Have you got that perfect idea for a startup? Are you chomping at the bit to get it off the ground? Well, in your exuberance to break out of the starting gate, set aside some time to figure out how you’re actually going to finance your operation.
Angel investors, small business loans, and venture capitalists are all options, but there are also tremendous benefits to bootstrapping your startup. Even if it comes at the expense of a rapid growth rate in the beginning stages, it opens up a great many opportunities down the road.
1. Save Money
If you’re funding your business with your own money rather than cash from an outsider, you’re inherently inclined to want to save more. Since keeping costs low is a key component of early startup success, going this route can improve your chances of staying afloat in those critical first quarters.
2. Retain More Control
Any venture capitalists who get involved in your operation are going to have a say in how you run things. Even though that input would be less prevalent if you were to go with an angel investor, an even better option – especially if you’re an alpha type – is to bootstrap. Create your own business goals, choose your direction, and maintain complete control over any and all decisions.
3. Grow Without External Pressure
If you bootstrap your operation you face no pressure from outside investors curious about your growth rate. Doing it on your own means that you are the only source of pressure on yourself to succeed. If you end up generating significant revenue, devise a growth strategy with the same prudence you used to initially finance your venture. Expanding with senseless abandon does you no good.
4. Get Up and Running Faster
This may seem contradictory, especially if your access to personal funds is somewhat limited, but you can get your operation off the ground faster if you bootstrap. The time it takes to receive funds from venture capitalists or angel investors varies, but it may be as long as nine months. And you can plan on waiting a minimum three months for a small business loan to be approved. This is significantly longer than it would take for a withdrawal from your checking account, for example.
Think about it like this: if you come up with an awesome startup idea that you’re really stoked about, do you want to have to wait on the paperwork and final decision to come through from a group of outsiders? Use your own funds to fuel your own concepts and momentum can truly be on your side.
5. Your Business Model Becomes More Flexible
If you’re under no constraints from outside investors, your business model automatically becomes more flexible. You can expand or scale back as you wish, and even if you want to move your company in a completely different direction, you can do so with no outside interference. By relying on funding from others, this advantage disappears.
If you decide to bootstrap a startup, just make sure your finances are in good shape before you begin – and never invest so much in your startup that you cut yourself short. Doing so may land you in credit card debt and have you struggling to pay your monthly bills, which comes with a set of financial consequences all its own. Do things yourself, but do them prudently and you can keep your stress levels low and your chances of success sky-high.
What are your thoughts on bootstrapping? Got any great tips to bootstrap a startup? Let us know in the comment section below.