Bootstrapping Definition from Investopedia.com:
“Bootstrap is a situation in which an entrepreneur starts a company with little capital. An individual is said to be boot strapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company.”
Bootstrapping is an ideal strategy for someone starting a small business, especially a part time, home based business. All 3 businesses I have started I used bootstrapping by reinvesting the profits back into the business. The following article will outline some of the benefits of bootstrapping.
“One of the earliest and most critical decisions an entrepreneur must make is whether to self-fund a startup by bootstrapping, or raise outside funding through venture capital. The implications of each decision are significant.
How you fund your company will help determine its chances of success, its scale, its long-term prospects, and ultimately, your relationship with your company.
As an entrepreneur who has invested significantly in my own company, I believe that bootstrapping is the best option. It’s never easy, and it’s not always glamorous, but bootstrapping will force you to become a better, stronger entrepreneur with a more vibrant business. Here’s why:
1. Creative Freedom: The creative and executive freedom that entrepreneurs have at the beginning of their projects is priceless. Bootstrapping a company with your own funds protects that freedom without the (often stifling) accountability to an outside voice protecting its investment. When you bootstrap, you are that voice — and you’re the creator too. Even if you supplement with outside funding down the road, bootstrapping gives you far more control over your own business in those critical early days.
2. Smaller = Scrappier: With less capital to work with, you will be forced to start small, test your assumptions carefully, and then scale up. Along the way, you will learn about your products, markets and customers more intimately. And if you make mistakes — as all entrepreneurs do — they will almost certainly be smaller in scale and impact. Meanwhile, you will learn to become a scrappier, more vigilant founder.
3. Better Products: Another advantage of a limited budget is a greater focus on your products and services. The pressure of a shorter runway will force you to get your products right. When every last dollar matters, you need to pay attention to your customers and their needs by building a superior offering. That insight and dedication will increase the likelihood of generating revenue and building a brand more quickly…”
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