Why You Should Bootstrap Your Business And 2 Reasons Not To

bootstrap a business pros and cons

Bootstrapping is a great way to get your new business underway. It helps ensure that you truly are your own boss and that you don't have to worry about investors when you bootstrap a business. However, it is good to be fully aware of the advantages and disadvantages of this bootstrapped approach. 

Ordering Your Finances 

Bootstrapping means that your personal and your business finances really have to work. Big influxes of money like you would get from investors can often have the effect of disguising problems or at least allowing you to overlook them for a time. When you fund your own business, you have to be thoroughly organized and know exactly what is happening with your company's money. 

You do need to get your personal finances in order if you are going to take this approach because it is important to know exactly how much money you need to live on and what you can contribute toward the business. You should create a budget and work on reducing your expenses in order to free up money. 

One way to do this with student loans is through a NaviRefi student loan refinance. As you review your budget, your assets and your debts, you may find that you need to delay your launch date until you have saved up some money, paid off some of what you owe and become more organized. 

Being In Control 

When you are starting your own business one of the most attractive aspects of bootstrapping is that you are in control of your business. If you have investors, their vision may be very different from yours. In a self-funded venture, the problems may all be yours, but the profits are as well. This control is also true for the long term. 

You may have dreams of building this into a family business that you will pass on to your children. If you have investors, they won't share this same personal attachment and in fact will probably expect you to have some sort of exit plan. 

Concrete Success 

If you are bootstrapping a company, you need a business model that will turn a profit as soon as possible. While this particular model might not be right for everyone or every type of business, it can be motivating for many people to see the practical results of their hard work quickly. Investors, of course, absolutely expect a profit as well, but in some strategies, they may be playing a longer game. That can work in some industries and situations, but it is also gratifying to see concrete success sooner. 

For example, service-based businesses are harder to scale but usually have lower overhead and the ability to profit immediately. A product-based business, even if it is digital, can scale up much higher but may hemorrhage money in the early stages.

Cash Flow 

There are several pros and cons but perhaps one of the biggest risks you run when bootstrapping is having cash flow issues. It is all too easy to operate on a thin margin, which can turn into a disaster if you suddenly have a few overdue invoices. One of the most frustrating elements of cash flow problems is that it is all a matter of timing. It isn't that the money isn't on its way or that you haven't hustled enough. 

When you have investors, you generally have a cushion to cover these types of issues. To avoid this in your bootstrapping enterprise, plan ahead for how you will handle cash flow issues, and save up some extra money to deal with them. 

Bringing In Others To The Business

Another big advantage of having investors is that it can in turn attract some top talent. On your own, you may not even have enough to pay mediocre employees, let alone bring in the best in the field. However, there are ways to address this. 

First, keep in mind that there is a lot of untapped talent out there that you may be able to attract. Second, start small. Learn the art of delegation, but do so at first with people you hire on a contract or very part-time basis.

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