What is bootstrapping in business? How to self-fund

Lots of people start by bootstrapping their business without realising. Funding your business off your own back on a shoestring budget, building it from the ground up, and growing it with creative ideas – these are all aspects of bootstrapping. 

But it’s more than a last resort for cash-strapped business owners – it’s a method of operating that some of the biggest companies in the world like Amazon, Microsoft, and Meta all started out with. 

So what is bootstrapping in business? And what are the lessons you’ll learn that could make you a better business owner? Read on to find out. 

What is bootstrapping? 

When you start a business from scratch with very little money or outside support, you’re bootstrapping. It’s a way of organically growing your business that typically relies on self-funding. 

At first, it might seem like all small businesses start out this way. But to truly bootstrap your business, you would avoid most kinds of short or long-term debts like: 

• business loans 
• credit cards 
• external funding

The essence of bootstrapping your business is doing more with less. Being as efficient and effective as you can be with your spending, to keep growing your business. 

An entrepreneur looking to bootstrap their business would usually fund it with their personal savings. And it’s common to maintain a full-time job while treating the business as a side hustle. Once it matures and there’s cash coming into the business, you’d use your profits to reinvest. 

There are definitely drawbacks to bootstrapping – it’s a slow way of growing your business that requires lots of effort and financial discipline. But it’s a strategy born out of necessity, that can help people start a business from scratch regardless of how much money they have.  

But that doesn’t mean there aren’t unique benefits to building your business this way. 

Five benefits of bootstrapping in business 

Whether you’re just starting out with your business or looking for a way to work more efficiently, here are five benefits to bootstrapping your business.

1. Full ownership of your business

Because you fund the business yourself, you aren’t selling off parts of it for investment. This means the business is 100 per cent yours and you’ll receive all the benefits from it. 

Full ownership also means complete control over your business. The more external factors involved in your business, the more difficult it is to do things quickly. When you’re the sole owner, you can make decisions quickly without having to seek the approval of investors or stakeholders. 

2. Financial independence

By not taking on debt at the beginning of your business, it means that you have the freedom to do what you want with your earnings, rather than paying off a loan, for example. 

So while it may be more difficult to grow in the early stages of your business, having financial independence further down the line could help you invest more in your business in the future. 

3. Increased resilience 

You only need to look back at the last few years to see how volatile the business landscape can be. With Covid-19 and the cost of living crisis causing serious financial difficulties for most businesses, many have looked to make their business more resilient. 

Bootstrapped businesses are naturally more resilient because they usually have fewer debts and aren’t loaded with loan repayments and interest. And the people who run them are used to working with fewer resources, so can more easily adapt to a challenging market.  

4. Attractive to investors

While this may seem counterintuitive, working with minimal resources and still managing to run a successful business is attractive to investors. Seeing that your business can grow organically with no investment shows that you’re sensible with earnings and know how to reinvest in your business. 

So while you’re not currently looking for outside investment, it’s good to know you should be a good investment if the time comes. 

5. Personal satisfaction and development 

Bootstrapping your business is challenging but that’s what makes success so satisfying. When your business grows, it’s a direct result of your hard work and commitment. 

And bootstrapping your business also helps you develop skills that’ll aid you as your business grows. Bootstrapping makes you more resourceful, disciplined, and efficient as a business owner and is a great foundation for success. 

How to bootstrap your business 

Every business is different and there isn’t one way to bootstrap your business. But there are aspects of your approach that should help you get off to a good start: 

• be lean with your expenses – it can be tempting to start strong with your spending to get your business off the ground but you should start as you mean to go on. Try keeping you initial spending low and focus on the essential payments 
• trade and negotiate – agreeing favourable payment terms with your suppliers should make sure you’re getting the best possible price. But don’t underestimate trading services – think of creative ways you can repay someone other than cash. Could your accounting firm offer free work in exchange for support from a marketing firm, for example
• free marketing – get creative in how you market your business. While paid advertising has its merits, there are many ways to engage with potential customers online and in person that are totally free 
• prioritise cash flow – a steady cash flow is important for every business but when you’re bootstrapping, it’s crucial. Consider offering incentives for early payments to improve your short-term cash flow
• reinvest your profits – while you should try and avoid big spending early on, reinvesting your business’s profits is a sustainable way to grow. Figuring out your businesses’ working capital is a great way to understand what your financial headroom is

More useful guides for small business owners

• Sole trader vs limited company: what’s the difference?
• Best business banks accounts compared
• How to do a self employed tax return
• What is professional indemnity insurance?

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