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Advantages and Disadvantages of Bootstrapping Your Business

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To bootstrap a business means digging into your own pockets and trying to bring your idea to life with whatever limited resources you may have. No rapid-fire rounds of funding or hype from VC firms – it’s all on you!

Bootstrapping is certainly an old-school approach to business funding, with plenty of pros and cons. Here is what today’s entrepreneurs have to say about bootstrapping your business, and some key things to consider.

Solo Venture

While many entrepreneurs are mavericks in their industries, they often get help and guidance from others when starting a business from square one. If you intend to fly solo, be ready to navigate challenges without this assistance.

“Some disadvantages of bootstrapping a business are you are going in alone without the advice or financial help of a partner or multiple partners,” said Aidan Cole, Co-Founder of TatBrow. “Oftentimes you are living check to check and funding the business operations as money comes in the door, there really is not a surplus of any kind. The advantages are that you do not have to answer to anyone and get to run the business your way. Also, it forces you to be creative and make things happen. When your back is against the wall, you can do things you never imagined you could. So like anything in life, there are both pros and cons.” 

We sometimes need dire situations to see what we can really accomplish, and business founders know this to be true from experience.

Complete Control

You’ll find that many companies are completely self-funded, and they view this as a point of pride. With total control over the direction of the company, owners never have to second-guess the decisions they make.

“We are a 100% fully bootstrapped company,” said Katie Lyon, Co-Founder of Allegiance Flag Supply. “Bootstrapping gives you complete reigns over the decisions made and keeps you in the driver’s seat of your company. Ultimately, there are always cost-benefit ratios to any angle you choose, such as angel investors, or bank loans as well. However, funding your company from the ground up with your own savings and not accepting other people’s pennies can in fact not only keep you goal-oriented, and determined, but also alleviate the headache that comes with a strictly financial silent partner.”

For many founders, bootstrapping is a matter of principle – self-made success is another level of fulfillment.

All On You

Starting a business comes with serious responsibilities that range beyond most peoples’ imagination. If you plan to bootstrap from the outset, be ready for even more.

“Funding your venture puts all the responsibility on you, encouraging you to put in all your effort towards making your business succeed,” said Dr. Robert Applebaum, Owner of Applebaum MD. “You won’t have interfering investors stifling innovation and creation. A disadvantage of you being the sole investor is the long wait before seeing any profit.”

If you’re all about taking ownership of outcomes in life and business, self-funding is the route you should take.

Survival Mentality

There’s a switch that flips in the human mind when we’re totally on our own. Just like surviving in the wilderness, we tap into something primal when making our way in the business world.

“What’s a bootstrapper to do?” said Author and Entrepreneur Seth Godin. “You have to go where the other guys can’t. Take advantage of what you have so that you can beat the competition with what they don’t.”

The jungle analogy is no joke when talking about business competition – gear up!

Creative Freedom

Red-blooded entrepreneurs know that creativity is the real driving force to their success and wealth. They would rather leverage all their personal resources than sacrifice that freedom.

“One advantage of bootstrapping is that there are no outside influences to throw your business off track. It’s your money only, so you have complete freedom over creative direction,” said Rym Selmi, Founder of MiiRO. “The downside is it’s your money, so you assume the risk of losing it in case you fail.”

Not all businesses require total creative control, but for those that do, bootstrapping is the only viable path.

Your Reason Why

Some see bootstrapping as bragging rights or a point of validation. That’s not sufficient reason to take this approach to business. Does self-funding really fit with your overall strategy, or do you just like the sound of it?

“It is definitely and difficult venture to take on,” said Eric Gist, Co-Founder of Awesome OS. “Have a plan on where you are going and what you are accomplishing, and see if bootstrapping is the way to go for you. See if you are in it for the right reasons, then make the decision.”

Once you make a comprehensive game plan for your business, only then should you consider how funding will work.

Weigh the Options

There is a lot of advice being dished out in the world of startups, good and bad. If you don’t like hearing the opinions of countless third-party contributors, bootstrapping might be your best bet.

“Bootstrapping your business means not having to deal with the opinions of others,” said Michael Scanlon, CMO and Co-Founder of Roo Skincare. “This gives you complete control over the entire process and the ability to focus on developing your product or service. Unfortunately, self-funding means a lack of resources which can impact the success of the business.”

Real independent thinkers will be driven to fund their own ventures and keep those external opinions to a minimum.

Proceed with Caution

Bootstrapping is not for the faint of heart, nor is it for people who lack strong financial literacy. Consider mastering your personal finances before you think about maxing out credit cards and emptying savings accounts.

“Financing your new venture on your own means you’re footing the bill for everything,” said Shahzil Amin, Managing Partner at Karlani Capital, Founder of Emagineer and WellBefore. “Thus, most of the profits your business makes go back into running and growing your operations, as well as paying those quarterly taxes. This in/out cycle can lead to personal financial strain. But, on the other hand, it can also teach you to think long-term and develop a cost-management mindset, enabling you to run a more streamlined and efficient business.” 

Financial management is a skill like any other, of course, and will improve with time and effort.

The Choice is Yours

Some business ideas will be considered unfeasible by lenders or venture capital firms. In that case, you’ll need to take full ownership of your project and go all-in on bootstrapping.

“If you are your only investor, then you have creative control over the direction of your company,” said Carrie Derocher, CMO of TextSanity. “This allows you to focus on the business and promotes innovation. The downside to bootstrapping is that you are cut off from connections and networking with those who can get your business in front of the right people.”

Maintain total confidence in your business, and you can make things happen without the backing of a big network or financial support.

Envision Success

For those with a clear vision of success, bootstrapping a business is simply the only option on the table. Perhaps it isn’t the right time to start if you don’t have this unshakeable self-belief.

“The upside to bootstrapping your business is you have complete control over decision-making, rather than having to deal with the input of investors who don’t understand your vision,” said Haim Medine, Co-Founder and Creative Director at Mark Henry Jewelry. “Responsibility falls only on your shoulders, which encourages solution-seeking and innovation. However, some cons of bootstrapping are you assume all financial risk if your business fails and its slow growth means slow ROI.”

Remember that many businesses have failed, but intrepid founders get back on their feet and try again until they strike gold.

Artist Advantage

There has never been a better time in history to make money as an artist, and these professionals know a thing or two about being resourceful when it comes to funding.

“For artists, bootstrapping their business means having complete control over how and where their art is presented,” said Josh Tatum, Co-Founder of Canvas Cultures. “As a result, they can carry their vision into how they want the public to see and regard their art, sometimes fueling even more creativity. But the work of an artist is always at risk of being copied or stolen. So, for many art-preneurs going into business for themselves means ensuring their work from art theft. But, when you’re bootstrapping it and financing your business without angel investment, you may find yourself strapped for cash and extra money to pay for legal representation may not be there when someone is infringing upon work.” 

With so many ways to succeed as an artist these days, we expect to see many new and interesting fundraising methods in the industry.

New Skill Sets

The realities of funding a business can’t be avoided, so you need to pick a lane and stick with it. Self-funding requires a lot of knowledge, discipline, and specific skills – no guesswork allowed.

“What sets bootstrapping apart from other forms of business funding is that it relies heavily on entrepreneurs’ frugal thinking, creativity, thriftiness, planning and cost-cutting efficiency skills,” said Author and Consultant Victor Kwegyir.

These are skills that can be cultivated like any other, but there is no place for ambiguity.

Calling the Shots

Many businesses are founded by people who want to be their own boss and answer to nobody. This is a healthy attitude for the most part, but make sure it doesn’t interfere with your ability to get funding and grow.

“Going it alone means you set the goals, the time frame, and financial allocations for your business,” said Jared Pobre, CEO and Co-Founder of Caldera + Lab. “It’s a self-sustaining business model with limited outside input. Thus, allowing you to focus on creating the best product for your customer and ensuring your business is heading in the direction you want it to go, and maintaining the standards you want to keep. However, growing your connections and increasing your customers can be more time-consuming without the networking opportunities that angel investors provide.”

It’s important to balance independence with networking and collaboration, especially when you’re taking the solo route.

Loan Ranger

Don’t be discouraged by the labyrinth of loans and credit that you’ll have to navigate when bootstrapping. It’s just part of the game, so take it slow and don’t get ahead of yourself.

“When you’re bootstrapping and relying on personal finance, and your business needs to buy its facility, your initial costs on your loan may be high,” said Tyler Forte, Founder and CEO of Felix Homes. “However, you can restructure the loan so that payments align with the span of your planned growth or your business’s seasonal peaks. For instance, a graduated payment mortgage will have small initial payments that increase as your business grows. These lower monthly payments mean more money is available for you to apply to other aspects of your business.”

Watch out for any deals that seem too good to be true – you might end up in hot water.

Energy Management

Starting a business demands you be smart with how you manage your energy. This means avoiding distractions and focusing on high-ROI activities. Those who plan to bootstrap have to take energy management even more seriously, but the rewards are great.

“The hard work that goes into bootstrapping your business can bring about a wonderful sense of accomplishment,” said Dr. Zachary Okhah, Founder and Chief Surgeon at PH-1 Miami. “But that result can be far down the road, and along the way, going the distance can monopolize your time, drain your energy, and take a toll on your family and personal relationships. However, necessity is the mother of invention. And the pressure and responsibility of having to do it all yourself may drive you to innovate and implement new strategies to make your business a success.”

Treat everything like a resource, from money and time to energy and health. It’s all important!

Mental Preparation

Most people are highly emotional when it comes to money, and smashing that personal piggy bank to start a business is simply too much to handle on a mental level. Are you ready to take that leap, or is there another way?

“Bootstrapping is a challenge,” said Olivia Young, Head of Product at Conscious Items. “It takes a huge toll on you overall not only financially but also emotionally. It is a great feeling at the end of the day to know that you were able to accomplish it, but at what cost? Make sure to take time for yourself and to have time to relax. Mental health is important to hitting goals.”

It’s easier said than done, but try your best to keep a light heart when starting a business and bootstrapping to any extent.

Independent Growth

If your company is making strides without major funding boosts, maybe the bootstrap method is the right approach for now. You might not necessarily need the help of VC firms if your results speak for themselves.

“We’ve been growing well on our own,” said Dennis Hegstad, CEO and Founder of LiveRecover. “A lot of [venture capitalists] have emailed us. They wanted to know if we were trying to be the next PO MailChimp of SMS? They told us they would like to potentially invest in us. We told them no. We just want to build a $10 million plus annual recurring revenue business that makes a profit. I think you can have a pretty good lifestyle bootstrapping your business.”

You can always consider offers down the road if you need some assistance, so don’t jump into contracts too early if you can avoid them.

Consider All Risks

Business owners know that eager investors are not always knocking at your door, especially if it’s your first venture. Remember that seeking funding can be a full-time job in itself, and you need to run the cost/benefit analysis from top to bottom.

“The advantages of bootstrapping a business is that you do not have to spend much time searching for investment partners or groups,” said Aidan Cole, Co-Founder of HIDE. “Another advantage is you are in total control of the business and do not have to answer to anyone. The disadvantages are you are taking a big risk by not having a large amount of funds saved up for when things are slow (investment partners). Also, it can take much longer to grow the business since you are not seeking outside investments and doing most if not all of the funding yourself.” 

The irony is that investors will want in – once they see your initial success – so stay focused and don’t let up.

Worth the Effort

While investments are abundant in the modern era, business owners know that there’s no avoiding bootstrapping to a certain extent.

If you’re truly passionate about your company, you’ll do whatever it takes to realize your dream, even if that means breaking the bank in the short term.

“Bootstrapping is how you build a business,” said Guy Bar, Founder of Hygear. “It is never easy, and it takes a lot of energy, but it is definitely worth it in the end. Know what you are getting yourself into at the beginning and know the cost, and then move forward.”

The truth is that there is some degree of bootstrapping required for businesses of all types, and you’ll need to exhaust all resources to make your vision a reality. These insights should help you weigh your options and find the right balance of funding and control.