Bootstrapping a Business

Friday, May 11, 2007 at 7:53pm by Site Administrator

Diagram - transition of business financial statesBootstrapping does not mean that you can never accept capital/ loans. It simply means that if you don’t have what’s necessary at present (subscribers, revenue, product) to get a loan or investment capital, that you bootstrap your way to that level first. Some entrepreneurs start off bootstrapping, prove a certain level of success or show the solid potential of their startup, then have venture capitalists making offers. So being financed can and often is a state in the path from nothing to success. Whether you start at a bootstrapped state or a financial state, you can make it to the success state. However, call me biased, I believe that bootstrappers stand a better chance of success because of raw desire and the need to succeed. It may be bumpy along the bootstrapped path, and many mistakes made. However, it’s those mistakes made early that quickly teach you how not to do something. If you start with a whole whack of capital, it’s easy to mask the mistakes, thinking that having money will get you to the finish line sooner. Abraham Maslow’s Hierarchy of Needs would suggest that entrepreneurs that have lots of capital have no overwhelming desire to move out of their established comfort zone. It’s probably similar to the reason that most salaried employees will stay that way. Those who do break out of that thinking are often the innovators of society. Or at least innovative on there way to success. One example is Canadian Kyle MacDonald, who wanted a house for himself. He started with a red paper clip, then kept trading up and up for increasingly more valuable items. Between his website, One Red Paperclip (on free host Blogspot), word of mouth, and the occasional classifed newspaper ad, he always found someone to trade what he had at present for something "better", in his estimation. Exactly one year to the day that he started, he had his house – albeit in the bitterly cold Canadian province of Saskatchewan, but he’s happy. Now imagine if you could apply Kyle’s principle to bootstrap a business. Start with very little, maybe a service you can perform, and offer it for something else – maybe equipment, furniture, services or even money. Reinvest or use whatever you get, and refine/ improve your product or service. Repeat the process. The accumulation may be slow, but a controlled process is necessary if you don’t have loads of capital. And these days, there are hundreds of free web applications for entrepreneurs and freelancers, to help you get started.

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