One of my favorite business terms is “bootstrapping”. The term is usually used in the start-up community to describe a company that is founded entirely or almost entirely by the work of the founders themselves.
Here are a few guidelines on how to start your business with as little capital as possible.
1. Nothing but the bare minimum
“Your starting a company so you need a big and nice office so your customers will trust you and a new computer because yours is getting a bit slow. Maybe you should hire someone to answer the phones because you will probably become to busy to do such mundane tasks and you should definitely pay someone huge amounts of money to design a cool website.” WRONG!!!!!!
When people start their first company they tend to think that it is okay to spend loads of money on the business because they are sure to make loads of money when it is up and running. I myself have been guilty of thinking this way but it just doesn’t work. You’ll end up spending all your money on things that you think make your company look professional but make no money. And then when it actually comes to advertising and doing something that actually creates income you will have spent all your money.
Instead you should think about what is the bare minimum you could get away with. Write down a list of everything you are thinking about spending money on then try to eliminate everything on that list by saying, “do I really need that?”. In most cases you will end up with a list of only a few things and you will be able to use the money on more productive things in the future.
2. Could you do it yourself?
Sometimes we hire people to do a job for us that we could do ourselves. For example one of the first things that many business owners do is hire someone to create a website for them and I agree that it is very important to be visible online from the beginning. But do you need a professional website or would it perhaps be enough to start with creating a simple website that you yourself could create? There are dozens of easy ways now to create a website without knowing anything about programming.
Advertising is also something that can often be done by the founder in a much cheaper way then if he would hire someone to do it. Richard Branson once jumped naked out of a plane with a parachute to promote one of his products. That is a fantastic example of where the founder is able to get the attention of the press without it costing much money. You don’t necessarily have to be so extreme but there is always some way of you promoting your product with little or no cost.
What else are you paying someone to do that you could do yourself?
3. Sell it now, produce it later.
Founders tend to spend too much time working on their product until they think it is perfect but if your like me, a bit of a perfectionist, then that day might never come. Instead you have to focus on the basic features of your product and try to get it out there as soon as possible and then sell, sell, sell.
Selling is very important to any business, I have seen many good businesses end badly just because no one in the company knew how to sell. If you are a good salesman sometimes your able to sell the product before you actually produce it. That way your income is guaranteed and you can invest the necessary money to produce it because you know you have already sold enough to finance the cost of the production. This in my opinion is a perfect way of doing business, there is no risk and you make a good profit.
The more experience you get the easier it will be to sell your product before it is finished.
4. A powerful team
Having a good team can make all the difference if your starting up a business and you have smart and energetic people to work with you can achieve anything. What you want to look for in people is passion, a talent for problem solving and someone that you feel good about working with.
5. Side projects, extra income
During the first year or two of your business you might run into money problems and then it can be a good idea to do some side projects. These are usually projects where you and your team are able to sell your specialized knowledge at a good rate. The down side to this is that you lose time that you should be spending on developing your own product.
6. Think before spending
So bootstrapping is basically using your creativity to limit the amount of money you use and instead try to find original and fun ways to achieve the same things.
Don’t start a business to spend money, start it to make money.