5 Ways to Bootstrap Your Business

Want to Get Accepted into the Entrepreneurial Hall of Fame?

Okay okay, we admit it. We haven’t actually checked if there is such a thing as a hall of fame for entrepreneurs. But these days, it sure can seem like fame, fortune, and funding have become the largest measures of success for startups. 

As a result, many aspiring entrepreneurs believe they should raise impressive funding pools as soon as possible. Getting funded may bring attention and some much needed mentoring, but it is not all beer and skittles. It also means giving up part of your company, both in terms of control and equity.

Instead, consider bootstrapping. What’s that now?

What Is Startup Bootstrapping?

The term Bootstrapping comes from the phrase “pulling on one’s own bootstraps” and first emerged in the 19th century. It’s been used to describe challenges that are deemed unrealistic for someone to solve. Today, it is used to describe the act of achieving something big without any external support, which is exactly what bootstrapping means when referring to startups.

Bootstrapping a startup essentially means kick-starting a new business using your own pocket change. Using your own money to fund your entrepreneurial adventure means that you keep maximum control over your business operations. Relying on your abilities in favor of outside investment has become very popular among startups and small businesses.

If you’re ready to learn more about bootstrapping, and how to do it, read on!

Why Bootstrap A Startup?

Bootstrapping your startup means financing it yourself, and generally speaking, you should keep doing that for as long as possible. This way, you stay in control of the decisions. Once the moment genuinely comes to seek out investors, you'll be in a stronger position, capable of choosing those who truly match your company while still holding enough leverage to negotiate.

Bootstrapping is a challenging way to go for sure. It puts all the financial pressure on you, the founder. Not having much to spend can slow down business development and compromise the quality of your products or services.

That doesn’t sound too great, we know. But is it all bad? Nope.

It depends on what you value as an entrepreneur. As the founder of a bootstrapped startup, you hold full authority over the business and everything it does. The upside is that every resource goes toward product development, not into an investment partner’s pocket.

Bootstrapping is not a simple path to make a return on investment, but it can be a method to begin steadily increasing profits and building up a safe operation that will support further business investment.

When you bootstrap, you end up thinking more creatively because the only person you're answering to is yourself—no investors or board of directors breathing down your neck with their own agendas. That freedom lets you experiment with ideas and refine your offering at your own pace, without feeling pressured by outside voices. The flip side is real though: you're putting your own money at risk, which means if it goes south, your personal bank account takes the hit. That kind of pressure can be scary, but for most true entrepreneurs, it's actually the fuel they need to push harder and stay focused.

Here are 5 Ways to Bootstrap A Startup

A great entrepreneur is resourceful, money smart and hardworking, all of which you need to successfully bootstrap your way through the startup jungle.

Bootstrapping a business gives you the chance to stay in control for as long as possible. It also hands you experience you’ll benefit from later, since scraping together money on your own forces you to be smart about spending, come up with creative solutions to every problem, and put all your resources, knowledge, and abilities to work.

Most importantly, bootstrapping will teach you the most crucial skill you need as an entrepreneur: working hard. We’re not joining the “you must work 80 hours to be a real entrepreneur” choir. That old song isn’t our jam. Hard work comes in different forms – but being persistent in your efforts is essential, regardless of how many hours you put in.

So before you make the final leap, ask yourself if your boots are made for walking the startup walk. Do you really have what it takes to be an entrepreneur?

Ready to dig deep into your pockets? Here’s how to bootstrap your startup in five bulletproof ways:

1. Cut Down Your Expenses

We know. Cutting down on luxuries and things you like sounds almost as enjoyable as realizing you just ate the last piece of candy without having been prepared for it. You know the struggle, right?

But if you’re serious about your startup, cutting down your everyday expenses is key. The more you cut, the more you have to put into your business. And while we’re not going to tell you to move into your parents’ basement for the next three years, we won’t judge you if you do. 

2. Dip Your Feet Before You Quit Your Day Job

If you still have a job, consider keeping it a little while longer. Building your startup as a side hustle will help you keep your head above water.

Use the time to test your idea, work out your business plan, do market research and all those other unavoidable tasks that no one will pay you to do anyway.

3. Find a Co-Founder

Are you a one-person army? Maybe you should consider bringing someone else on the trip. While finding the right co-founder can be a difficult task, for most startups, it’s worth the effort. You can share the ups, downs, risks, workload – and bootstrapping costs, of course.

4. Hold on to Your Cash and Spend it Wisely

For most entrepreneurs, it can be tempting to spend profits as soon as they hit the bank account. But don’t fall into that trap. Adding unnecessary expenses might seem like a good idea, but we promise you it’s not.

We bet you can go a little while longer without a new office space, the cool business cards you had designed, or the website you don’t really need yet. Instead, only invest in things that will boost and grow your business right away.

5. Prepare yourself for a marathon

Building a successful startup will not happen overnight. If you’re looking for the quick big bucks, you’ll be disappointed. 90% of startups fail. Not yours, of course. But succeeding takes blood, sweat and tears.

Prepare yourself for a marathon, and you’ll (almost) be ready for everything that lies ahead.

Highlights And Pitfalls of Bootstrapping

Let’s take a detailed look at the pros and cons of bootstrapping your startup business.

The Highlights Of Bootstrapping

Bootstrapping has many advantages.

Cutting Expenses

Bootstrapping is relatively inexpensive. Working with your own resources ensures that you will be most cost-efficient. You are more mindful of your day-to-day operations expenses and start managing your business on a streamlined strategy to lower costs.

Develop New Skills

Because you don’t bring in outside investment and support to help you tackle challenges, bootstrapping your startup also pushes you to develop new skills. Entrepreneurs who bootstrap need to be hard-working, flexible, and always prepared to challenge themselves.

Be Your Own Boss

As a bootstrapping entrepreneur, you don’t have to answer to anyone. So you’re free to determine the direction of your company. This means that your company’s progress will happen according to your concepts and personal principles, without any external interference.

Reap What You Sow

Being the boss of your own business, with no investors involved, also means that when your business succeeds, you will be the one harvesting the fruits of your labors.

No Need for Sweet Talk

Securing outside funding from venture capitalists can be challenging, and it requires time and commitment, something you don’t have to spend time on if you’re bootstrapping. This means you can focus completely on your own visions for the business and spend more resources on product development, marketing, and sales growth.

Further, once you are ready to go out and get funding, you will stand stronger, because you’ve built the financial base of your company by yourself. And if there’s one thing investors like in a founder, it’s founders and CEOs who are devoted to their own business and who demonstrate a good financial understanding.

The Pitfalls to Bootstrapping

Bootstrapping is tough, and while it is generally a good way to get your startup going, there are some pitfalls that you should be aware of.

It’s All on You

Since you won’t have the budget to recruit a team, or even one extra person to help out, you’ll need to lean heavily on your own skills and drive to make things happen. Expect to push boundaries, work long hours, and juggle more roles and duties than ever before. Are you up for the challenge?

Lack of Resources

One of the key reasons startups struggle is that they run out of money. Being smart with your money doesn’t mean you avoid spending it. Spending on the right things at the right time can massively improve a startup’s performance and its odds of success. When you choose to bootstrap, know that it probably won’t last forever. At some point you’ll have to decide when to stop using your own money and start looking for funding.

Slower Growth

Why not just keep bootstrapping until you’re profitable? Unless you have significant money to put into the business yourself, a lack of funds will eventually start limiting your ability to market and expose your product or service to a wider audience. That leads to sluggish growth, which in turn means fewer resources to serve customers and keep expanding.

Although bootstrapping your startup is great up to a certain point, be careful not to let it slow down or undermine development. If you want your startup to be an established business in the future, you’ll need to get financed at some point. So make sure your financial situation is healthy and be smart about the choices you make.

Mixing Business with Pleasure

Mixing business assets with private savings can turn into a stressful, problematic affair. Bootstrapping buys you more control and a bigger profit share, but it also carries a higher level of uncertainty, where losses and setbacks can hit at any time. One main reason bootstrapped businesses fail is lack of revenue, when earnings simply don’t cover expenses.

Handling the Long Working Hours Alone

Founding a company usually means exceptionally long working hours, since you alone have to keep the business afloat. Because you’re bootstrapping, you’ll most likely take a minimal income for your efforts, at least early on. You’re also typically the only one responsible for whatever challenges or problems pop up, simply because there’s no budget yet to hire help.

There’s no doubt that the pressure on bootstrapping founders is tremendous. You have to deal with all the tasks, responsibilities, and financial management by yourself, which can be a heavy load to carry. That’s why all entrepreneurs, bootstrapping or not, should seek help and support from their friends and family.

Bootstrapping your startup for as long as you can is a good idea, but be careful not to let it choke your growth. If you want a shot at the startup hall of fame, you’ll need funding at some point. Stay on top of your financial situation and be deliberate about the decisions you make.

Want to explore other funding options? We think you’ll like: How to get seed capital (and avoid early startup death).

What It Takes To Bootstrap Your Startup

A successful startup founder is highly productive, clever, and hard-working. If you want to, or need to, bootstrap your startup, you’ll need to match those same qualities. Bootstrapping a company lets you stay in charge for as long as possible. As an added bonus, managing finances and generating revenue on your own builds insight that pays off as the business grows.

You will find yourself forced to spend your money wisely, find inventive answers to each obstacle that comes your way, and make the most of every bit of your energy, experience, and skills.

Most notably, bootstrapping sheds light on all the essential skills and parts of being an entrepreneur. It is heavily reliant on your ability to work hard, be persistent, and push through.

Hard work means different things to different people, but no matter your definition it is imperative that you’re consistent in what you do, no matter how many hours you work.

So before you decide to bootstrap – or jump into the wild startup waters, be sure you’re fully committed to what lies ahead. 

Exploring the Success of Real Bootstrapped Startups

Still a bit shaky about the benefits of bootstrapping your startup? Don’t be! A lot of today’s world-leading businesses started out short on cash. Let’s take a look at a few examples.

RailsFactory

RailsFactory is an advisory and software development company that offers services for the Ruby on Rails web framework. It was started in 2006 by Senthil Nayagam and Dinesh Kumar. RailsFactory offers a wide variety of services, mostly prioritizing the Ruby on Rails interface app creation.

Senthil and Dinesh bootstrapped RailsFactory with barely $1,250 to their names, pooling their own resources and betting on themselves from day one. Senthil drained his personal savings while Dinesh convinced his parents to chip in. The bet worked out fast—they were bringing in actual revenue in just a few months and never stopped growing. These days, RailsFactory has delivered hundreds of projects and serves clients spread across the UK, Australia, the US, Canada, Singapore, and India. Not bad for two founders who started with almost nothing in the bank.

Mansa Systems

Mansa Systems is a SaaS-based IT business established by Siva Devaki in San Francisco in 2006. Siva created Mansa Systems to focus primarily on cloud computing. Mansa is now publishing a range of applications to be used in combination with CRM and Cloud Storage to expand the enterprise through Salesforce’s AppExchange platform.

Mansa Systems remains fully self-funded, and there are reportedly no plans to seek outside financing. The business has currently generated two million dollars in annual sales and sufficient profitability to grow and distribute its apps at a steady pace, without ever raising capital!

AgilOne

AgilOne, a cloud-based predictive consumer research firm, was created in 2006 by Omer Artun. Initially, the business focused solely on utilities to get close to clients, understand and resolve their issues, and produce sales in the process.

When AgilOne collaborated with Sequoia Capital in 2011, Omer had successfully bootstrapped his startup and taken it from no money or workers in 2005 to over fifteen million dollars in sales and almost fifty employees. Silicon Valley’s largest venture investment firm then made a sizeable, high-value purchase of the service-driven startup.

Finisar

 Finisar manufactures optical communication modules and control systems. It was created in 1988 by Jerry Rawls and Frank Levinson. Jerry and Frank financed Finisar by first offering consultancy services before designing high-speed fiber optics for computer systems.

They looked for a gap in the electronics industry that was not fulfilled and found the demand in the early nineties when they invented a cheaper gigabit optical connection that made optical drives more viable.

Despite Finisar's rapid growth, the company remained fully self-funded. The two founders bootstrapped Finisar throughout its first ten years and did not bring in outside support until 1998.

Jerry forecasts that the business’s pre-IPO revenues amounted to thirty million dollars in 1998. By the time the firm was made public in 2000, its revenue had reached about sixty-seven million dollars. Optical communication systems and modules are designed to be highly complex and expensive. But still, the two founders managed to bootstrap their business by incorporating services to grow their business to an IPO. 

Our Final Thoughts On Bootstrapping

All of the bootstrapped companies and startups listed above turned a profit by applying common bootstrapping principles to get their ventures off the ground, and those same principles can work for your startup too. It’s a smart way to launch, and these examples prove the strategy can lead to real success.

So, are you up for it? Strap up those boots and get to work!