Why Bootstrap Your Business ?

wealthymattersThese days, it’s very fashionable to have a business “funded” by an investor or venture capital firm.But this is almost always a bad idea. Bootstrapping your business is usually the better alternative.

Bootstrapping is starting and growing a business using your existing resources.

Bootstrapping doesn’t mean you’re excluded from investing any of your own cash. It also doesn’t mean that you must remain a one-person company for eternity, or that you have to settle for meager revenues and profits.It simply means growing your business using your existing resources instead of going out and raising a bunch of money from other people. It means growing organically.

If your #1 goal is to build something enormous and world-changing as quickly as possible, bootstrapping may not be a good choice. But if your primary goal is to build a profitable business that you will ultimately control, bootstrapping is almost always your best option. Here’s why:

Cash Alone Rarely Solves Problems

Cash is pretty nice to have around, and there are many situations in which a fat bank account can come in handy.

But in just as many cases, business owners tend to see cash as a solution to their problems. Instead of thinking through business growth issues and dealing with them, they’ll simply throw a lot of cash at the problem (by hiring contractors, consultants, etc.) and expect the underlying issues to be taken care of.

This rarely works and is a mistake. Instead, most successful companies grow due to the direct, in-the-trenches sweat equity of a highly invested personal founder who is personally grappling with problems. Paying to outsource the early work involved with getting a business off the ground is almost always a bad idea.

Forces You to Prioritize

When we have a lot of something, we tend to be much less discriminating about how we use it. When you’re sitting on a big pile of money, it’s pretty easy to spend needlessly on things like logos, flashy web design and nonessential “feel good” business items.

Working with limited resources (both times and money) forces you to ruthlessly prioritize on the bare essentials to move your company forward. More often than not, you’ll eliminate 90% of the waste and fluff that wasn’t that important anyway.

Allows You to Maintain Control

Money always comes with strings attached. At a minimum, you’ll be bringing on a third party who will be scrutinizing and trying to influence your decisions. At worst, you’ll be giving up control of the company you’re pouring your heart and soul into.

That doesn’t sound like much fun. Isn’t calling the shots one of the reasons you started your own business in the first place?

Makes You Focus on Profitability

With a few crores in the bank (especially if it’s someone else’s crores), it’s easy to mask the reality of an unprofitable venture for far too long and avoid making difficult (but necessary) decisions. That’s much less likely to happen if you’re running a lean operation and/or the money in the bank was solely generated from your own blood and sweat.

Keeps You Out of Debt

Skip out on that big bank loan. Few successful companies have been started with a founder saying, “We just secured our 50 lacs line of credit! Let’s start ordering things.”

And potentially even more dangerous is the prospect of borrowing money from family. As Dave Ramsey says, Thanksgiving dinner always tastes different when you owe somebody at the table money.



About Keerthika Singaravel

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