Funding - Bootstrapping

February 2, 2023

There are 5 posts in this series:

Bootstrapping means making as much progress with the business as possible using the least amount of time and money, and is the most common strategy for funding the birth of a business. Specifically, founders use personal resources to fund expenses before taking capital from outside investors. Because of this, the business is usually launched in a minimalist way, or with a “Minimum Viable Product” (MVP) that is explained well in the book The Lean Startup by Eric Reis.

Through an MVP, your primary goal is to verify that customers are willing to pay for your product or service as you grow. This entails making a basic version of your product or service and selling it, which will make it easier to raise outside funds in the future. Your initial months of selling will help:

Prove that a market exists for what you offer
Show where the greatest demand exists
Obtain customer feedback to help improve your offering(s)
Improve your understanding of your value proposition and target customer profile
Refine your selling technique
Build a base of customers and word of mouth referrals
Establish a history of business revenues and costs
Improve your efficiency (time & cost)

Once you have validated your concept with an MVP you’ll have many more options available to you to finance the growth of your business, both internally (through generating your own cash flow) and externally (investors will have more confidence in the soundness of your business ideas).

There are a variety of possible approaches to bootstrapping, depending on what you offer. They include one or more of the following:

Moonlighting
Keep your full or part-time job while building your business during your “off” hours
Subcontracting
Use your skills to help larger businesses complete projects. Get paid while learning more about the market, what customers need and value the most, and approaches that other companies use.
Product Placement
Sell your product in a public place, consignment store, café, etc. While you may pay a significant commission on each sale, the total cost may be a lot less than leasing your own space while sales volume is low.
Special Events
Church or school functions, craft fairs, county fairs, etc. provide an opportunity to lease a table or booth at a relatively low cost in an environment which will have heavy traffic. If that traffic includes your target market, this can be a cost effective way to determine if your product or service interests them.
Funding from Friends & Family
Friends and family know you, and may be more willing to take a risk with you than a 3rd party like a bank. However, treat their support just as seriously as you would a bank loan: have a written agreement that clearly spells out how much control they have (or don’t have) over the company, how (and/or when) they will be repaid, and how the agreement can be terminated. And before asking for money, think through how things might go if you are unable to repay them.
Crowdfunding
This is more likely to be successful if you already have a sizable following on social media that you can promote your crowdfunding initiative to, and have already established that your offering appeals strongly to the target market. There is a lot of crowdfunding competition, and your offer (discounts, early access, swag, other benefits, etc.) must be attractive and presented professionally.

The other articles in this series each describe a few of the other funding sources in more detail.

Additional resources you may find helpful include:

To ask questions and/or learn more about funding for your business, register for a “Funding Your Business” workshop in the SCORE workshop calendar or request to meet with a SCORE Mentor (a free service).

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