Here’s a fun fact: The phrase “lift yourself up by your bootstraps” was initially meant to be mocking rather than encouraging. It is impossible to lift yourself up by your bootstraps; you are too big and heavy, and the visual of arms lifting legs is comical.
Still, millions of entrepreneurs every year attempt the bootstrap route, hoping to avoid the weight of investors, debts and other concerns that might slow business growth or interfere with their control. For some, bootstrapping can even bring substantial success.
If you are hoping to bootstrap your brand-new business idea, you will need a plan to raise and organize business funding. Here are a few budgeting tips to keep your bootstrapping
Cut Most Business Costs
When you are funding your business out of your own pocket, you want to keep your expenses as low as possible. While you might have grand machinations for how your corporate empire will eventually function, for now, you want to strip back your business to the barest of bones. Here are a few tricks for reducing costs as much as possible:
Work from home. There’s a reason that the prototypical entrepreneur is working out of their parent’s garage: That’s how so many multi-billionaires today got their start. You don’t need business offices if your workforce includes you and a handful of others.
Hire digital employees. Instead of limiting your workforce to the candidate pool in your area, you should consider going online to find employees. Most young, talented workers are internet-savvy and motivated enough to thrive while working remotely. You can compile an entire virtual team through online job boards like ZipRecruiter, Work From, Working Nomads and more.
Use free tools. There are so many free resources for entrepreneurs, like website builders, chat services, cybersecurity, project management and more. Eventually you might need to upgrade to more robust systems, but in the beginning these free tools will work just fine.
Keep Business and Personal Separate
While you are using your personal savings to fund your business, you don’t want to confuse your business expenses with your persona ones. It is wise to keep your finances completely separate, with different savings and checking accounts for business and private, different payment cards and more. The only link between your two books should be the salary you take from your business — which might be extremely limited during your first few tentative years of operation.
Applying for an employee identification number and establishing a business identity will help both you and the government differentiate between your personal financial situation and that of your business. To start, you might only need to create an LLC, but as your business grows, you might shift into some variety of corporation.
Consider a Zero-based Budget
There are hundreds of business budgeting philosophies, but considering that you are working with extremely limited capital, you might consider operating with a zero-based budget. This method requires you to start from and end with a zero base — which means that all of your business’s available income is immediately dedicated to an expense. While developing your budget, you should allocate all funds so that you aren’t left with any extra cash lying around; then, when your budget period ends, if you have money left over, you need to devote that excess to some business issue, if not immediately then in the next budget period. It is a good idea to make use of a robust budget planning tool to help you track income and expenses and allocate funding appropriately every period.
Of course, your expenses should be well-justified. The benefit of using a zero-based budget is that you are giving your business the benefit of every dollar, which means it has more opportunity for growth than if you leave some dollars behind. If you are wantonly spreading your bootstrapped cash around your business, you probably won’t gain the advantages of this budgeting strategy — but then again, you probably won’t find any budget strategy particularly helpful if you aren’t planning how to properly leverage every cent.
Bootstrapping isn’t easy, and many business leaders doubt that it can be done in this day and age. However, if you stay organized and committed to keep your business above water — and if you throw off any dead weight that might be pulling you down — you might be able to set sail toward success.