Starting a business is easier if plenty of money is available. Fortunately, having a lot of money isn’t a requirement to start an Internet business. If you don’t have access to megabucks, you can always bootstrap your new business. (The term comes from the idea of pulling yourself up by your own bootstraps or making your own way.)
In the case of financing your entrepreneurial dream, bootstrapping is a matter of making a little money go a long way.
Making the leap to the bootstrapping lifestyle
One of the first rules of bootstrapping is to hang on to other sources of income for as long as possible. In other words, keep your day job! You might have to design your website during lunch breaks or work past midnight to prepare customer orders for shipping. Although keeping a regular job while starting a business can mean a grueling schedule, it provides you with much-needed financial security in the early stages of building your company.
Try something between maintaining a full-time job and starting a business. Many entrepreneurs worked part-time jobs at night so that they could dedicate them- selves to their new businesses during the day.
If you’re the all-or-nothing type, perhaps you want to throw yourself completely into the business. Or maybe you’re con dent enough in your idea that you just know success (cash!) will materialize. However, you should still plan for alternative sources of income. Look for freelance work, short-term consulting jobs, or whatever else it takes to keep money coming in while building your business.
Saving money to make money
Making sure that cash is coming into your business is only your first step. Learn- ing to conserve your cash is the second rule of bootstrapping. Controlling the out ow of money, or how that money is used, is quite important.
Here are some ways that any good bootstrapper can conserve cash:
Spend only when absolutely necessary, and then buy on the cheap. Rather than buy brand-new o ce furniture, for example, nd what you need by shopping garage sales, thrift stores, and eBay.
Create a financial plan that helps you track income, expenses, and projected sales. By monitoring the money you have coming in and going out every day, you’re less likely to get into trouble. Book 2 shows you how to establish this type of budget and set up your accounting procedures.
Use other people’s money.
Rather than borrow money from banks or investors, “borrow” money from your suppliers and customers. You can negotiate terms with vendors that allow you to pay for supplies 30, 60, or 90 days out (in other words, after you receive them). Then ask customers to pay for your product or services up front or in net 15 days. This strategy lets you use your customer’s money, rather than cash out of your pocket, to pay your expenses.
Sacrifice for the business.
The cash coming into your business should be just that — money for your business. If you’re using revenues to support your personal lifestyle, the business doesn’t stand a chance. Bootstrappers commonly forfeit luxuries and even downgrade their living circumstances while growing a company. Could you live in a smaller house for a while or drive a less expensive car?
Inspire, don’t hire.
The early stages of building your company can be overwhelming, with lots of hats for you to wear. Rather than hire full-time employees, inspire others to work with you gratis (for free). Not everyone wants or needs immediate compensation, so sell people on your skills as a leader and get them excited about where your company is headed. College interns are a good source of free or inexpensive labor for your business. When the economy is weak and jobs are scarce, even out-of-work profession-
College interns are a good source of free or inexpensive labor for your business. When the economy is weak and jobs are scarce, even out-of-work professionals are willing to accept internships in an effort to improve or expand their marketable skills. The promise of a job (after you’re on more stable financial ground) may be enough to get someone working 5 or 6 hours a week right now. Some individuals are also willing to work for free, in return for a recommendation from your company. For example, a lot of people design complementary websites in exchange for using those websites as client referrals. By seeking out this type of synergistic swap, you can avoid hiring employees in the beginning.
Some individuals are also willing to work for free, in return for a recommendation from your company. For example, a lot of people design complementary websites in exchange for using those websites as client referrals. By seeking out this type of synergistic swap, you can avoid hiring employees in the beginning.
Find a mentor.
Hiring a consultant can break the bank before you even open your doors for business. Mentoring is an alternative way to get advice from established professionals that costs you absolutely nothing. These experts probably won’t do the work for you, but they can advise you on critical decisions, introduce you to other professionals and suppliers, and sometimes even help you and your first customers. People are generous with their time, especially when you ask them to share their personal expertise with you.
In addition to locating experts or finding cash, you need to identify other means of getting what you need. Check out these resourceful alternatives to help you jump- start your online business:
Barter and trade
One way to keep a lid on your spending and still acquire supplies and services is to trade with other companies. Rather than pay a professional to write copy for your web pages, for example, barter with a writer for her service. Barter, or trade, is a method of paying for products or services without using cash. When you barter, you exchange your services or products for those of another person (or company).
This method of conducting business has become so popular that you can now join formal barter- exchange organizations, such as Southern Barter Exchange. Membership is usually free. You can nd barter organizations online that serve your specific state or region or nd one that has a national reach.
The Internal Revenue Service (IRS) doesn’t mind bartering, as long as you record on your taxes whatever you receive as income. Any transaction involving the exchange of a product or service that doesn’t involve cash changing hands is considered “barter” by the IRS. The IRS has guidelines and reporting requirements for individuals and formal barter exchanges. For example, barter amounts should appear as income for both parties when you complete Form 1099. You can read the complete guidelines for how to report bartering as income on the IRS website (www.irs.gov).
Try out trial versions before you buy.
When you stock up on necessary software for your online business, don’t rush to buy expensive of -the-shelf products, which can cost several hundred dollars. Instead, use free demonstration (demo) versions that are good for a specific period. Eventually, these free trials run out of time, so budget accordingly if you anticipate needing to make a more permanent software purchase.
Most of the marketing tools have a trial period of 14 through 30 days which is enough to check and decide if the tool works for you and fits your business.
Use free tools.
Lots of free business-related software (called freeware or open-source software) and free or almost-free applications are accessible over the Internet. Independent software developers and small companies typically o er software applications, graphics, games, and developer tools at no cost to you, and with no strings attached.
Other apps cost just a few dollars. And even if you don’t find a recognizable brand-name product, you might find one that has similar features. Be aware that freeware and free business apps may have no technical support or very limited support. If you are using open-source software, there is usually a community of developers on forums who help answer questions, but it is not support in the traditional sense of the term.
If you find a software solution you really like, but there’s not a free version publicly available, consider contacting the company directly. Sometimes you can get a 2-week or 30-day trial with all features enabled if you ask for it!
Bellow are several tools you can use instead of paying hundreds of dollars for big names. Once you make enough money you may purchase the exact software you need, Microsoft Office Suite, Adobe Photoshop etc.
- Microsoft Office – LibreOffice, Apache Office, Google Docs, Online Office from Microsoft (is inside your outlook.com account)
- Microsoft Outlook – Mozilla Thunderbird
- Adobe Photoshop – GIMP
If you need suggestions on free software feel free to contact us. We are willing to help everyone as we use around 75% of open source tools in our agency.
Although bootstrapping may seem painful, consider the alternative of bringing in other investors or borrowing money. Is it worth the sacrifice? You may also want to check the hub staff bootstrapping story – Why bootstrapping our startup was one of the best decisions we ever made