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How To Bootstrap a Startup Without Asking Everyone For Loans

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It seems like a common myth is that you have to have lots of money to start a business.  Another rumor is that if you think positively, you’ll attract money and wealth to yourself.  The final extreme is the person who thinks they need ALL of their money (and everyone else’s) to go towards their business, so they tire everyone out begging for money, doing GoFundme Campaigns, and living out of their car.  Sound familiar?

 

how to bootstrap a startupWith all of these “theories” floating around, if you want to start a business with a tight budget, you’re left to think either you don’t stand a chance because you don’t have alot of money, you have to think positively and spend like you have money in order to attract more, or you have to start major fundraising campaigns and go homeless for awhile.  In my article on Bootstrapping and Start up Business Funding, I talked about why I think boostrapping is the How To Entrepreneur preferred method of funding, but in this article I’ll explain how to bootstrap a startup without asking everyone for loans or living out of your car.

 

My Story

 

I’ve personally bootstrapped several businesses.  At one point, I thought getting a business loan would be a better option, but when I experienced the stress of debt, I learned to think otherwise.

 

In my personal finances, I got loans on various items.  I was being “normal” as Dave Ramsey would say.  I got a car loan, credit cards, school loans, and a mortgage.  None of my debt really bothered me until I decided to transition from my decent-paying, stable job (in the military) to start a business.

 

In my business startup, I had to experiment quite a bit to figure out what would work.  Heck, I still experiment with things to see what would make things better.

 

The bottom line is…my finances fluctuated quite a bit, and at times, they still do.  It happens.  Sales volumes go up and down.  Some things are seasonal.  Some things are evergreen, but evergreen is less common.  That’s life.

 

All in all, I’m glad I didn’t get a business loan for my startup because of the pressure.  When you have debt, the banks don’t care if your business has peak seasons, if your loved one needed money for medical expenses, or otherwise.  Your expenses can go up for no fault of your own, and their demands will stay the same.

 

how to bootstrap a businessIt can be VERY stressful.

Another Reason Why I Don’t Recommend Business Loans to Startups

 

With business loans, you usually need collateral.  That means if you’re experimenting to build your sales funnel, split testing to see what will work best, and doing everything else you’re supposed to do, but the pay doesn’t come when they want it, you can end up losing something you worked very hard to earn when they wipe the collateral from beneath you.

 

For all these reasons, I recommend bootstrapping for start up business funding, but I understand it’s a less common alternative nowadays.  In places where bootstrapping is common, it’s uncommon for people to talk about it.  It’s like a shame surrounding it in some instances.  In this article, there’s going to be admiration for the boostrappers as we discuss how to boostrap a startup without asking everyone for loans or living out of your car.

 

The First Thing To Do If You’re Bootstrapping a Business

 

I can’t stress this enough…Choose a business in a subject you’re familiar with!  I’ve seen so many people who see people making millions blogging, flipping websites, or offering freelance SEO, so they think, “I want to make big money, I’ll do what they did.”  Then, when they’re in the motions of the business, they’re miserable because they chose something they weren’t passionate about simply for the money.

 

On top of being miserable, they find themselves having to outsource much more than someone whose skilled in the subject area because they don’t have the primary skills required to make the business float.  Don’t fall into that trap!

 

Starting a business you’re not knowledgeable about can be very expensive!

 

It’s also not enough to simply be a good technician.  In his book, The E-Myth, Michael Gerber talks about how many people think they can start a business because they’re good technicians.  That myth is a trap as well.  You have to be more than a good technician to run a thriving business.

An entrepreneur has to be skilled (even if just a little) in management, leadership, collaborating with others, observing the needs around them, money management, and one of their greatest skills must be in acquiring leads/sales.  It’s not enough to be a great doctor, and decide to start a medical practice.  No.  It’s not enough to be a good lawyer, and start a Law Practice.  No.  Great technicians have businesses that fail too.

 

Choose something you’re good at and don’t overlook whether or not you have the other pertinent skills too.

 

Barter with Others

 

While you’re boostrapping, there’s going to be someone else who needs your skills for their endeavor too.  Maybe you’re a carpenter, and you need an accountant.  Consider offering carpentry services in exchange for your accounting work.  Find situations where bartering can be a win-win.  The last thing you want is for a person to dread when you come around because you’re overusing them.

 

Make sure you’re giving equal or greater value in exchange for the services you receive, and you’ll find that your loyalty will increase drastically.  I don’t like to hammer scriptures too much here because of the diversity of the audience, but a wise King named Solomon said:

 

“A good reputation and respect
are worth much more
than silver and gold.”

– Proverbs 22:1 NIV

 

how to bootstrap a startupWhat I’m saying is, “Barter with others, but protect your reputation while you’re at it.”

 

There’s people that are like gold mines, so when you meet them, you feel like you’ve gotten wealthier.  It may be the ideas, connections, encouragement, or maybe even money they share that makes the relationship so valuable.  Then, there are people who are like mosquitoes, ticks, or flesh eaters.  When you meet them, they drain and irritate you.  Be a gold mine.  Barter with others, but be a gold mine.

 

Be logical; not Optimistic

 

I’m speaking to myself on this one….you can skip it if it only applies to me, but I doubt it. LOLOLOL!

 

Optimism is when you add the “ism” to positive thinking.  You start to think:

 

  • If you’re motivated enough, then things will work
  • If you simply do X, then you’ll reach Y

I’m so guilty of this, and I think most entrepreneurs could relate!  I would overestimate my capabilities or providence.  I didn’t want to think that the way others failed had any weight on my results.

 

Sometimes optimism is good because you challenge stigmas and create change.  The Wright brothers had to be optimistic when they were trying to invent the airplane, right?  The odds probably didn’t look good for them.

 

how to bootstrap a startupOptimism feels great too!

 

Who likes to feel like they have limits?  We all would love to believe there is no limits to what we can do, and when we pump our heads up with that it feels great.  The reality…

 

We have a certain measure of skills, time, connections, money, values, and ideas.  Take the resources you have, do your best to accurately measure how far they can get you, and challenge yourself realistically.  Don’t ride on someone else’s results and expect them for yourself unless your resources are identical (which they will not be).  And, certainly don’t ride on optimism alone!

 

Get a result and scale it.  Don’t scale something without proof your babystep will work.

 

When you’re starting a business, you have to be careful not to take too many simulaneous risks.  Follow this hypothetical example with me for a second…

 

You decide to make a challenge for yourself, so you say, “I’m going to grow my social media following”.  Maybe you’re a people pleaser, and you only post what everyone else would like without regard to your own voice.  Maybe you decide to experiment to see if your true opinions would jive well with your social media audience.  That’s risk #1.

 

how to boostrap a businessRisk #1 could cause you to drastically reduce your following or it could cause your following to grow drastically.  Who knows?  There are ways to make an educated guess about how well this would work, but ultimately, you would have to experiment to find out.

 

While you’re experimenting with risk #1, you may not also want to experiment with the same thing on your website.  You may want to continue to chug along producing content on popular topics that your audience would love rather than risking your followership on your social media and on your website.

 

The moral of the story…

 

Balance your risks.  Don’t take too many risks at once.

 

Add Revenue Before Expenses at all Costs

 

When you’re bootstrapping, you’re using your own money to finance a business.  The idea behind boostrapping is to learn to grow money.  Growing money is a skill that has to be learned and practiced.

 

You have to learn how to take $1 and turn it into $10, then upwards from there.

 

You’ll never grow money if you continue adding expenses before increasing the revenue.  Accumulating expenses before revenue can be a very easy trap to fall into–this is why majority of the US population lives paycheck to paycheck.  Even in our personal endeavors, it’s easy to spend more than we get.

 

how to bootstrap a startupWhen bootstrapping and growing a business, you will have to learn to regulate the desire to buy more, and transfer the focus into increasing the revenue.  Live below your means and live on a budget.

 

You will have to track your spending in your personal finances, prioritize your business according to your values, and invest in your business.  Everyone will have different ways they prioritize their business investments.  Some people will prioritize their business investments before their other needs, some people will prioritize business investments  as a want.  Whatever you do, be consistent.

 

If you make the business a need before you have enough funding to cover needs and wants, you’ll have to have a diehard work ethic and make revenue flow quickly.  Of course, boostrapping a startup after you’ve saved more than 1 year of expenses is the ideal situation, however, there have been people who leveraged their additional income in business to get them out of living paycheck to paycheck.  Be strategic.

 

I’ve found it an exciting challenge when I set milestones for myself.  I may say, “when I get XX from XX, I will do XX”.  The reward for achieving the goal can be simple or big: it depends on your situation.

 

Choose a business model that can get cash flowing

 

Pay-up front businesses, subscriptions, or low start-up cost businesses can make it much easier for the boostrapping entrepreneur.  When customers pay up front (even partial like a retainer), it gives cashflow to the business.  You can work with us to create a business strategy for your business.

 

Subscription business models offer consistency, which helps to give financial stability.  Business models that ride on sales volume can be difficult to stabilize (especially in the beginning) because the consistency will depend on the effectiveness of the marketing and sales efforts.  When ads go well, lots of customers will come, and when they don’t, your sales will suffer.

 

how to bootstrap a businessYou don’t want continual roller coasters like that when boostrapping, so I’d recommend having multiple streams of income that can carry you beyond seasonal income streams.  You also want different payment options.  Some payment options can be based on sales volumes, but others should be upfront payments or subscriptions, so you can forecast your income with some level of certainty.

 

I personally recommend most entrepreneurs to start an online business rather than starting offline.  In some instances like starting lawn care services, and the like, it may not be as feasible.  However, learning internet marketing as a means to gain visibility for services is a way I recommend.

 

Scale as the cash is Flowing

I see so many entrepreneurs who constantly try to scale faster than they should because they look at big box stores as their competition.  Others, may not be comparing themselves to big box stores, but they may be looking at much more established entrepreneurs, and how they pay attention to details, then stay in perfectionism mode while they have not even reached the $1000/month mark.  There are many details that don’t need to be analyzed before you have revenue.

 

While the big box stores may contain a market share, startup businesses should analyze their competitive advantages, and exploit those rather than applying costly initiaves to their businesses.  Startup businesses have huge leverage in their customization options and flexibility.  Startup entrepreneurs can offer a more customized experience because they are smaller, and big businesses have scaled to the point they order high volumes of pre-made and cookie cutter things.

 

how to bootstrapTo all startups…TAKE ADVANTAGE OF YOUR COMPETITIVE ADVANTAGES!

 

Startup businesses who try to have a refund policy like Walmart could be killing themselves!  You may not be able to offer refund policies like that.  You may not be able to offer human resource benefits like maternity and paternity leave your first year in business.

 

Be okay starting small, achieving revenue goals, and scaling as the cash is flowing.  It’s okay to project addons with certain levels of achievement.  You can make $5,000/month addons, $10,000/month addons, and so on, so you can have things to look forward to as your business grows.  Don’t overextend yourself before the cashflow is coming in.

 

Side Hustle as Much as You Can

 

There are so many side hustles you can do: some more time-consuming than others.  You can choose some side hustle gigs to do to augment your business income and infuse capital.  In the beginning, you may need to spend money on a few things to make the products and services quality.  In these cases, you can use income from an alternative source.

 

A job can be a good alternative source of income while you’re growing your business.  In my article, 25+ Side Hustle Ideas You can Start with Minimal Upfront Time Investment and How You Can Make Thousands on the Side Doing Them, I gave several side hustle ideas.  You should check it out!

 

Maintaining a job or a side hustle can add financial stability while you’re growing your business.

 

Due to my experience of leaving my stable job and going into a fluctuating income, I don’t advise anyone to experience the roller coasters I did.  I recommend startup entrepreneurs to try their best to wear more than one hat: the job hat and the side hustle hat until their savings is large enough for them to live off of for one year, or until their business income gets steady.  Keeping a job and maintaining your business as a side hustle for as long as you can could make your transition much less stressful.

 

Prioritize, Prioritize, Prioritize!

 

I talked about it before how you will have needs and wants financially and in your time that could really affect your boostrapping budget.  You will NEED to priorituze!

 

When you have line items on your budget like:

 

  • Water
  • Electricitiy
  • a Mortgage
  • a Car payment
  • Transportation
  • and, other NEEDS

 

It’s not the time to experiment too much.  If you’re stuck like maybe you lose a job or something, and you have your needs to take care of.  I WOULD NOT recommend going into business unless you’re POSITIVE that your business can bring the revenue to support your NEEDS in a timely manner.  You could crash your business and reputation quickly by not being able to pay your bills and acting in extreme desperation.

 

Once your needs are met, and you are concerned about covering line items like:

 

  • Recreation
  • Restaurants
  • Hair Salon visits
  • Grocery extras
  • Salsa Dance Classes
  • and other WANTS

Then, you can decide whether your wants are more important than your business venture.  If your business is important to you, then you can sacrifice some wants to invest in your business.

 

Prioritizing in Your Schedule

 

how to bootstrap a startupThe same principle that applies to money will apply to your time.  You’ll have challenging schedule decisions you’ll have to make in order to secure your productivity in your business.  If you have things on your schedule like:

 

  • A job
  • Family Time
  • Marriage Time
  • Your Business
  • Side Hustling
  • Your Social Life

 

You’ll have to commit to spending time at the job or side hustling in order to make the money for the business.  At times, you may have to negotiate time away from other line items on your schedule in order to protect the productivity in your work life and bring the money in.

 

Balancing a startup business alongside anything is challenging.  The startup business requires alot of time, and entrepreneurs usually have the vision to see the business thru to success, so it can be a challenge to unplug from the vision to tend to your family, friends, or other engagements.  I get it, but priorities are priorities, and every decision has its consequences.  Decide what consequences you want to live with.

 

You may want to simply quit the job cold turkey, but you may be better off disciplining yourself to stay in the position until things get more solid.  I understand how promising your business may look, and how depressing it can be to wake up daily and do something you absolutely don’t want to do.  However, developing the perseverance, and making the disciplined decisions to manage your time and money right will make you a stronger person, and a more grateful person when your business does work.

 

Ultimately, how you prioritize your business is up to you.  Do you!  You will live with your consequences.

 

Final Statements and Recommendations for How To Boostrap a Startup

how to bootstrap a startupBoostrapping your startup could be one of the most courageous and character-building experiences of your life!  People who boostrap learn to build relationships, have to be creative, and stabilize businesses in ways you can’t do otherwise.

 

I highly recommend that you look into low cost-high return marketing options like internet marketing.  I’d love to help you take your business online, and make it a massive success.  If you’re interested in joining my online community of 1,000,000+ internet entrepreneurs “crushin it” online, I’d love to host you and walk alongside you as you scale your business to success.  Click HERE and I’ll see you on the inside!

 

Alternatively, if you would like to get more information (like this) in your inbox to scale or grow your business, CLICK HERE, leave your information, and get my free gift.  I appreciate all of my readers who support me on my blogging journey!

 

Now, it’s Your Turn…

 

Have you bootstrapped a business?  What tips would you give for how to boostrap a business?  Did I leave anything out?  Did you agree or disagree with me?  Leave your questions or comments below.  I’d love to hear your thoughts on this subject.

 

 

 

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