Bootstrapping is in many ways the simplest way to start a business. You don't need to find investors. You don't need to find a bank willing to lend you money. You don't need to convince potential crowdfunding partners that you -- and your idea -- are worth investing in.
Plus, bootstrapping your startup is extremely attractive in terms of flexibility and freedom. You're the sole owner. You're in charge. If things go well, the upside is basically unlimited because you don't have to share the rewards.
But the downside definitely exists. Bootstrapping means risking your money, your time, and your resources. So how can you know if bootstrapping is right for you? Here are five questions to ask yourself:
1. Do I want complete control over my business in return for slower growth?
Money often fuels growth. Money allows you to hire more people, place more ads, and create products and services at a faster rate.
If you decide to bootstrap and don't have significant resources to draw on, you'll need to dial back your costs. You might even need to keep your full-time job while you launch your business on nights and weekends.
In short, you'll need to accept that your startup's growth will likely be slow (and hopefully steady). In return, though, you'll maintain complete control over your business -- and your profit. Are you OK with the tradeoff between growth and control? That's a decision only you can make.
2. Can I provide enough value and make enough money from early customers so I can invest in the business and get it off the ground?
As I've written about before, in a bootstrapped startup, short-term results matter most. That's especially true where short-term profit is concerned, because short-term revenue and cash flow provide the investment fuel to help your business grow.
If you can actually generate revenue and profit, of course.
Which means providing genuine value to your customers.
You may be tempted to develop a minimum viable product (MVP) so you can get your business rolling -- but if that product doesn't provide real value to customers, you won't have any customers.
In short, if you will need to spend significant time and money developing a product or service before you make your first sale, bootstrapping may not be right for you.
(That's why some of the easiest businesses to bootstrap are service businesses, because the main cost is "just" your time.)
3. Are there partnerships I can put in place to fund the business in its early days?
Finding the right partner can be tricky -- but it can be done.
A wholesale manufacturer may give you extremely generous payment terms -- as much as six to nine months -- which will allow you to start your business without investing in inventory. A service provider may offer to finance inventory in exchange for performing installations and maintenance.
While it may take some digging -- and some creative pitching -- you may be able to find a mutually beneficial relationship with an established partner.
Then the capital you need to get started won't have to come from you.
4. Do I even need capital to test my idea or concept?
Market validation involves determining if there is a profitable intersection between what you hope to provide and what customers actually want.
Here are a few ways to validate your idea that don't involve significant investment.
Build a list of people you feel certain will be interested in your product or service.
Talk to them -- about their needs, about their pain points, about how they solve their current problem.
Create a simple landing page about your product or service and try to get people to sign up for updates and access when it's ready.
Create a minimum viable product (not for sale, but for trial use) and ask people for feedback.
Granted, some startups require significant capital. Want to build electric cars or build rockets? You'll need significant capital. (Hi, Elon!)
But even if you do have generous amounts of capital, validating your idea early on makes sense. Why spend thousands of dollars on an idea you only hope will work?
5. Am I willing to accept the risk I might fail, both financially and emotionally?
Startups are emotional roller coasters. Some days are awesome. Some days are devastating.
Most are stressful, especially early on.
There will be setbacks. There will be roadblocks. When you don't have money to throw at problems, there will be challenges that you need to overcome through creativity, effort, and persistence.
Struggling is never easy. Failing is never easy. Bootstrapping is never easy.
But it can also be incredibly rewarding to build something great out of almost nothing.
If you're willing to accept the risks in pursuit of the returns, bootstrapping may be right for you.