Bootstrapping: Think big, start small

October 24, 2011 - Tags: Financing Entrepreneurship Startup

You have a great business idea, but money is tight. What can you do? Consider bootstrapping — a strategy that focuses on cutting costs to free up operating cash.

The term bootstrapping comes from the notion of “pulling yourself up by the bootstraps” — in other words, getting things done without outside help. In business, this means getting things up and running with the help of personal savings, cash flow management, and penny-pinching.

During start-up, your focus should be on generating cash flow. It's important to make sales, but don't forget to keep your expenses down — is a sleek designer chair for your office the best way to spend limited funds, or can it wait? It can be tempting to go on a spending spree when money starts rolling in, but reinvesting profits in the business will set the stage for long-term success.

These five tips can help you succeed on a shoestring budget:

1. Look for free publicity. Approach local media with your story or expert opinion and look into the benefits of social media marketing.

2. Barter with other businesses. Offer your products or services in exchange for something you need. For example, you could cater an event in exchange for bookkeeping services.

3. Pay your suppliers on time. Developing a good relationship with suppliers can help you extend payment terms, free up cash, and build a good credit rating.

4. Work from home or share an office. Can't afford high rent? Reduce your overhead until you can afford to expand.

5. Weigh the pros and cons of leasing instead of buying. It may cost more in the long run, but leasing can free up cash during start-up. Our Lease or Buy Calculator can help compare costs.

Don't be discouraged if you are not able to launch your business on the scale you desire — it may take time to grow, but a solid customer base and a positive cash flow will set the stage for future success.

Visit BDC's 7 tips for building your cash flow page to get information on boosting your revenues.

Date modified: