- You don't have to please anyone else except yourself and your partners, if you have any.
- It's a lot of hard work without support, because you are basically doing this on your own until you can afford to employ that one extra person to work with you. Without the backing of a funding option, when you are looking to expand, you might find you need to compromise on adding the right people because you cannot afford them. Yet, if you don't make the investment in more people, you can't plan for an exit strategy because the brand (and business) are tied to you. Although please note that I haven't taken my own advice.
- You are not able to take advantage of some opportunities because you need to balance your cash flow.
- In hard times (read: recession), cash flow can create some very hard times. I have been through a few of these. I was lucky that my overheads were never very high but still find that I am almost always a couple of clients away from hard times.
There are businesses that need to have funding in place because they need resources to ensure that it not only gets them off the ground but carries them through for a couple of years before they start seeing real profits.
- Probably the biggest pro for funding is the fact that you can focus on your core business. In theory, this means you have the resources to research, trial and perfect the details of your business.
- Employ the right resources and people so that you attract the best talent to grow.
- Invest in a well-thought-out communications plan that will raise your profile and help you build your business and reputation.
- You need to think of all the eventualities (for the business) and getting funding can be a challenge (unless you have a Souq or a Facebook in you).
- You have a wider base of stakeholders that you need to consider with each business decision. This is not really difficult to juggle but sometimes -depending on the project- it can delay or thwart some progress. So, selecting the right partners, investors, and employees, can be a lengthy and fraught process.
At the end of the day, it's your business and you need to see what would suit you and help you get your project off the ground. As John D. Rockefeller said: "Don't be afraid to give up the good to go for the great."