The Cash Flow Blog

That’s how bootstrapping was characterized in this post from The Wall Street Journal Small Business website — simply, doing more with less.  It’s a fair characterization.

Bootstrapping is self-funding your business.  Putting off the temptation to borrow money or take on investors.  It’s the old fashioned way to grow a business — offer something for sale, sell it, and use the money to fund offering more stuff, etc. Wash. Rinse. Repeat.

Bootstrapping is a common and legitimate means of business growth.  It’s how I grew my business.

There are two things to point out about bootstrapping that’s not often considered:

1. Bootstrapping doesn’t mean you have to stay small or a self-proprietor.  Bootstrappers can grow substantial businesses, employing many people and making lots of money — profitably.
2. Self-funding your business venture with your retirement plan or credit cards is risky at best.

The second point is the one I’d like to drive home in this post.

Bootstrapping is attractive for many reasons, not the least of which is limited access to money and desire to retain control over your business.  What results is many people tap into their retirement plan, savings, and available credit to fund their dream.  The problem is when the dream becomes a nightmare of unrealized expectations and underperforming cash flow — with more money going out than coming in to cover expenses.

Obviously, this is a greater topic of discussion than I’ll give in in this post.  But one thing I’d like to touch on now and elaborate thoughts on late is if there’s a fault of Bootstrapping it’s that it’s too easy to move forward without a well thought plan.  A benefit of outside investors and commercial lending is you have to explain things to others who vet your idea.

Bootstrapping is often the more risky venture because it’s too  easy for too many people.  Being in total control of what, why, how, and when you grow may be the rub.

Access to your money is easy, maybe too easy when it comes to bootstrapping.  Be cautious.  Find someone to vet your plans and ask the tough questions about how you’re going to make it month to month.  Understand how and when you’ll be cash flow positive.  And be sure you know how and when you’ll repay the money you accessed to fund your business.

The point of this post isn’t to say bootstrapping is a bad thing — it’s not.  The point is to remember to vet your ideas and plans when bootstrapping to reduce the risk of self-funding.

It’s something to consider.  What say you?

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