Starting your own business can be a daunting challenge, particularly when cash is limited and other resources are stretched to the max. Most businesses are started on a shoestring budget making anyone who has started a business on this basis adept at bootstrapping, or in layman’s terms stretching resources, both financial and otherwise as far as possible.
But bootstrapping isn’t limited to the start-up stage. It’s valid at any stage of a business’ growth.
Bootstrapping is one of most effective and inexpensive ways to ensure a business’ positive cash flow. It means less money has to be borrowed and interest costs are reduced.
Make the most of trade credit
A great example of bootstrapping is the use of trade credit to maximise your financial resources over the short term.
Suppliers traditionally extend credit to their regular customers for 30, 60 or 90 days, without charging interest, dependent on the industry and nature of business.
However, when you first start your business, suppliers may well require payment on a COD basis (cash on delivery) for each order until such time that the supplier has established that you are able to honour your financial commitments and that you are a prompt payer.
While this is a fairly normal practice, in order to raise money during start-up, a fledgling company will benefit from negotiating trade credit facilities with its suppliers. One of the many things that will help you in these negotiations is having a written financial plan.
Manage your finances properly
Another key aspect of bootstrapping is managing the finances of the company effectively. For both of these it is advisable to use an experienced financial executive that has experience in a variety of industries over a number of years.
Bootstrap financing really begins and ends with attention to careful management of your financial resources. Be aware of what you spend and keep your overheads low.
By definition, bootstrappers have a lot of responsibility and a lot on their plate; there are many variables being juggled at once. The best-of-the-best keep an uncanny sense of calm amidst the surrounding chaos by keeping things in perspective.
This way, they can execute on many important tasks without compromising their creativity, enthusiasm, and ability to inspire others.
As an entrepreneur wears many hats, there are simply not enough hours in the day to get everything done. Especially when you’re bootstrapping and finances are tight, time is vitally important.
Most successful entrepreneurs wake up early in the morning with excitement and dedication but don’t have the necessary skills in the financial department to turn that dedication into profit effectively.
There are a handful of companies out there that are able to support these businesses without depleting the budget by offering a part time or interim solution that suit the budget yet give access to experienced and highly qualified financial experts.
Just remember, in the financial realm, sound strategy, correct reporting and a grasp of the business cash flows are critical to the success of the business.