Bootstrapping has 2 sides. It is a strategy of taking maximum advantage of available resources. This is a particularly relevant strategy when you are starting a business. For example, doing business from your own home, using income from employment, and using personal savings for starting your business, and having your family and friends help in your company for free. Bootstrapping is also a means to cut costs. This is especially relevant if you incur high costs or have limited financial room. For example, sharing business space with other entrepreneurs. Or borrow or rent business assets such as machines, cars, and tools instead of buying them. Or if you buy, buy second-hand instead of new.
Benefits of bootstrappingBootstrapping has a number of advantages:
- It prevents high debts for you as a (young) company and limits your interest costs.
- It ensures that you retain control over your company and shares because you do not need external financing.
- It can stimulate your business competences, because you enter into strategic relationships and because you gain experience with new sides of entrepreneurship.
- Bootstrapping can increase your creditworthiness, because you develop your business debt-free.
Disadvantages of bootstrappingBootstrapping also carries risks. For example, how long you go on bootstrapping has consequences for the life expectancy of your company. The longer you use bootstrapping methods to finance your venture, the smaller the chances of survival become. This has several causes.
- Long-term bootstrapping ensures that your company cannot make large investments. This can prevent you from reacting to opportunities that arise, or you cannot react in time.
- Prolonged bootstrapping makes it more difficult to be resilient if difficult times or unforeseen circumstances arise. That is because you can only use most bootstrapping tools a few times or for a certain amount of time.
- Sometimes you have to be able to speed up your business. For example, to seize an opportunity or to remedy a threat. You can achieve that with investments or an increase in business costs. For example, to hire personnel.
Do you want to apply bootstrapping yourself? Then use the Bootstrapping Checklist (in Dutch) and discover what your options are.
More success with your financing application
Are you considering financing? With the financing flow chart (in Dutch) you select a financing form in advance, so that you contact a financier that suits you. Review the criteria of financiers before submitting an application. If necessary, adjust your business operations beforehand. Consider alternatives if you score less on a criterion.
Help with financing
Enlisting help increases your chances of financing. With the right advisor and a good financial basis, a 'yes' to your financing application is within reach. These advisors (in Dutch) will help you on your way.