What Exactly is "Bootstrapping"?
Jul 29, 2019 by Bob Voss
If you look up the word “bootstrapping” in the dictionary, you will find definitions that include “a means of advancing oneself”, “a means of accomplishing something”, “relying entirely on one’s efforts and resources”, and “to help (oneself) without the aid of others”. Most people who help start small businesses use the word “bootstrapping” only in relation to money. Their definition would be launching a business with as little outside money as possible. Another way of putting this is, getting your business off the ground without having to go to others for financial help.
From my perspective, the concept of bootstrapping is extremely valuable and effective, and I promote it in a number of my classes, especially the class I teach called “Capitalizing a Small Business”. There are really four reasons why I promote bootstrapping to all my students and SBDC clients. The four reasons are:
1) Having to raise money from banks (debt financing) is a very time-consuming process, and even with good credit in today’s economy, you will most likely get the dreaded “NO” answer. In addition, if you are fortunate enough to get the “YES” answer, debt at the early stages of a business is usually not a wise thing. Remember, even if you get a bank loan in the name of the business, you are still going to have to personally guarantee the loan, and that puts your personal finances at risk. Bootstrapping keeps you out of debt and saves a lot of time and energy.
2) Having to raise money from outside investors (equity financing) is also a very time consuming process, and every time you get an investment, you are giving up a part of your business. Now there are other owners to deal with, and, like customers, there are good owners and there are bad owners. Bootstrapping keeps you in control and saves you a lot of time and energy.
3) Bootstrapping forces you to be a good money manager. From personal experience, I know that the good habits you start at the beginning stages of a business are the habits that last throughout the life of the business. Knowing how to handle small amounts of money and making it last is a critical skill at the beginning stages of any business. This skill also increases your probability of success for long-term growth as well.
4) Bootstrapping forces you to be creative. Plato once defined necessity as the “mother of invention.” If you really need something for your business and cannot afford to buy it, then your only option is to get the creative juices flowing and figure out another way of getting what you need. There are always ways to get something done without having to buy it.
The next obvious question is, “What are some ways I can bootstrap my business”? Now that I have defined what bootstrapping is, I think I will leave the bootstrapping ideas for another blog post. Remember, if you can bootstrap your business completely, you still need to create at least a simple business plan for your business before you launch. Going through the business planning process will show you very clearly what areas of your business you will need help in, and this is the first step to understanding how much bootstrapping you are going to have to do!
If you have any questions or comments, do not hesitate to email me at Bob Voss.