7 Ways to Bootstrap Your Business to Success

Most first-time entrepreneurs seem to believe the myth that they need a minimum of a half a million dollars to start a business. At least that is usually the lowest number I see requested from our local angel investment group. In reality, over 80 percent of successful new businesses are self-funded for much less --often as little as $10,000.Im convinced this also reduces risk.

Related:No Money to Start a Business? No Problem. Try These 5 Options.

Starting a new business on a limited budget without investor involvement is called bootstrapping, and its the only way to go if you dont want to spend months on the investment pitch preparation and delivery circuit. Also, with bootstrapping, you wont have the added pressure and risk of an investor boss hanging over your shoulder and second-guessing your every move.

Over the years, Ive accumulated a list of common startup practices from entrepreneurs who have managed to avoid the ironic pain and suffering of comfortablystarting a business with a large cash stash from a rich uncle or a vulnerable investor.

1. Stick to a business domain you know and love.

Starting a new business in an area where you have no experience, just because it appears to have great potential, is a recipe for failure. There are unwritten rules in every business, and your lack of insiders knowledge will cost you dearly. Good connections can get things done for very little cash.

2. Find team members to work for equity rather than cash.

People working with you need to understand their failure means startup failure, rather than expect money up front. Managing employees and contracts is difficult and expensive, and new entrepreneurs arent very good at it anyway. Equity is your best assurance of commitment and focus.

3. Build a plan around your budget, rather than around your wishes.

Entrepreneurs who start without a plan spend more money. Likewise, those who feel compelled to keep up with the popular media will spend most of their time courting investors. Most investors agree that too much money leads to poor spending decisions and lack of controls.

Related:8 Musts to Start Your Business With Little to No Capital

4. Defer your urge to find office space until you have customers.

Remote startup team members are the norm todayand can be very productive with smartphones, videoand the high-speed Internet. Office space costs money up front, requires equipment, staffingand travel expenses. With a website, your business can look as big as any competitor.

5. Ask for advance on royalties and vendor deferred payments.

If you solution has real value, future partners will jump on discounted future royalties, and many vendors and existing partners will understand your cash flow challenges. You may also be able to barter your services to offset theirs. It never hurts to ask. Practice your sales skills early.

6. Negotiate inventory management with suppliers and distributors.

For many products, suppliers or distributors will direct ship your product to eliminate your inventory. For services, dont be afraid to ask for a retainer up front to offset your costs. Business terms are negotiable, but new entrepreneurs with plenty of cash dont bother to ask.

7. Choose a business model to optimize your revenue flow and timing.

Popular examples include monthly subscription fees and optional service fees, versus one-time product sales. Another is the use of an ecommerce site, rather than retail, to facilitate product sales seven days a week, around the clockand around the world.

One of the biggest ways to reduce your budget and your risk is to use social media, which essentially is free, to find our whether you have an attractive solution, before you invest your time and limited resources in creating the product or service. Social media is also an invaluable and inexpensive marketing approach, since no one buys a solution they cant find or dont know anything about.

A limited budget can be viewed as your biggest constraint, or as an incentive to do things more creatively.With startups, there is a big premium on creativity and innovation.Big competitors are quick to copy a conventional solution with minimal risk. Let a limited budget be your driver to winning, rather than a curse.

Related:How Fine Art America Built Its Business by Bootstrapping

http://feedproxy.google.com/~r/entrepreneur/latest/~3/0t6xao-j0b4/254217

Write a comment

Comments: 0