As a small business or startup, you have the challenge of spending as little as possible to bring in (ideally) exponentially more – not a simple feat given that your time and energy is by definition split in multiple directions. Thus, the age-old debate: How should you fund your vision? Do you bootstrap, funding everything from within the business? Or raise outside money, venture capital?
Our take, start with bootstrapping.
After spending years in the trenches with dozens of small businesses – and unfortunately watching several go under – we feel pretty firmly that bootstrapping is the approach for startup success.
Why? While potentially facilitating slower growth, bootstrapping forces you to get smart fast… permanently.
5 reasons why you should bootstrap your business instead of raising capital
1. Bootstrapping requires you to assess product-market fit early, potentially saving you time and dollars.
Companies spend thousands – if not hundreds of thousands – on ideas that have little or no demand. Bootstrapping, on the other hand, requires you to assess demand and what problem your product solves, or else survival is at stake. We recommend our clients take the minimum viable product approach to test the market and refine if need be. For more reading on this topic, check out Eric Ries’ The Lean Startup.
2. Bootstrapping forces you to spend on what’s necessary and most strategic, instead of the next shiny object.
When you have money, it can be harder to distinguish an intelligent purchase from a tempting one. Bootstrapping helps you cut out superfluous spending and get clear on what investments are needed to grow.
3. Bootstrapping means you have to think about revenue immediately.
Without money coming in, nothing moves forward – no opportunity to get distracted!
4. Bootstrapping breeds creativity.
Without much of a financial runway to speak of, you’ll have to innovate and be relentless with your problem solving. After all, necessity is the mother of invention.
5. Bootstrapping leaves you with full control of your vision.
Investors (understandably) get input – so if you want to guide your company’s path unencumbered, bootstrapping is the way to go.
We hope this leaves you inspired to get cozy with your company books. There’s nothing like being intimate with – and frankly ruthless about – where your dollars go.
Happy business building!