The phrase, “Pull yourself up by your bootstraps” means to get yourself out of a pickle, without outside help. It is often used in a semi-negative way, in the sense that a person is too prideful to ask for anyone’s help. However, when it applies to business, bootstrapping is often seen as a way of getting started without having to deal with loans or other means of funding. Whether the business owner doesn’t like loans, can’t qualify, or simply wants to go without them, bootstrapping is how many small businesses across the country have gotten their start. There are a few ways to bootstrap, and if you are kicking around the idea of starting your own business, these may interest you. Keep in mind, however, that bootstrapping is often a lot more work than getting a small business loan. There is a reason there are so many resources available to those looking to get their business going: it is much easier to get a loan and get on with your business.
Alternative Methods of Funding
One of the most commonly used methods to start a small business, when loans are out of the picture, is one’s own assets. This can be savings, inheritances, or investments. If you really want a challenge, you can do what Mitt Romney did and use your retirement account (keep in mind this has some very strict rules).
For those who are younger and unable to procure the assets needed, people will often turn to their own personal credit for the loan. This could include credit cards, home equity loans, or personal loans. Just keep in mind the interest rates could be high.
Those who are well connected might be able to turn to friends and family for the startup capital. These inter-family or inter-friend loans should be entered into with caution. Too often what happens when a person borrows from friends or family, they struggle to repay the loan. I suggest that this be treated just like a regular loan, interest and all, to keep the strain off the relationship.
When no other way of raising capital is available, people choose to start small. They will maintain their full time job, and begin their small business as a side hustle. As the side business grows, and becomes more profitable than the full time business, the roles are reversed (or the full-time job is dropped completely). This is perhaps the safest, although the most exhausting, way to start a small business.
Once the business has gotten on its feet, it won’t take off overnight. Companies such as Amazon, Walmart, and other large corporations do well because they spend millions of dollars on advertising. Since advertising isn’t a straight dollar for dollar trade (meaning if you spend $1 million you will get far more than if you spent $1 one million times), there are ways to keep costs down, yet keep the profits coming in.
Guerrilla Marketing is one of those buzzwords that pops up every now and then. The concept is simple: take to the streets and ambush your market. Hand out flyers, hire a street performer, pass out bottles of water at the fair on a hot day. The key is to use labor rather than dollars to get your name out there.
A big tool that we have at our disposal is social networking. Linkedin, Facebook, Twitter, and Google Plus are all free ways to build your brand and keep your name in front of people. Chances are people will not run out to support your business because they saw your ad, but they will remember you the next time they need your product or service.
Finally, good old fashioned word of mouth will keep your business going. Here’s how you do this without sounding schmoozy: walk up to an acquaintance and ask how their business is going (it helps if you can say “oh are you still with such-and-such company?”). They will enjoy talking about themselves, and if they are any good at conversation, they will ask what you are up to. You give them your 30 second elevator pitch (explain your whole business in 30 seconds) and hand them a card.
The hardest part about starting a business is putting in the time to start a business. But you can have all the time in the world if you don’t have funding. If you are unable, or unwilling, to take out a small business loan, then you will need to figure out which bootstrapping method works best for you. Loans or no loans, if you have a good idea, keep good track of your accounting, and put in the time required, you ought to see your business succeed.
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