Facebook and Dell could be considered the poster-children for financial bootstrapping based on how they handled their financials during the early phases of their developments. Looking at the jump in the number of start-ups, it looks like they are not alone in benefiting from this investment strategy, which is characterized by its emphasis on recycling profit and initial investments directly into the company, instead of relying on external funding and excess borrowing.
There is a lot of appeal to financing your own projects, namely that you have complete control over the changes that can be made to the company as it grows, but like everything else in life and business, this sounds much better on paper than it is in practice. The reality usually involves notable sacrifices in your personal spending, which can really impact your lifestyle. There is more to this than simply investing all of your savings and maxing out your credit cards though – having a business plan grounded in strategy is still key in maximizing your chance to reap the potential benefits. In addition to a solid business plan, there are some things you should think about if you are trying to get the most out of a tight budget.
1. Ask For The Start-Up Discount
You’re not alone in thinking your company has serious cash-cow potential. Some businesses make money by providing other companies with support services, and know that if you do well, they will too. This principle gives them incentive to offer competitive rates for their services. When shopping for the right bank to work with or which server to use, ask if they have a discount for start-ups or entrepreneurs.
It might seem like pandering, but in addition to saving you money, asking for a discount can help you to evaluate whether these companies are used to working with companies of your scale and profile. You are trying to offer your clients something that meets their needs; you should expect the same thing from your server provider and bank.
Worst-case scenario, asking for a discount costs you a little pride, but the potential return makes up for that, and let’s be honest – pride is something you probably had to give up on a while ago, so cash in.
From catering companies to law-firms, it’s easy to find groups that offer discounts to people just like you, so factor discounts into choosing who you give YOUR business to.
2. Take Charge Of Accounting
Hiring an accountant is really tempting, and while this may come off as insensitive to those of you still reeling from undergraduate finance classes, taking care of your accounting doesn’t just save you money, it helps you understand the nuances in your company’s spending. Put hiring an accountant on the “when I make it big” list and get yourself some accounting software. Some people get by with QuickBooks, while others opt for project management tools that incorporate accounting functions into their management systems. BaseCamp seems to be carving out a name for itself by offering add-ons that merge project management with invoicing and accounting, which could explain the higher price tag. For many founders this price is still more justifiable than hiring an accountant though.
Asking for money is one of the best ways to loose a friend, but there is nothing wrong with utilizing the other resources your friends have. If you know someone who works for a big tech company, ask them if there are any interesting conferences coming up and if they can get you a ticket, or if you’re really lucky maybe someone you know works at the cooperate office of a store that sells something your company could use. Friends can be an incredible resource, so be proactive and see what resources exist within your social circles, just make sure to give back because even if you don’t believe in karma, it doesn’t take a genius to realize no one wants to help out a d-bag.
4. Be Your Own P.R. and Tech Team
We live in the time of SEO and WordPress, so save the money people used to spend on P.R firms and tech teams, and start getting your hands dirty. When you are in the hiring stage, look for candidates with secondary backgrounds in things you can use. At this stage you probably have a tech “guy” instead of having a tech team, so divide and conquer, have the people with a tech background build a site using inexpensive resources (like WordPress) and put the people with some marketing experience to work on generating strategies to get the word out.
The general trend here is that if you can do it yourself, then do it, and if you have to pay for it, shop around and make sure you’re getting a price that takes your current circumstances and long-term potential into account.