The Business of Bootstrapping

business bootstrapping

The term “bootstrapping” is used to describe when a firm or start-up business determines to use internal resources rather than seek the assistance of external investments.  This can not only develop the company internal cash flow but also work to keep expenses at a minimum.

Bootstrapping can be addressed in a variety of ways.  The financing needs, for example, could be addressed by owners obtaining financing via their cash assets into the starting up of the business; a company could also use the revenues generated from its business to uphold the financial operations.  Other options, riskier options, include delaying vendor payments or using personal credit line(s) to fund the business.

Seeking total efficiency to ensure limited outside financing causes a large drain on management resources, both financially and mentally.  This is risky because the focus of management is running the company to maximize all assets rather than exploring other opportunities to expand, grow or maintain competitive advantages.

Although bootstrapping may be a viable option when starting a business, when it comes time to growth or meet customer demand, the best option would be to seek outside investors.

Always make sure that you make an informed decision in all cases,

All the Best,

The Capital Corp Team

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