Seek cash from family and friends.
Don’t underestimate the funding power of your inner circle when looking for alternative ways to kick off your startup. Depending on your lineage, your professional network and your list of friends, you can possibly raise enough operating cash. “Family and friends are typically more likely to fund an entrepreneur’s idea because they want him or her to succeed,” says Jason Abaluck, an Assistant Professor of Economics at Yale School of Management.
Tap into your personal savings.
Want others to show you some financial love by helping propel your business? Of course, the answer is “yes.” So, why don’t you start by using part of your own nest egg? Some of the retirement schemes out there will allow you to borrow money from your own accounts at reduced rates.
Sell equity stakes to investors.
Inviting other investors to buy shares in your startup is another effective bootstrapping strategy. The way it works is: you sell equity stakes, or shares, of your company to investors in exchange for cash. You will lose some ownership in your company, but you avoid the often stratospheric interest rate charged by banks that could drag your revenue margins down.
Reduce operating expenses.
Bootstrapping doesn’t simply focus on getting money from non-lending sources. It also entails an effective use of the resources you already have. Start by reducing operating expenses like rent, office supplies, utilities and materials expense. Pay attention also to personnel cost, and hire as many interns as you can.
Become a jack-of-all-trades
Keeping with the same tactic of reducing operating costs, try to be a jack-of-all-trades. Wear as many hats as possible in your new business. For example, you can be the chief executive officer, the head of operations and the purchasing manager if needed.
Bootstrapping is an art and a science—and you should treat it as such. It is an art that you, as a startup founder, need to polish, making sure you cultivate the appropriate ties with key stakeholders that will help your business grow.
Bootstrapping is also a science in the sense that you still need to manage your business by the numbers, ensuring that your operation generates sufficient revenue to cover your financing costs and eke out a reasonable return on investment. Money issues can be the bane of your business – whether you have too little to successfully operate or grow it, or too much from the wrong people or institution. Research your options carefully and tread strategically toward the best combination of options for you and your business.
Dr. Emad Rahim is an award winning author, educator, community leader and entrepreneur. He co-founded two startups, a consulting firm and a nonprofit trade association in Upstate NY. He is the appointed Endowed Entrepreneur-in-Residence at Oklahoma State University and serves as a Visiting Scholar at Rutgers University. He is also the CLO of Global i365 LLC and was the former Business Dean at Colorado Technical University. He lives in Chicago, loves coffee, considers himself to be a foodie and is passionate with this thing called entrepreneurship.
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