In Rudolf Erich Raspe’s The Surprising Adventures of Baron Munchausen (1781), the protagonist quickly finds himself trapped in a swamp. With nobody available to save him, Baron instinctually decides to pull himself to safety by using his own hair as a rope.
Though this tale of individualistic heroism was originally a work of fiction, the moral of this story is what is often believed to be the origin of the phrase “pulling yourself up by your bootstraps.” The idea presented here is that through individual wit, grit, and effort, it is possible to escape adversity on your own.
Naturally, this concept has been attractive to many individuals in the world of business. Though some people consider the concept of willing one’s self to success to be a romanticized myth, the many notable examples of people overcoming tremendous amounts of challenges and actually succeeding ought to be enough to give hope to entrepreneurs of all backgrounds. Bootstrapping a business to success is certainly a unique challenge, but the possibility of doing great things may be well within reach.
What does it mean to “bootstrap” a business?
“Bootstrapping” a business means making the choice to start a new business without any outside capital, investments, loans, or assistance. Bootstrapping a business is something that is attractive to many rising entrepreneurs because of the high potential for reward if everything goes as planned. With a fully bootstrapped business, the owner has rights to all profits and total control of the company.
Any industry or sector that has a potential for reward will also have a potential for risk. Before deciding to bootstrap a business, it is essential to think of all of the pros and cons of each possible decision.
Usually, when bootstrapping a business, it is a good idea to specialize in something very specific. The sole proprietors who are the most successful are the ones who can supply a product or service in a way that is unique from other, already existing, competitors.
This means it is important to have a well-developed understanding of the industry you hope to enter, how your product or service can fulfill an under-supplied need, and how you can make a fundamental difference.
Many of the most successful startups are eventually bought by much larger organizations once they have been able to effectively demonstrate their potential for value. For example, massive organizations such as Microsoft, Google, and Berkshire Hathaway have entire divisions dedicated to acquiring new startups. Many of these organizations were bootstrapped by just one person before being bought out (though these should be considered the exception and not the rule).
How can I get my startup off the ground and running?
If you are wondering how to bootstrap a startup, there are few important things you should keep in mind. Taking the time to begin by clearly defining your goals, your restraints, and your logistical path to success can help you get started in the right direction.
When bootstrapping a business, it is important to realize that though you are the one who will get to enjoy the benefits of everything going as planned, you are also the one who will be held accountable in the event that something goes wrong.
Naturally, the first step to bootstrapping a business is making sure your business will be financially secure even if your revenues are lower than projected.
It is important for new entrepreneurs to be very prudent with all of their expenses. Generally, you should not expect a significant amount of personal income from the very beginning—remember, because you are the one who is personally funding the business, every dollar you spend is one less dollar that you will have. Fortunately, there are many things you can do in the short-term that will cost nothing more than your time and will also help your business expand its reach.
The first thing your business can do is build social media pages (Facebook, Twitter, Instagram, etc.) that have regular posts appealing to your target market.
You may also want to consider pitching stories to local newspapers, magazines, and news outlets to help your business gain access to free press. Going to local trade shows, networking with relevant individuals within your industry, and constantly seeking new ways to pitch your idea are also things you can do to help promote the general recognition of your business.
If you are spending any money on your new business (which you will inevitably need to), it is important to keep track of everything you spend along the way.
Almost everything you spend that is objectively business related will likely be tax deductible. This will effectively decrease your end of year tax burden and make it more possible to maintain a positive bottom line.
What are the most common risks of bootstrap entrepreneurship?
The benefits of bootstrapping a business are immediately apparent. You are the one who will get to enjoy any profits that you make and you are also the individual who will be able to have complete control of the company you’ve created. However, with these benefits, there are inevitably a number of unique risks involved.
The most obvious risk of starting a new business is failing. Most well-developed industries are incredibly competitive and, in fact, it has been claimed that more than 50% of all businesses fail within their first five years of operation.
Existing buyers in the industry will almost always prefer to buy from an organization that is already well-established unless you can provide them with an overwhelming reason to make a change. These reasons can include price benefits, new utility, or general convenience.
Another risk of bootstrapping a business is personal liability. Unlike a corporation, if you are running a sole proprietorship, then all of the financial liability will rest on you. If you are unable to pay back any loans if you do take them out, then your credit score will be affected and will likely take a considerable amount of time to correct. If you are unable to pay back the taxes you have due—something that can be dangerously easy for a sole proprietor to do—then you may even end up facing legal repercussions in the future.
Conclusion
If you have already decided to bootstrap a business, you should not let the stories of past failures intimidate you. Instead, you should learn from these stories and recognize the fact that if you hope to someday succeed, you will have to do things differently than how they’ve been done before.
By putting in the work to have your business recognized by others in the industry, constantly searching for new ways to add value to your clients, and finding a way to distinguish yourself from the competition, bootstrapping your business may be much more possible than you had otherwise imagined.