When starting up a new business, it takes cash to purchase the necessities. You need a website, office space and equipment, and many other expenses, depending on the company you are starting. But where do those funds come from?
According to a study led by Business.org, 89% of small businesses have used their personal debt to fund their business. “These debts range from $5,000 to over $100,000, and 38 percent of entrepreneurs report that their personal credit score has gone down since starting a business,” states Business.org.
These high debt levels are attributed to the inability to secure startup financing, and women have a more challenging time securing new business financing. According to nerdwallet.com, “businesses run by women are less likely to be approved for a small-business loan than those run by men, according to the Federal Reserve.”
Nerdwallet.com has also listed small business loan options for you to explore. The alternative to seeking outside funding for your business is to bootstrap your way.
Here are six ways you can bootstrap your business:
1. Focus on getting paying clients in the door first
The biggest mistake startup businesses make is by focusing on activities that are not revenue generating. You need to create sales from the beginning to get money in the door, so focus on sales and getting paying customers right from the start.
2. Prove your offer
Serving several paying clients and having clients happy with your offer is a way of proving or validating your offer. This is an essential step that you don’t want to miss because you will bankrupt your business if you are trying to sell an offer that people don’t need.
3. Invest your profits into building the business
You’re ready to invest in websites and other things that will support your business when you have a proven offer and paying clients. You use the profit you are earning each month to reinvest into the company to expand on marketing, advertising, and other services that will increase the business’s visibility and get more paying clients in the door.
4. Hire a team when you have 3-6 months of their salary in cash reserves
Don’t rush to hire a team on payroll. You can work with many consultants until you are ready to have a team on payroll. Often business owners feel they need their team right away, but you don’t want to rush that commitment.
5. Don’t try to do everything at once
You don’t need to have your marketing perfect, complicated sales funnels set up or fancy websites. You need a proven offer that sells, and then you can grow and scale your business on a solid financial foundation.
6. Don’t chase shiny objects
The internet is filled with business coaches and consultants who want your money and will offer you unrealistic promises of overnight success to get it. Resist the temptation and build your business one step at a time. Your wallet will thank you.
The bottom line is that there are advantages and disadvantages to financing your business, whether through outside sources or bootstrapping. Regardless of your choice, it would help if you were comfortable with your chosen method. However, bootstrapping a business and not taking external funding allows you to be in financial control of your business and not give up any operational control.
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