Bootstrapping: how to finance your start-up?

What is bootstrapping?

Originally, this English word referred to the ring at the top of a cowboy boot, enabling it to be grabbed and hoisted up the leg.

The current expression conceals a very simple principle: self-financing.

From creation to development, the entrepreneur manages and finances his business himself. In other words, they are completely free and don't need external investors to launch or grow their project. 

Entrepreneurs who bootstrap their startups use all their internal resources to help their project get off the ground and grow : time, skills and savings.

The benefits of bootstrapping

Bootstrapping is a daring approach that is ideal for solving many of the problems associated with start-up creation, and offers a number of advantages.

First and foremost, it's an excellent way to save time when setting up your businessYou won't have to call on or convince banks or investors to obtain a loan or financing. Some entrepreneurs are unable to provide personal guarantees, or have no network of their own, so this solution is perfectly suited to them. 

And save time, bootstrapper not only saves time, but also money , as external loans and investments are subject to interest charges. This money can be invested in the company's registration costs or in marketing (website, advertising campaign costs, etc.).

So, bootstrapping is the only way to keep total control of your business, and to steer its development on your own. You don't have to report to anyone, so you have complete freedom to make your own entrepreneurial decisions and actions.

Finally, bootstrapping helps entrepreneurs to evolve and learn from their mistakes. Indeed, if you have no money to lose, you'll be more inclined to take risks and dare more to launch your business on the market.

Bootstrapping is the only way to find out if your business is profitable. It will make you a more experienced, bolder and better entrepreneur.

The disadvantages of bootstrapping

However, if bootstrapping also presents setbacks for startup launchers.

Firstly, self-financing means having no investors, and therefore a potential lack of the capital needed to support the rapid and efficient growth of a young company. It also means that you'll have to be patient to see your business succeed, as everything will take longer.

Creators of bootstrapped startups may find it difficult to :

• recruit qualified personnel,
• invest in technology or tools essential to the project,
• finance the expansion or diffusion of the company on a larger scale.

By relying solely on his own resources, the start-up entrepreneur inevitably limits the development and innovation of his project, and risks a drop in motivation due to all the responsibilities and stress he carries alone.

His time is limited, and he has to juggle his job - which he must do first and foremost to generate sales - with sales promotion, marketing, logistics, accounting and so on. He must therefore make sure that bootstrapping does not interfere with his creativity and productivity, or put additional pressure on him. 

Also, bootstrapping as a sole resource makes the company more vulnerable to market risks and economic fluctuations.

Not having investors or a "financial cushion" can pose difficulties if difficult or unforeseen times arise in the life of the company.

How do I make an effective bootstrap ?

Sometimes, entrepreneurs don't have a choice: bootstrapping is their only option for financing the launch of their project. Let's take a look at how to bootstrap well, with adaptability, creativity and flexibility.

Business plan and financing

First, draw up a business plan. It will help you define your objectives and establish your development strategy . The business plan will also help you to identify the potential challenges and risks you may encounter, and how to deal with them.

Then build up a reserve of money to finance the start-up. Start saving as soon as possible, as soon as you're thinking of building a business around your idea. If this reserve isn't big enough, you can :

• sell personal property, 
• offer various services, 
• seek grants and subsidies, 
• crowdfunding crowdfunding. 

All means are good for generating start-up capital. Subsequently, it is the flow of capital generated by your work that will finance the development of your business.

Startups and bootstrapping

As a start-up entrepreneur, you need to set aside part of this capital for your visibility, and therefore for marketing, which is not optional, even when it comes to saving money. Work on your reputation to attract customers quickly and sustainably. On the web, don't neglect SEO, content marketing and social networks, which will help you reach your target audience. 

Finally, find different ways to save money. For example, instead of paying to rent premises, consider coworking to run your business. You can also use free online software to create a showcase site, or do your accounting and invoicing. 

As we've just seen, boostrapping can be the ideal financing solution for the creation of a start-up. This method of self-financing, without investors, requires patience and flexibility, and has both advantages and disadvantages, so it's vital to study them carefully before choosing this method.