Bootstrapping is a business term where entrepreneurs use limited resources like relying on their personal finances to open up a business. It is disregarding the idea of an angel investor or a venture capital. This method is dependent on the customer’s support to attain business growth. The median capital to create a business is about $10,000.
In the 19th century, there a saying that goes “to pull oneself up by one’s bootstraps” translates to doing an impossible task. It also appeared in a few writings like the Workingman’s Advocate in 1834, where the excerpt goes: “It is conjectured that Mr. Murphee will now be enabled to hand himself over the Cumberland river or a barnyard fence by the straps of his boots.”
Since most boots have a handle known as bootstraps to pull them up, metaphorically, it means to help yourself without any external help.
We can also relate the term “booting-up” when a computer starts to run up its operating system to bootstrapping.
Pros and cons in a bootstrap business
Is it a smart way to use it in business? Let’s start with the cons or the disadvantages. Using bootstrapping when creating or even at any stage in your business is often a long way to attain business growth. And since you are just starting and this method relies on customer support, you will have very minimal believability from customers that an influential backing can provide. The compensation of the product’s quality can also be another disadvantage due to too much cost-cutting.
On the other hand, there are still advantages to consider. It can still be a handy and inexpensive way to generate revenues. Why? An entrepreneur will not always have the anxiety to satisfy investors as he is on his own frequency lane to rise and fall at his own expense. At the same time, there is lesser stress because there is zero interest. After all, there is no borrowed money in the first place. The entrepreneur has total control by being able to make all decisions be it big or small.
A successful bootstrap story
Forbes’ survey 2015 says that 90% of all startups end up failing. But GoPro is included in the 10%. GoPro is an action camera company built by Nick Woodman with just $10,000 from selling shells and belts made out of his van. He designed their very first product and created its prototype. He also did not seek help in arranging the manufacturing and marketing to suppliers. Up to date, GoPro is now worth $2.96 billion since its humble beginning.
Tips on bootstrapping
An entrepreneur can start by generating even a minimal amount of money to get started. Then, think about something that you consider a passion. Innovate a unique and indispensable product that competitors can’t beat. The choice of business model and budgeting is very crucial to generate positive revenue. Know if there is demand or decline in your product offer. Make sure that your employees are passionate about supporting you and your business.