Bootstrapping strategies for building successful business has proven to be the bailout as businesses keep crashing every now and then.

One huge secret many business owners have used to survive is called "Bootstrapping". It is A method which has proven to be most effective and inexpensive ways to ensure a business' positive cash flow.

Research revealed that most businesses that have survived the recent economic downturn is as a result bootstrapping strategies the own adopt.

The word "Bootstrapping", however, means starting a business without external help or capital. Such startups fund the development of their company through internal cash flow and are cautious with their expenses. They seek to grow their business through money generated by the business.

In today’s business world people brag about raising huge capital as if that is all to building a huge and successful business. Most young entrepreneurs spend all the time chasing investors with pitches in order to attract capital but end up being demoralized and downgraded by the money bags.

Is raising capital from investors a guarantee for success in business? Frankly, it can help fast track growth but can equally lead to huge waste of funds on strategies that may not yield corresponding returns. The history books are filled with companies who failed despite the huge capital they raised; notable of those is Solyndra (a solar power tech start-up) which filed for bankruptcy in 2011 after raising $1.22bn in venture capital funding.

Many big companies such as Spanx found their way to the top using funds generated by their businesses. Spanx was founded by Sara Blakely at age 27 using her life savings of $5,000 and it has grown to worth billions of dollars without taking a penny from outside investors. Till date, Sara still owns 100% of Spanx.

While raising capital is a big time function of a business owner, most don’t know that they can get that capital internally using methods collectively known as bootstrapping.

TIPS FOR BOOTSTRAPPING YOUR BUSINESS


Bootstrapping Strategies For Building Successful Business
1. STRATEGIC PARTNERSHIPS: Certain aspects of the business can be funded through partnership with firms or individuals with technical know-how or core competency you don’t have. Joint ventures can lower transaction costs by 35% or more through costs sharing and increase the likelihood of profits.

Strategic partnerships can be forged with core staff by urging them to work for equity in the business. This allows the business to manage its cash flow effectively.

2. BUDGETING: The rule of thumb here is to spend according to your budget and not in accordance with your wishes. The importance of cash flow budgeting is very important and this requires enough planning for its implementation to be successful.

Entrepreneurs who start without a plan spend more money. Likewise, those who feel compelled to keep up with the popular media will spend most of their time courting investors. Most investors agree that too much money leads to poor spending decisions and lack of controls.

3. SMALL OFFICE SPACE: What do Apple, Hewlett-Packard, Goggle, Amazon, The Walt Disney Co have in common? They all started in the garage before growing to befitting offices. There is no crime in starting your business from your home. This can eliminate a lot of expenses like rent, electricity bills, sundry office expenses and so on.

You can also start your business in a small office that is within your means. Resist the urge to acquire a huge office space until you have enough funds to do so. If you don’t have enough customers then you have to manage your existing office space.

The money saved off annual rents can be plunged into more pressing needs like strategic marketing and brand building.

4. OPTIMAL BUSINESS MODEL: A business model a plan for the successful operation of a business, identifying sources of revenue, the intended customer base, products, and details of financing. It describes the rationale of how an organization creates, delivers, and captures value, in economic, social, cultural or other contexts. Finding the best model that creates a win-win situation for all stakeholders is part of business strategy.

Popular business models include monthly subscription fees and optional service fees instead of one-time product sales. Another is the use of an e-commerce site, rather than retail, to facilitate product sales seven days a week, around the clock and around the world. Next week, we will discuss business models.

5. ADVANCED ROYALTIES AND DEFERRED PAYMENTS TO SUPPLIERS: Try to retain cash in the business system for as long as possible. Negotiate payments with suppliers and take advantage of discounts, credit facilities and other customized offerings. Don’t be shy to ask to advanced payments from your customers. You can also come up with promos that allow you to get more cash from customers in shorter cycles. This is better than collecting loans from banks.

If your solution has real value, future partners will jump on discounted future royalties, and many vendors and existing partners will understand your cash flow challenges. You may also be able to barter your services to offset theirs. It never hurts to ask.

6. LOW OVERHEADS:
Try to start your business as lean as possible. Keep your expenses very low. You can take advance of staff who work remotely (from their location). Remote startup team members are the norm today and can be very productive with smart phones, video and the high-speed Internet. Office space costs money up front, requires equipment, staffing and travel expenses. With a website, your business can look as big as any competitor.

Overhead expenses such as accounting fees, advertising, insurance, interest, legal fees, labour wages and salaries, rent, repairs, supplies, taxes, telephone bills, travel expenditures, and utilities; need to be effectively managed and reduced to the barest minimum possible.

7. REFERRALS:
Word-of-mouth marketing still remains the cheapest and the best form of marketing. If you keep your customers happy and satisfied they will they others about your products. You should also request for referrals from customers. Companies today are creating incentives to craft a beautiful intertwined loyal and referral program that is working like a sales voodoo.

8. SOCIAL MEDIA MARKETING:
Though social media marketing is relatively cheaper than the conventional media, it is very effective and precise in hitting your target audience. One of the biggest ways to reduce your budget and your risk is to use social media, which essentially is free, to find out whether you have an attractive solution, before you invest your time and limited resources in creating the product or service. Social media is also an invaluable and inexpensive marketing approach, since no one buys a solution they can’t find or don’t know anything about.

9. RESIST TAKING IN INVESTORS:
Once you accept investment capital, you’re no longer the boss and you’re on a path to sell your business or go public. Unless you’re struggling with cash flow or preparing for an exit, accepting outside money makes no sense.

10. DON’T COPY THE MARKET LEADERS:
The leaders in your business endeavour have access to many resources that you don’t. Plenty cash, top talents, world class processes and the brand to attract, build and sustain innovative solutions. They can take on huge risks that will not have much bearing on their balance sheets. Small firms often compete against well-funded corporations with millions of investment capital that can afford to throw money at bad ideas. Don't follow all of their decisions.

Study your market and customers very well to provide cost effective and custom-made solutions that the big competitors can’t afford.

CONCLUSION:
Starting a new business on a limited budget without investor involvement is called bootstrapping, and it’s the only way to go if you don’t want to spend months on the investment pitch preparation and delivery circuit. Also, with bootstrapping, you won’t have the added pressure and risk of an investor boss hanging over your shoulder and second-guessing your every move.

A limited budget can be viewed as your biggest constraint, or as an incentive to do things more creatively. With startups, there is a big premium on creativity and innovation. Big competitors are quick to copy a conventional solution with minimal risk. Let a limited budget be your driver to winning, rather than a curse.

Source: https://www.agvictor.com/2018/09/04/bootstrapping-strategies-for-building-successful-business/