You have no money, but you want to start a business. How do you bootstrap your business? Startup on a shoestring?
When you’re the boss, no one limits your “vacation days,” tracks your hours rather than your productivity, or demands you stay late when your child has the chicken pox. In other words: no one arbitrarily restricts your freedom.
Unfortunately, many people assume they need big dollars to start a business.
Let me debunk a myth: You’ll need many traits to start a business — like persistence — but you don’t necessarily need a lot of money.
Very overhead-intensive companies — such as companies that need brick-and-mortar storefronts — need money. But you don’t HAVE to start an overhead-intensive company. There are loads of businesses you can launch on a dime.
Can You Bootstrap Your Business Idea?
Before we go any further, you need to figure out if the idea kicking around in your head is bootstrap-able (look, I invented a new word!).
Here’s a quick litmus test: Does your dream business require tons of equipment, such as forklifts and cranes?
Second, does your dream business need talent that can’t be outsourced, like neutering animals? (I know that’s a weird example. But you can’t outsource pet-neutering to a virtual assistant in India. I’m just sayin’.)
If the answer to both of these questions is “no,” you probably have a business idea that can be bootstrapped.
The Problem With Bank Loans
Most small businesses are launched with business loans, which are usually borrowed against the owner’s house. This poses a massive risk: both your job AND your home depend on the startup’s success.
I’m pretty pro-risk, which is why I’m always encouraging people to quit jobs they hate. But borrowing against your home verges on gambling.
The Problem With Investors
It’s also a myth that starting a business requires you to find angel investors or venture capital backing. Loads of businesses launch without it.
In fact, having money and backers for your startup could be a hindrance:
- You could get caught in the unimportant. The more time you spend with your investors, the less time you have to listen to your customers.
- What matters most is passion. Investors want a piece of the action in exchange for their dough. Since I believe wholeheartedly in my business, the notion of selling pieces of it makes me queasy. Dilute your ownership of the company, and you risk diluting your passion for running it.
- You forget how to bootstrap. Startups require sacrifice, which include sleeping at the Motel 6 on business trips. Launch your business with a boatload of investor capital, and you might forget the core of what you’re doing: you’re fundamentally trying to earn enough money each month to reliably pay someone’s salary – and that’s an incredibly tall order.
So How Do I Bootstrap A Business?
Saving money in your business is no different than saving money at home – you simply need to ask yourself: “How can I do this, but more cheaply?” Here are the 10 best tips I discovered though old fashioned trial-and-error:
#1: One nice suit makes a stronger impression than 5 mediocre ones.
#2: Don’t rent an office until you have at least 2 employees.
#3: Make Powerpoint presentations in rooms you can rent by the hour. Many public libraries, colleges and some Starbucks locations offer these.
#4: Don’t settle for mediocre. As you grow your business, you’ll start to look with envy at friends who get steady paychecks, benefits, and clock out at 5 pm. Remind yourself that there’s a reason you aspire to something different than this. Be strong.
#5: Before you invest in a brick-and-mortar storefront, take your product to a festival or open-air market stall. See if anyone buys it.
#6: Offer your employees a SIMPLE-IRA retirement benefit instead of paying $200/mo or more for some third-party to administer a 401k program. (Worse yet, after sucking you dry for $200 a month to administer a plan for just one single employee, the 401k administration company may charge you a $1,000 cancellation fee. Ask me how I know!)
#7: Protect yourself from lawsuits by shopping around for liability insurance, which may protect you if you get sued by a client.
#8: Use your friends as a “beta” test group as you develop your product or service.
#9: Meet people in your field though local chapters of professional groups or through meetup.com.
#10: (If you’re in the U.S.) Use Nolo Guides to get templates of legal documents. Nolo’s books are great (although its website, in my opinion, needs improvement). I used a Nolo Guide to create an LLC agreement with a couple of partners. If the legal help you need is straightforward, this is cheaper than hiring an attorney.
Thanks to evhead for that cute photo. Notice it misspelled “entrepreneur”?