Starting a business is a lot like climbing a mountain: there are countless ways to reach the top and each path is its own unique journey; when you’ve reached the summit, it’s all a testament to your willpower. The motto of pulling yourself up by your bootstraps to achieve success makes for one of life’s greatest adventures. It’s one that thousands of new startup founders embark on every year, searching for newfound paths of success and the capital they’ll need to fuel their businesses.  There are plenty of options out there, such as venture capital, angel investors, or family and friends, but outside investment isn’t always an option for today’s entrepreneurs. 77% of small business owners are reaching into their own pockets to get the ball rolling. The industry calls this bootstrapping, when entrepreneurs start off with very little capital, but still drive ahead by sheer force of will. It’s a lean approach to running a business and is an excellent model for up-and-coming startups, promoting fiscal responsibility like no other.

The Value of a Dollar

By putting your own money on the line, the value of a dollar will never be clearer, and the pride you take in your work will never be greater. Bootstrapping also allows you to focus on the fundamentals and surround yourself with the vision that first inspired you to break out into the business world, without the hassle of compromise.  These qualities are at the core of a bootstrapped startup’s potential. You’re building your own path to success with every dollar accounted for. It’s part of the reason why founders like Aytekin Tank, CEO of the leading online form builder, JotForm, avoided investors from the start — even with all the money on the table, you can’t afford to compromise on your vision. Tank’s story is a great example of bootstrapping done right. He moved at his own pace and turned down outside money, avoiding the common pitfall of wasting your first round of investment. He wouldn’t even hire someone until he could pay the annual salary and never spent a dime he hadn’t earned. Tank’s explanation for why he stuck to his guns should strike a chord with every founder; he explains, “I prefer to keep the vision and plans to myself instead of putting them in the hands of an investor who might decide on something different.” Sometimes only bootstrapping can offer the independence and autonomy that you deserve.  Thinking on Your Feet Bootstrapping also teaches founders how to improvise and solve problems quickly, which are two essential skills for running a business. The limited amount of resources at your disposal means you’re constantly racking your brain, trying to find the right corners to cut and costs to trim. You’ll have to roll with the punches without losing any of that precious momentum you’ve built up. It’s what turns any potential setback or obstacle into a lesson worth learning.    

Reinvesting in Your Venture

Without outside investors expecting a return on their investments (besides you, of course), all revenues should go back into your startup. With a heightened sense of fiscal responsibility, bootstrapping can yield higher profit margins and lead to lower overheads. Plus, self-financing founders are avoiding dilution of ownership when they forgo loans, which is key to retaining ownership over your startup.   As a startup founder, the biggest paycheck you can write yourself is one that goes back into your company. Think of it as a stimulus for your ROI that doesn’t put your cash flow at risk, while still being a huge asset for the business. Most experts will recommend putting about half of your profits back into your business for the first couple of years. While that number may seem high, just know that you’re bound to reap what you sow. Reinvestment is crucial for bootstrapped companies to remain competitive. It’s how you inject the capital you’d otherwise depend on investors for into your startup.  There is more freedom within the restraints of bootstrapping your startup than you think. Bootstrapping bolsters a startup’s efficiency, grants more autonomy, and encourages more creative power to everyone involved. The gung-ho attitude of startup culture is on full display in every bootstrapping success story. It’s the ultimate test of a founder’s most valuable traits: accountability, critical thinking, and self-reliance. It makes success taste that much sweeter.

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November 15, 2018
Business Building