Bootstrapping a business means funding it from your own pocket. This is saving up money from a w2 9-5 job for months to do marketing or buy inventory. This can also be dipping into savings to cover costs like labor and equipment.
The term is coined from the expression “pulling up from one’s own bootstraps” – a metaphor for tackling a challenging feat all by yourself. However, contrary to belief, bootstrapping does not mean going it entirely alone forever, but just during the startup phase. Indeed, many use the strategy to obtain the traction and proof of concept needed to entice investors later on when the business is much more profitable.
The Three Stages of Running A Startup With No Loans
There are three stages to bootstrapping a startup: the beginning stage, the sales stage, and the credit stage.
1. The Beginning Stage
During the early days of your startup, you’ll need to reach into your savings and active income to cover your expenses and get your company off the ground. You may, for example, need to buy the necessary equipment or software, assemble a team or pay for advertising. Because there won’t be any money from other sources, many people who bootstrap their startups do so while bringing in a salary from their day job. Doing so ensures that they have at least some form of regular income while the company gets traction off the ground.
2. The Sales Stage
With no investors to aid you, your customers and clients will inevitably keep your operations going and eventually, if you’re successful, fund your growth. Of course, it may take a while to build momentum at this stage and you may have to fund your operations for some time still but eventually, you should reach a point where you’re no longer reaching into your own pockets to support your business.
3. The Credit Stage
Once your money issues are out of the way and your business is making a profit, you can start focusing on expanding your company. You may, for instance, look to hire more staff, improve your facilities, develop new products or invest more in your marketing efforts. In addition, you may leverage your current success to attract investors. At this stage, taking out a loan, but having the cash to cover any of the balances is a good idea.
The Pros and Cons of Bootstrapping a Startup
