Many entrepreneurs have to bootstrap when first starting out for a variety of different reasons. You may not necessarily want to bootstrap, rather raise outside capital. However, bootstrapping in the beginning is not necessarily a bad thing. If your business is a startup, there is no guarantee that it will be successful, therefore borrowing money (or getting it from an investor) right from the get go may not be an ideal situation for you. Here are three good reasons why you may want to consider bootstrapping for the first few years:
It Could Save You Money – Investing your own money into your startup could save you the hassle of worrying about making monthly payments on a loan or line of credit. It’s one less expense you will have to think about. Your business will also have a higher overall net worth because it’s essentially debt free.
You Want to Grow Slow & Steady – Contrary to popular belief, there’s nothing wrong with slow growth. Slow growth can bring some stability to your business. Businesses can sometimes grow to fast and crash and burn quickly. Have you ever heard of the tortoise and the hare? Slow and steady usually wins the race.
It Could Increase Your Chances of Raising Outside Capital – When your business is finally in a position to borrow money, showing a bank or investor that you have invested your own funds into the business could increase your chances of being able to obtain capital from them. In my experience, banks and investors are a bit more comfortable with lending to businesses that have already taken the risk of investing their own money and experienced some success.
All in all, bootstrapping is a personal decision that should be made based on your business goals and objectives. For me, bootstrapping is a no-brainer. I’m a strong believer in slow and steady growth because it gives me time to learn and strengthen my business skills. I tend to get better with time in life and business so bootstrapping is ideal for me.
In my early days I wanted to raise capital, but if I knew then what I know now, I would have never tried. I lacked the knowledge and experience to use the capital effectively and would have most likely crashed and burned. That’s why I always suggest my fellow entrepreneurs ponder on this before taking big the leap. Is bootstrapping right for you?