How to Bootstrap your Startup

As a startup company, you must identify alternative means to fund your business if investment opportunities are slim. Here we explain what bootstrapping is and how to bootstrap your startup.

What is Bootstrapping?

What is Bootstrapping?

There is an old saying; “pull yourself up by your bootstraps”. In modern times it means accomplishing something spectacular with little to no help from others. In businesses, “Bootstrapping your startup” refers to financially developing a company by oneself – not having investment and instead self-fund via several different means, which we will discuss later in this insight.

Why startups fail

38% of all startups fail because they run out of money. Within the top 10 reasons for failure, it sits at number one. This is why it is essential to be aware of finances within your startup. Below are some suggestions to help secure your position within the market.

Tips for Bootstrapping

Here we have a few suggestions on increasing the odds of success when bootstrapping your startup.

1. Income vs Outcome
2. Sweat Equity
3. A Minimum Viable Product

Our Bootstrapping top tips!

Income vs Outcome

As previously mentioned, 38% of startups fail due to a lack of money. With this in mind, all startups need to keep an eye on income vs outcome.

Some businesses self-finance, and others use personal debt. However, no matter how you inject funds into the company, spending what you need to buy is critical. 

If you do not need an office to work out of and can instead use an area in your house to work, you will be better for it. The money you would have to have spent on office rent, bills, and transportation, can be spent elsewhere (or not at all), accelerating the business.

Typically, the founder/s of the startup will work other jobs and have the business as a side project until the company can afford to pay them. Even then, the founder/s usually takes a nominal salary to save money.

Understand the operating costs

It’s essential to grasp the operating costs associated with the startup. For example, if we were to calculate all outgoing expenditures; website hosting, equipment cost, software licences, accountancy costs etc.

What would that figure look like?

Then, you can identify what a recurring cost (yearly subscriptions) is and what is a one-off payment (new laptop). This means you should have an operating cost in black and white! If your income can cover the operational costs, you are bootstrapping!

Sweat Equity

Sweat equity = Unpaid labour.

As a founder, you will be putting ungodly time into your business. If you have a job to keep your head afloat, you will be stretched thin. Sweat equity is the name given to a founder’s unpaid physical and mental labour. Usually, this term relates solely to the founders. However, sometimes you can trade time/sweat equity for equity (shares) within the company to a third party.

When doing the latter, be sure to have it in writing! You don’t want to be trading shares for someone to put time into something and have then not do anything in return.

A Minimum Viable Product (MVP)

You may have heard this term gets thrown about in the startup world. However, there is a great reason to do so, especially if you are bootstrapping!

An MVP is the name given to the smallest piece of effort produced by the startup that can validate the business idea. It can be something as simple as a survey or something more complex like a small piece of tech.

At Hiyield, we have had tons of experience in creating MVPs for startups.

Test the market!

The number 2 reason startups fail is that the market does not need the business idea. A whopping 35% of failed businesses were because of this reason. Creating an MVP is an inexpensive way to validate the idea before spending a significant amount of cash on an idea.

Do you have a startup idea?

We have dedicated problem solvers who love seeing startups succeed!

If you think you have an excellent idea for an MVP and are unsure how to develop it, let’s talk!