Many aspiring entrepreneurs come up with a business idea, and then bemoan how they can go nowhere due to a lack of capital. But according to QuickBooks, “more than 40 percent of all small businesses started up for under $5,000,” and 64 percent of entrepreneurs had less than $10,000.
The process of starting a business yourself, without loans or investors, is called bootstrapping, and it is the best way to start a business if you can. You will not have a bank or investor standing over your shoulder, pressuring to pay them back or telling you how to do things. In fact, starting with limited funds can be a benefit as you are encouraged to be as efficient as possible from the start.
Bootstrapping is challenging, and successful entrepreneurs need to make the most of every cent to succeed with this strategy. Here are some key steps to help stay an independent entrepreneur.
Build Social Connections
For a cash-strapped business, connections are absolutely critical. Good social connections can help you figure out what consumers want, tell you how to surpass nearby competitors, and serve as free and effective advertising. By forming bonds with other business, you can exchange favors or even barter which can help you get things you need without having to spend what little cash you have.
If you have a strong social network centered on a particular profession, look to establish a business based on that profession so you can use those connections. If you do not, you will need to build one over time. Forbes contributor Matt Toledo has some tips for how to build warm connections, and I think the most important thing to remember is that you have to maintain connections. If you do not speak to a connection for six months to a year, it will not be as strong as one where you regularly speak once a week or month.
Don’t use Family Connections
If you are running a business and are low on cash, you may consider turning to your family. Maybe you can have your cousin or sibling help out your business for a few days at a lower price, or you can ask your parents for a small loan.
But getting family involved in your business to get short-term cash flow assistance is a very bad idea for multiple reasons. Disagreements which would remain professional with a normal co-worker can become emotional with a spouse or brother. It can be harder to keep work and family lines separate, meaning that you may end up stuck talking business at family functions. And even if you get along perfectly with another family member, that can also be a bad thing as it increases the likelihood of groupthink.
You do not have to quit your day job to start a small business. In fact, you should not. Plenty of businesses have started as part-time gigs done outside of regular office hours before expanding into a full-time business. This approach helps you bootstrap because you can plow your business’s profits back into the business without having to worry about feeding yourself and your kids.
Entrepreneur points out that running a part-time business alongside a full time job does carry disadvantages. It will leave you with less time to run the business, and the stress of running two jobs at once may be overwhelming. But being a full-time business owner is challenging as well, and running a part-time business alongside a full-time job can help you see whether you have the time and stress management skills to run a full-time business.
Get Used to Wearing Many Hats
If you are bootstrapping your business, you are limited in how many people you can hire, and so will have to do many things yourself. Customer service, answering phone calls, handling inventory, making sales, and handling payroll are just a few tasks which you may find yourself having to do.
Don’t think that you are too good for those mundane tasks. I have seen far too many new, failed projects where the founder tries to claim he is the “ideas guy,” which ends up being an excuse to not have to do any real work. Also make clear to anyone you do hire that they may find themselves wearing different hats as well. Otherwise, you will anger good workers who thought they were hired to do one thing but then are suddenly told to work on something else.
Have Fun and Passion
You need more than passion for your business to survive, but passion remains a necessary ingredient. Running a business is hard, and bootstrapping one can be even harder. This means that it is important to have fun while you are running the business.
And during intensely emotional and stressful periods? Don’t hesitate to take the rest of the day off and clear your head. You will not build your business in a day, and a little break can make all the difference later.