6 Ways to Bootstrap Your Small Business from the Ground Up
Getting a startup off the ground is a hard and perilous job. All new companies are vulnerable during their first year, and this goes double for small businesses. The statistics behind the startup failure is rather brutal. About 20% of all new companies go belly up during their first year. 34% of them fold before the second anniversary. In fact, barely 50% of all startups manage to stay afloat past the five-year mark. Startups fail due to many reasons, but the most common one is that they simply run out of money. Whether they overspend or misallocate their initial capital or can’t secure alternative lending, going broke is the number one startup killer. That is why securing additional sources of money and finding ways to bootstrap small business is so important for all aspiring entrepreneurs. Here are some ideas on how that can be achieved.
How To Bootstrap Small Business With Fast Cash Flow
If you are starting a manufacturing company, this obviously will not be an option for you. It will take a considerable amount of time before you will be able to generate any income. Fortunately, there are other options available that are income ready almost from the start. Spending some time researching these options and choosing the best one for you will reward you generously. Starting a company that is income-ready lets you funnel that income straight back into operations and basically create a Perpetuum mobile. This way, you can focus on growing your company in peace, without the sword of insolvency hanging over your head.
Control Your Costs
Generating income can be a tough proposal, especially for small businesses and new companies, but that is not the only way of creating some surplus cash. There is always the other side of the ledger. Maybe you can’t increase your income, but you can probably decrease your costs. In the early days, your company has to be as lean as possible. Everything that isn’t critical for operations needs to go. Yes, it is nice to have brand new computers and other equipment, but maybe you can make do with second-hand ones in the beginning and replace them later.
The same principle can be applied to almost every aspect of a business. Do you really need an assistant or you just like having one? Do you need to buy Lexus for a company car or Ford will do? For that matter, do you even need a company car? Maybe you can use your personal vehicle until the company gets on its feet. Exploring these and similar options will do wonders for your bottom line.
Reduce the Need for Startup Capital
When it comes to the need for startup capital, not all businesses are equal. It takes a lot more money to open a restaurant than an accounting firm. If you have a choice, it would be smart to go with a cheaper option. That way you will reduce the need for bootstrapping. It will allow you to use a greater portion of your war chest during the crucial period and greatly reduce the stress of having to create income right off the bat. Not everyone will have this option, but if you do, you should at least consider it. Keep in mind that this is only a temporary solution and that eventually, you will have to have an income if you want to survive. However, as a stopgap measure, it can do wonders for your initial stability and solvency.
Explore Growth Possibilities
Many experts agree that expanding early is a bad idea. Generally speaking, that is true, but there are circumstances when pursuing growth possibilities as soon as possible can be highly advantageous. If you are looking to increase your income, expanding can seldom be your only option. Recognizing these circumstances isn’t always easy and requires a lot of experience, something new business owners don’t always have. That is why it is important to dedicate your time to learning new things, such as market psychology. It can help you understand and recognize growth opportunities and see clearly which ones are worth the risk. Ignorance is not the option and the sooner you understand that, the better.
Find a Partner
Giving up control of your company, even partially, can be a third pill to swallow, but sometimes it is the only thing standing between you and bankruptcy. Finding a partner means that you will be letting someone else have a say in how you run your own company and often, their views won’t be aligned with yours. It adds a layer of complications that can send your stress levels sky-high. But, if there is no other option, it is still vastly better than folding and calling it a day. A partner will bring in a fresh infusion of cash that will stave off your lenders and allow you to fight another day. They can also provide a fresh perspective on things and maybe see things you were oblivious to. A fresh pair of eyes can be a difference between success and failure. And, if you are not satisfied with how things work out, you can always buy them out later.
Loans can Bootstrap Small Business
Not the most popular option for bootstrapping a small business, that is why we put it last. There are several things you need to know about loans before deciding to get one. Right now, due to the coronavirus pandemic, small business owners have access to SBA 7(a). These loans were designed to help the small business stay afloat during the economic hardship imposed by the rampaging disease. In essence, they will allow you a 6 months grace period, during which you won’t have to pay any principal, interest, or any other costs related to your existing loans. This should give you enough time to weather the storm and live through the recession.
Regardless of what option or combination of options you choose, make sure you fully understand the consequences. For instance, an SBA loan will help you survive for another 6 months, but it is still a loan. At one point, you have to repay it. If it helps you to get to the point where you can do that, excellent. But don’t rush in to simply prolong your misery. There comes a time when simply admitting defeat and moving on is a smart decision.