Issue No. 64 - April/May 2012
Bootstrapping to fund business growth
by Kishen Vijayadass
Wikipedia defines ‘bootstrapping’ as a metaphor: a self-sustaining process that proceeds without external help.
Most entrepreneurs I know have grown their business by putting in lots of blood, sweat and tears to get their business up and running, committing a lot of their own funds, picking up the right employees and leveraging off their network of business associates to deliver products or services to their market space in a unique way. The reality for most entrepreneurs out there is that there isn’t an angel investor or fund with deep pockets prepared to throw a million dollars their way to back their ideas. Most of these entrepreneurs are left to grow their business by pulling themselves up by their bootstraps.
Many entrepreneurs appear to have a large degree of luck – to make that big break, win the industry award which leads to the large new contract to boom and big profits. Not so: my experience is that these entrepreneurs have invested lots into making them and their business good at what they do and it’s inevitable that success follows once the market recognises the value they bring to the table.
Why do you bootstrap?
Here are the most common reasons: You don’t have a choice No equity needs to be shared with other investors The risk of the venture is lower without any debt obligations You are answerable to yourself – not to external stakeholders with their own agenda The direction of the business can be reset depending on market conditions, up or down – extreme flexibility Arguably it helps focus the entrepreneur on profitable growth due to need for cash flows, rather than top line revenues or staff/customer growth Also focuses a business of managing debtors and collections very keenly from the outset – this just makes good business sense
Why don’t you bootstrap?
Bootstrapping is not for the faint hearted or indiscipl...