According to www.entrepreneur.com, 82% of the businesses fail because of problems related to cash flow. Nowadays, businesses look for various methods of funding their businesses, and bootstrapping is something that they prefer. In the present business world, bootstrapping is referred to starting a new business with no money or comparatively little money. Bootstrapping basically means getting the startup ready without taking any help from angel investors or venture capitalists. Bootstrapping is making use of the money that you have or the money that you are earning from your customers and investing it into the startup again. It has been observed that only a few startups obtain funding from the venture capital firms currently and hence bootstrapping is becoming more and more common.
Before you decide to bootstrap, you need to have a proper idea about the various advantages as well as disadvantages that are associated with bootstrapping the startup.
Advantage: You are your own boss
There is no denying the fact that this is probably the most important as well as the biggest advantage of bootstrapping the startup venture. When you are self-funding the business, you do not have to answer the questions that others have for you. You will be liable to answer only to yourself. You will be a free bird and you can do anything as per your wishes with your startup’s direction.
If you are wondering why you are free, you need to know that when your startup is funded through angel investors and venture capitalists, you have to remember that they are going to have something to say. They have their interests and goals and they will also put certain parameters on how you are going to conduct your business. If you see that the interest that you have, and they have, are not compatible, chances are that you will get into trouble.
Disadvantage: Huge personal risk
Entrepreneurs who are using their personal assets or money in order to get the startup going, actually incur the financial risk, especially if there are chances of the business failing. When you decide to bootstrap, the entire business venture is dependent on you. If you are making a profit, it is undoubtedly going to be great. If due to any reason, you do not gain a profit, you can lose almost everything.
For most of the startup owners, they forgo salaries when they have just started. However, if they fail, they will have to spend time without any income. Huge financial risks are associated with bootstrapping and hence the business owners should always have a backup plan in case if their business suffers a failure. If you are taking loans from traditional institutions, you can visit the reputed website of https://www.libertylending.com/ to gain more information on clearing all your debt.
Advantage: You can pick your focus
Since you are your own boss, you can pick up the direction of your business. This is something that is not possible when you tend to obtain funding from somewhere else. When you are self-funding your business, you will not have to listen to the outside influencers or investors. You have the right to steering your business in any direction, as per your choice.
You do not have to get anxious and worried about taking the business towards the direction that someone else has advised you. Bootstrapping allows you to take a creative and complete control of your direction and you are not going to get disturbed by the others or no one else is going to navigate your business according to their directions.
Disadvantage: Networking issues
The investors, as well as venture capitalists, are connected in a great manner. However, when you decide to bootstrap the startup, chances are that you are missing out on creating connections with influential people. You will also miss out the partnership opportunities, which tend to open up a new market for your business or can work on increasing your brand’s visibility. Additionally, investors give a lot of support and advice to a particular business. Missing out on the expert wisdom is also a huge disadvantage.
Advantage: Maintaining responsibility
As the only investor of your company, you are going to maintain complete responsibility for your business. It has been observed that a person who is in charge of his own company often gives more effort in comparison to someone who is not in complete charge. It is human nature to take care of a certain thing when a person has complete ownership rights over it. You will take more responsibility and work with wisdom when you decide to bootstrap your business.
Disadvantage: Slow growth
Without a capital, your growth is going to be extremely slow. When you are bootstrapping your business, it means that you are going to operate with resources that are not only limited but also little. This is responsible for the slow growth of your company. If you consider other funding options like venture capitalists or angel investors, you can be assured that your growth is not going to be slow.
In the case of bootstrapping, you can invest in other resources only when money starts coming. However, this is a long process and no startup owner can say as to when they are going to receive money back from their business. Since this is going to be extremely slow, you have to adjust the overall projections.
Advantage: Superior products are created
When you have a low funding, you will be more motivated when you receive positive feedback from your customers. You cannot deny the fact that your customers are your inspiration and this is a great benefit that is associated with bootstrapping. Even though you do not have millions of dollars behind you, it is hardly going to matter if your customers are with you.
A positive feedback from your customer will allow you to build superior products, which will allow the customer to start paying. It is crucial that you work extremely fast on a new product and ensure that it is of the best possible quality.
Bootstrapping is undoubtedly the best way of allowing your business to take off and pushing the business towards success. Even though you will not have a lot of capital, but the most important thing that you are going to have is the freedom to make your own decisions. Therefore, you can be assured that bootstrapping is the perfect manner of paving your path through the tough world of business.