A bootstrapper is someone who builds and scales his business without any external funding. In this situation, all the resources needed to keep the business running comes from his personal savings. Also, the revenue made from the business is invested back into the business.
Advantages of bootstrapping
- The most obvious advantage of bootstrapping is being in total control. There is no board of directors to report to and all the decisions pertaining to the business are solely taken by the founder. Although, he/she may make consultations, he has the final say.
- Bootstrapping pushes a founder to be more resourceful, versatile and innovative. He’s forced to come up with better and more creative ways of doing things.
- Because of the limited resources a bootstrapper is very frugal in spending and allocation of resources. He/she tends to spend money on expenses that are of high priority.
- As a bootstrapper, all the profit made from your business is all yours. There is no issue of equity in this case.
Disadvantages of bootstrapping
- Slower Growth: It takes longer for a bootstrap startup to grow and even much longer to scale. This is as a result of limited resources. Limited resources mean a smaller team. A start-up needs a considerable number of people to scale.
- The bootstrapper’s team is usually stretched, overworked and underpaid
- Another disadvantage is that when things go wrong, the bootstrapper bears all the loss, which can take a great toll on the business depending on the magnitude of the loss.
- Essentially all the business problems have to be solved by the bootstrapper. As he/she calls all the shots, which could be hard compared to having a higher authority to deliberate on an issue and make a resolution.
Should I bootstrap?
The answer is yes, but maybe not in the literal term. Whether you’re a pure bootstrapper that is running completely on own resources or if you have attracted external funding. Every business owner should spend his money wisely.
Before making any expense think about if it’s something you really need and if it will generate a return for your company.
The reality is that while some businesses require external funding to scale some others don’t. If you keep your spending under control and drive your sales you’ll be amazed at how far you can get.
To make sure you’re running your company with the bootstrap spirit start using professional cloud accounting software from day one. It allows you to keep a close eye on your financials.