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How to Bootstrap Your Startup or New Business


Bootstrapping is one of the new buzzwords in business. It means using your own resources and effectively managing your cash flow to internally generate the funds that you need to operate your startup or relatively new business.

Bootstrapping keeps venture capitalists or angel investors from sinking their teeth into your business. When you let them on board, you lose control of a part of your company. You probably don't want that to happen.

Watch your cash flows and make every penny count. That's what bootstrappers do. Here are some tips to help you.

Difficulty: Average
Time Required: Variable

Here's How:

  1. Control Your Costs. Bootstrappers live by the motto, "Make every dollar count." They also make every penny count. Do you really need that fancy new computer? Can you get by for awhile with your old computer? If you can, do. If you can't, still do.

    You don't need to go to an office supply store and buy an "economy" package of rubber bands. Do you know how long 10 packages of 1000 rubber bands each will last you? Probably longer than your business if you don't stop spending money like that. Buy a package of rubber bands and forget it.

  2. Hire part-time or volunteer help. If you are in a university or college town, check with their business college or department. They may have an internship program where they place students, for free, with local businesses just for the experience. You may be able to get free help for your business.

    If you can't get free help, try for part-time help. Lots of people are out of work and would be glad to take a part-time job. You might even be able to find someone to work part-time from home, which would be even cheaper. You don't have to hire full-time workers where things like benefits will be an issue.

  3. Control your accounts receivables. If you extend credit to customers, manage your credit accounts better. Be sure that they are collected on time. Give a cash discount if customers pay their bills within ten days or some period you set. That's an incentive customers will respect. Shorten your billing cycles. Customers will hardly notice.

  4. Don't quit your day job until you're sure you can afford to. I can't emphasize this step enough. I know you want to quit your day job and spend all your time on your business, but don't. Not until you are sure your business can support your lifestyle and your family and itself from a cash flow perspective. Then, quit!

  5. Extend your accounts payable. Your accounts payable are what you owe your suppliers. There is no virtue in paying your bills early. All you do is give your supplier the use of your money when you should have the use of your money. If you have 45 days to pay, take 45 days, unless you get a discount for paying early.

    Ask your suppliers to extend your payment period. Most suppliers will work with you on this, especially during a down economy. If you have 45 days to pay, ask for 60 days. All they can do is say no and many will say yes. This will give you the use of your money longer.

  6. Publicize your business. Tell everyone about your business. Ask your family and friends to refer customers and clients to you. Write a press release and send it to the local newspaper.

    If you have a website, try to get it ranked with the search engines. Use Search Engine Optimization (SEO) to be sure the search engines can find you. If you don't know how to use SEO, tap your local university for an information technology student who needs an internship and can probably SEO your website in their sleep. Having a website doesn't mean that "if you build it, they will come." You have to be sure they know you are there.

  7. Use a home office. If your business is a startup, work from home for awhile. You will be able to take a home office deduction at tax time if you do it properly. You will save a lot of money and you will be able to make sure your business will fly before renting office space.

  8. Team up with another business. You can save a lot of money by sharing office space with another business if you're ready to leave your home office. An existing business might welcome the extra income from rent.

    Talk to friends who own their own businesses. One of them may be very willing to let you use a corner of their office. If they are struggling financially in the recession, they may even partition their office off for you.

  9. Use the barter system as payment. Bartering is exchanging goods and services with other individuals and business owners without the exchange of real money.

    You may provide a service that other business owners or individuals need. Perhaps you can offer that service in return for products or services you need. That is the beauty of bartering though, in the U.S., we've almost forgotten how to use the barter system. The recession is reminding us. Make use of the barter system. Bootstrapping is all about stretching your dollars. Nothing will help you do that like the barter system.

  10. Manage your inventory.If you sell products and not services, reduce the amount of inventory you have in stock. You need enough in stock, but remember that having too much inventory in stock means your cash is tied up in those products. It's also taking up valuable space that you're paying for. Keep your inventory to a bare minimum while not taking the chance of stocking out.

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