Bootstrapping a business from the ground up has a long history. Entrepreneurs have been creating companies based on little or no debt, and paying as they go, for as long as there has been a capitalist economy. As a business building strategy, bootstrapping will succeed in any kind of economic climate. With increasing talk of an economic downturn in the air, developing a debt free company may be just the right idea for the times.
During boom times, it's often tempting to plunge heavily into debt to start a new business. The budding entrepreneur, often lured by easy credit, may overextend the budget and be unable to repay the debt. While that scenario may be scoffed at by many business people, all too often a bad business plan, or even none at all, can spell finacial disaster. A new business person, with stars in their eyes, will mortgage a home to begin a company. All too often, bad things happen, and those bright stars, the company, and the house are gone.
Without the overhead of a business loan, a bootstrapping entrepreneur can ride out that often difficult and trying startup period. During a recession, that low debt level may be a company saver. In more prosperous times, the debt free company can grow even more without the need for constant debt servicing from day one. There are always plenty of opportunities to take on debt later, when the business is better established in the marketplace. In the startup phase, however, a more prudent course of action is to keep any debt load away from the organization.
Financing a new business from the ground up is not easy, but it will place the new company on a firm financial foundation. Start small. Don't think that you have to be the industry leader overnight. The overwhelming majority of your competitors took years to grow to their current size. Your business needs time to put down its roots, and grow organically. Rome wasn't built in a day, and neither is your company. Patience and faith in your product and service, combined with free or minimal cost guerilla marketing techniques, will create natural business growth.
Use the cash flow from the business itself to finance further growth. Don't extract cash from the company for personal use. Instead, employ that revenue to build the organization. If you retained your curent job, while establishing the startup company, this should be easy to accomplish. When the business becomes self sustaining, and when it can also generate an income for you and your family, that is the moment to leave your job. At the same time, your new and growing business will be debt free and a real hard asset.
Think in terms of a debt free bootstapped business and you will succeed in any economy. In good times or in recessions, your lack of debt and high overhead will keep your company afloat and sailing toward even greater success.
