Tuesday, 12 May 2020

STARTUP FINANCE- BOOTSTRAPPING



Bootstrapping a startup means starting lean and without the help of outside capital. An individual is said to be bootstrapping when he or she attempts to establish and build a company from personal finances or from the operating revenues of the new company. Compared to using venture capital, bootstrapping can be beneficial, as the entrepreneur is able to maintain control over all decisions.
The major thing to be kept in mind while bootstrapping your startup is to put a cap on overheads (expenses) of the business.The entrepreneur needs to evaluate every expense critically and also has to be a publicity magnet so as to get his/her product or service going in the market.Bootstrapping has many pros, some of them being :
1. Control over direction of the business
2. Ownership of your business.
3. Sense of accomplishment.
4. Being forced to create an effective and efficient business model as the survival of business depends on it.
But as bootstrapping has its pros it also has it cons, some of which are:
1. The entrepreneur has to work really hard as he has to run his/her business with lack of capital, personnel help, expertise, etc..
2. Chances of survival are very thin as there is always a possibility of running out of money.
3. Growth can be stunted due to lack of resources.
4. Also, due to less availability of resources and experienced staff, it may be hard to keep the work organized.
Bootstrapping a startup business can be a romanticized idea. For those who can pull it off, it may be highly rewarding. 

Following are the various methods of bootstrapping :

1.Customer-focused Marketing : Marketing your products can be a huge expense for any business and therefore keeping a sharp focus on your targets is essential to ensure return on your investments. This will mean targeting the right customers for your products and making them know the effectiveness of your product.
2.Creative Branding : As a business with access to limited resources, it becomes a challenging task to creatively use the things at your disposal to make a significant impact in the market. This could be done via social media platforms, that requires flexibility and willingness to take risks.
3.Free or Discounted Resources : Always keep an eye out for free and discounted resources. Don't pay for consulting if you can get advice from a friend, don't pay rent if you can manage through virtual space, etc.. The key to being a successful Startup CEO is to make optimum use of every single penny you have for business.
4.Small Business Grants : Sometimes grants are available if your startup is focusing on solving important problems like healthcare, education, etc..
5.Venture Debt : Similar to bank loans, there are loans from Venture debt companies. These firms provide debt on terms similar to credit card debts.

Some of the companies that succeeded with bootstrapping are Dell computers, Oracle Corp., SAP, Coca-cola Co.. Bootstrapping continues to be an attractive option for the startup entrepreneurs. It can bring a lot of benefits to the business, just one has to be aware of its detriments too.

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