At What Point is Bootstrapping a Bad Sign?
A bootstrapper is someone who builds and scales 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.
The most obvious advantage of bootstrapping is being in total control. There is no board of directors to report to. All the decision pertaining to the business are solely taking by the founder. Although, he 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 to do things.
It brings about judicial spending, as a result of limited resources. The fact that there is no external body pumping in money into the business forces the founder to be judicial with the allocation of resources. He 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.
The major advantages of bootstrapping have been outlined; there is also a flip-side to bootstrapping which are:
Slower Growth
It takes a longer for a bootstrap startup to grow, not to talk of scale. This is as a result of limited resources. Limited resources lead to a smaller team. A start-up needs a considerable number of people to scale, which in a bootstrap start-up’s case will take a much longer time.
The team has to be a dedicated one to be able to stick with you through hard times, which may be experienced often. They tend to be overworked and underpaid as 1 person may do the job of 3.
Another disadvantage is when things go wrong, you have to bear the loss all by yourself, which will definitely take a greater toll on you compared to when you have partners to bear the loss with.
The business problems have to be solved by you. As you call all the shots, it is expected of you that problems be solved by you 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 it will generate a return for a company. The reality is that some businesses require external money to scale but most businesses don’t. If you keep your spending under control and drive your sales you’ll be amazed 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. Creating an account is free. You can’t get much cheaper than that ;)
