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The Start Up Business’s Guide to Bootstrapping

It’s not easy out there for UK start ups right now. Sourcing business funding is, frankly, a blinkin’ pain – especially for those hoping for conventional funding from their bank. Entrepreneurship is no easy road even when the banks are open for business, but in these tough times, aspiring business owners must work doubly hard to find the funding to get their baby off the ground.

There are plenty of options out there, but none of them are a saunter through the park. Business funding is now available online from Everline, through online crowd funding platforms like Kickstarter or can even be sourced from an angel investor. These routes are not suitable for all businesses, B2B start ups typically fare poorly in crowd funding websites, while angel investors are not always ready to take a leap on an ‘out there’, creative project. If you’re out in the financial cold, but are still passionate about your business, there’s really only one thing for it…Bootstrapping.

What is bootstrapping?

Bootstrapping is a general term referring to doing, well almost anything, yourself without assistance from outside sources. You’ve heard of pulling yourself up by the bootstraps, well now it’s time to take a good hard look at your personal resources and make it happen in business.

Within a start up business, bootstrapping really is an all or nothing approach. It involves putting your own assets into your business – so you really have to be sure that you’ll see a return. However, it’s also a very good benchmark – after all, if you’re not prepared to risk your own finance on your start up, why should an investor? If you’re not confident about what you’re doing, maybe you should stick to the day job…

How to bootstrap

Most entrepreneurs ease their way into this solution, taking the time to evaluate the risks and gradually putting more and more into the enterprise as success becomes increasingly likely. This gives you freedom which straightforward investment simply doesn’t. It also gives you complete control over the initial development of your business – without the interference of investors. Many business owners start by simply ‘financing’ with their own time. Moonlighting on evenings and weekends to grow their new business. This is very hard work, but it ensures there is money coming in, and you’re not risking your future on a pipe dream.

The big steps…

Once success looks close and the day job becomes unsustainable, many entrepreneurs quit and start to think about putting their own finance into the business. Some will remortgage houses, sell cars and max out credit cards to get the business ball rolling, others will approach relatives to find finance.

An interesting idea

One interesting way to free up some capital is to employ staff in return for equity or deferred payment. If your offering is exciting enough to attract employees tempted by this set-up, you’re likely onto a winner. It ensures you team work harder for you than any other staff anywhere else, and it keeps costs down too – what’s not to love?

Know your assets

Of course, the resources available to each bootstrapping start up business will vary considerably from entrepreneur to entrepreneur and this finance really is all about doing it yourself. So look at what you have, and don’t just think in terms of capital, take a really close look at your assets – then focus on turning them into a way to boost your business.

Very good luck, start ups!

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Be the first to comment - What do you think?  Posted by Cash Flow Mantra - January 31, 2014 at 4:41 pm

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Business Is Starting Off

December was so busy that I didn’t write a single post for this blog emphasizing the fact that it really is a hobby for me and when life gets busy, the hobbies have to take a back seat.

Why was it so busy?  Well, things finally got moving on the legal front with purchasing a business and lots of things had to be done before my wife, family, and me left on vacation from December 19th to the 30th.  We hustled for the two weeks before leaving and could do absolutely nothing while away due to lack of internet access.  Now we are continuing to finalize things and hope to have things in order and running smoothly over the next few weeks.

Items we have had to deal with:

  • Negotiating and dealing with bank on the final loan documents through the lawyer.  Hopefully these will be signed in the next day or two despite having hoped for 1/2.
  • Finalizing the LLC Operating Agreement.  Got final draft yesterday and running through the few members.  Should not be a problem.
  • Getting Federal and State Tax ID numbers.  This is done along with the certificate to collect sales tax.  Now we just need to go through the process of filing at the end of each month.
  • Working on getting health insurance for employees.  Somewhat of a cluster.  Getting short term monthly policies while working out the details of a more permanent solution.  The insurance broker was a little slow in getting it together.
  • Getting leases for production equipment.  This was a little tough given the circumstances.  We have the majority of equipment, but no official lease yet.  In process but more of a formality.
  • Meet tomorrow to go through payroll process.  And the good news is we will collect enough money to meet payroll this week.
  • Getting credit card machine and ability to run cards on site and direct deposit.
  • Host of other little decisions involving vendors, credit apps, website, etc.

Needless to say, it has been quite busy.  The polar vortex and foot of snow has slowed some things down, but all should work out by the end of the week when the weather will warm up.  Obviously, I will know a lot more by the end of the month and have a real good sense of business at the end of the first quarter.

The good news is that I suspect it will ultimately be worth it, but I still want to maintain a healthy skepticism.

Bottom line for me is:  No time for new year’s resolutions, I have a business to run.

10 comments - What do you think?  Posted by Cash Flow Mantra - January 7, 2014 at 11:28 am

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Increased Health Insurance Premiums

I just finished the open enrollment process at work.  I have been putting it off because I know there have been lots of problems with health insurance as a result of all the changes brought about by Obamacare.  I am incredibly thankful to have a job and have health insurance with it, but my take home pay will definitely be going down as a result of everything.  So, my wife and I will have to look carefully at the budget and try to decrease our spending levels.

As a result, less waitresses will be getting tips since we will have to eat out less and eat at home more.  We have been doing some of this since I broke my arm and couldn’t work for a month anyway, but we will intentionally refocus our efforts to cut costs.

Health Insurance Premiums Going UP

Thankfully, health insurance isn’t the only line item in our budget, but we are seeing an incredible increase in the cost for 2014 compared to 2013.  Our out of pocket costs will be going up by 18.2% in 2014!  And that is after my employer is supporting a 7.5% increase!

That means that our family health insurance premiums for 2014 are increasing by 25.7%!!!

Ouch and double ouch.

Hopefully no other items in the budget go up by that much in 2014.  If gasoline, which is currently at $3.25 per gallon where I live, the cost would be $4.08 per gallon.  I think I might have seen prices about that during the summer so it is entirely possible.

What if food were to go up by that much?  Then a gallon of milk would be approaching $4 per gallon which could conceivably happen.  Dang, I am getting a little depressed.  I guess the budget will have to be squeezed quite a bit in 2014 in order to withstand the potential price hikes.

I haven’t set goals for 2014 yet, but I have mentally been thinking that I would like to shave expenses by about 5% next year.  This would be through a combination of spending less on discretionary items and avoiding additional debt so that as a few debts get paid off, the costs remain eliminated from overall spending.

I plan on sitting down at the end of the year, seeing what the expenses are and then cutting from there.  I have a feeling that the costs for health insurance are only going to get worse for the next few years.

 

So, what impact has Obamacare had on you?

 

 

 

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8 comments - What do you think?  Posted by Cash Flow Mantra - November 23, 2013 at 3:08 pm

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