In this current economic climate starting a business using the “bootstrap” method minimizes your personal financial risk to outside sources. Bootstrapping is a means of financing a start-up business through creative acquisition and use of resources without raising equity from traditional sources or borrowing money from a bank. In short, “bootstrapping” means starting a new business without start-up capital; it is a self-sustaining process that proceeds on its own.
Objectively evaluating your current financial position will help you determine how to proceed with your business idea. Many people will need to get some financial management training and work on clearing out unnecessary debt before launching their business. Others will benefit from dedicating themselves to becoming frugal minimalists by scrutinizing expenditures. Building this foundation for yourself will help you establish a core value for your business success.
There are lots of ways to get a business up and running while staying within your financial parameters. Here are a few.
• Start your business out of your home. Rent is one of the biggest expenses for any business. If you can, start your business in your home office, basement, or garage.
• Start with what you have. Use what you have around the house first. Consider borrowing from a friend, renting or buying used equipment when you can.
• Learn to barter. Barter everything you possibly can. Think outside the box —trade services with other entrepreneurs
• Start small. You don’t need a huge start-up marketing campaign. Start small and ever-so-slowly work your way up. Keep in mind that a moderate expenditure for an established business can be an outrageous one for a start-up.
• Be creative. One of the keys to keeping start-up costs low is to find affordable and creative ways of doing what you need to get done, rather than just spending cash to hire someone else. Save money by making your own fliers and business cards, instead of getting them professionally designed and printed.
How you maintain your personal finances is a good indicator as to how you will manage your business finances. A good place to start is to develop a good cash flow budget. This is a goal setting tool to help you see the flow of income and expenses over a period of time. It is an estimate of cash coming in and cash flowing out. Monitoring when and how money comes in, and where it goes on what dates, will allow you to save for upcoming months when money may not be as plentiful. Knowing this will help you determine when to purchase equipment and other needed supplies thus keeping you in the black.
Cash flow should be the first priority for every business, so begin this practice in your personal finances to get a feel for doing it in your business. There are many resources available to help you understand this process and effectively implement it in your personal finances.
This link will give you a cash flow worksheet: http://www.entrepreneur.com/formnet/form/483
For a good explanation of cash flow try: http://www.entrepreneur.com/encyclopedia/term/82034.html
Mona Edwards is a program coordinator working with the MERIT Microenterprise Program at the Chemeketa Small Business Development Center. www.sbdc.chemeketa.edu.