Have you ever heard the phrase you got to spend money to earn it? This phrase is especially true when starting a business. It takes beginning capital to launch a business. However, you want to avoid taking out a business loan or giving up equity in your future business; what do you do to obtain starting capital? One option is to bootstrap your business idea. Bootstrapping is all about paying for start-up costs out of pocket. However, with some ideas, it may take a large amount of capital to launch an idea, so how do you come up with it on a tight budget? Here are four ideas to help you on your way to bootstrapping your next business venture.
- Pay off debt:
One of the fastest ways to add extra cash to the monthly budget is to pay off as many liabilities as possible. According to the Federal Reserve Bank of New York, in 2024, the total household debt rose by 109 billion to 17.80 trillion. That’s a lot of people that are underwater. When you are in debt, a good portion of your salary goes to the banks. This means you are working for the bank and not for yourself. If people pay off their debt, they get to keep more of what they earn. This extra cash can be put aside in order to fund your business idea. Also, when debt is paid off, it reduces the amount of stress you carry.
- Freelance/ Part-Time Job:
Another option is to increase your income. This can be accomplished by picking up a part-time job or freelance work in something you are skilled at. This increased income can also be used to pay off the debts as well. With a part-time job, you can have extra cash that can be put toward your business idea. If you decide to freelance, you can also freelance in the same space as your proposed business idea; this can help you understand the market for your proposed business.
- Cut Monthly Spending:
Another way to create extra cash is to make more room on the budget. There are a few ways this can be accomplished. Firstly, try to consider bundling your services such as telecommunications/ internet, insurance, etc. In my case, I could bundle my phone and internet, which reduced my phone and internet costs by 20%. Often, bundling can save you money on your monthly bills. Secondly, cancel any unused or needed monthly subscriptions. List all your subscriptions, and you will be surprised by how many you have. This is because many of us forget them, especially the smaller ones. Lastly, control spending by limiting purchases. I use the 30-day method; that is, if there is something that you want or think you need, wait for at least 30 days before you decide to buy the item.
In most cases, after 30 days, you will find that you no longer want or need the item. However, if after 30 days you still want or need the item, then by all means, purchase it. Some may say well, what if the item is on sale for a limited time? Can’t I get it if it’s on sale? The answer is still no; this is because sales cause people to spend more in a particular store than they would have if the sale did not exist. It’s a common trick that many retail companies know about. The more you cut from the monthly budget, the more money you can put away for your business idea.
- Pay Yourself First:
Paying yourself first is not a new concept, but it really helps with improving your savings. The idea is to immediately save between 10% to 20% of every check. The best way to do this is to automate your savings. Many banks will allow you to set dates and savings amounts automatically. This means that your bank will transfer your savings to your designated account on the day you are paid. This will maintain the savings without your input at all.
Starting a business is worthwhile, but it requires some capital to get going. There are many options in this regard. However, one way offers security and helps you maintain all the equity through bootstrapping. However, bootstrapping can also be one of the most challenging ways because it requires more time and sacrifice than the other options. Although bootstrapping can be a challenge, following the suggestions above will mitigate the challenge.
References
Federal Reserve Bank of New York (2024) https://www.newyorkfed.org/microeconomics/hhdc