Understanding bootstrapping

Doing it on your own


Bootstrapping means that you grow your business slowly, with profits you make from the business by cutting costs to an absolute minimum. Sometimes this might also involve using small amounts from your personal savings, but largely the money will come from the work the business does.

Here are some examples:

Can't find premises:

  • Consider starting from home.
  • Consider sharing premises.
Don't have finance for new machinery:

  • Try buying second-hand.
  • Think creatively about what you already have, perhaps you don't need new machinery.
Don't have the money for a vehicle:

  • Try renting one.
  • Consider pooling resources and sharing a vehicle with someone.
These examples give some ideas of how you can effectively reduce the amount of money you need to start your business. 

Bootstrapping often means that the business owner needs to take a significantly reduced salary in the early stages to enable the cash to be reinvested in the business.

It is really important to keep good financial records of every cent spent on the business and the income it earns. This will show the history of how the business was able to grow. At a later stage when you need to raise finance for expansion, these records will provide lenders with a valuable picture of careful financial management and the profitability history, as well as the amount of money you reinvested in the business.

DSBD
SEFA
USAID
BLSA
SASME
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