Using bootstrapping to start your business

If you have an idea and the right financial advice, you can start a business today. Bootstrapping has become a popular term to describe small businesses that begin without taking out loans or raising capital. It’s about making smart and economic decisions to generate cash flow before acquiring too many costs.

Fortunately, the World Bank ranks New Zealand as the easiest country in the world for starting a business. In fact, as a sole trader you could begin today. ReadBusiness.govt’s article on sole traders to learn the legal requirements of becoming a sole trader.

Begin with the Internet

You don’t need a large marketing budget to build a customer base. The Internet connects you to billions of people worldwide – and best of all, you can have a strong presence for free.

Build a website

Did you know that Westpac offers a free website builder?* You can take advantage of this tool today to generate demand for your product or idea, clearly define the benefits of your business, and even start collecting payments.

If you don’t enjoy writing, you might have a friend who constantly shares their blog on social media. Ask this person to help – odds are they’d love the opportunity to share their writing talents.

 Get active on social media

Speaking of social media, you can also start generating demand for your products through:

  • Facebook – use friends and ‘likes’ to get your offerings on potential customers’ walls. Paid advertising is relatively cheap too.
  • LinkedIn – connect with complementary businesses and create blogs.
  • Google Plus – join groups and have discussions about your business. Check if your customers are asking questions about your products or services.

It’s impossible to manage every social media account on the Internet by yourself, so identify where your target market spends the most time online and start making connections.

Speak with a friend who loves social media and learn essential information from them. Take the time to post content regularly. The more you post, the more chances you have for others to share your content. Social media allows you to reach an ever-expanding group of potential customers with no financial investment.

Start off small

Jack Garson, author of How to Build a Business and Sell It for Millions says, “You don't need to open your dream business on the first day. It’s better to start with a successful hot dog stand than to get halfway through the construction of a full-service restaurant and run out of money.”

In other words, a nice looking building doesn’t make you a successful business owner – generating cash flow does. Some of the largest companies in the world started in a garage. There’s nothing wrong with having big dreams, though you need to build a good foundation and start earning money before you can go big.

As your business grows, consider enrolling in Westpac’s Managing Your Money workshop for small businesses.

Postpone any planned spending

There are costs to starting any business but you may be able to delay them through various methods. For instance, ask suppliers to defer payments for a month. You’ll most likely need to show them your business plan and explain how they’ll benefit when your business grows.

Another option is to obtain a Westpac credit card. You may not have the cash today but delaying costs by even a few weeks can make a big difference when bootstrapping a new business.

Borrow tools and equipment

Many new businesses require equipment and sometimes you can borrow from a friend. For example, suppose you begin a photography business and can’t afford the $5,000 camera you need for the wedding tomorrow. Borrow a friend’s camera until you build up some reserves to buy it.

Renting or leasing equipment is also a possibility. While this won’t save you money in the long run, paying $100 to rent a camera that enables cash to start coming in will serve you much better than purchasing all new equipment before you have the money.

Regardless of your equipment, you need to get your business generating income – think strategically about where you could borrow or rent what you need.

Get creative to raise funds

Is your garage full of junk that you can sell online? Use the money you earn to jumpstart your business.

Crowd funding has gained increasing popularity in recent years. This process allows you to receive donations on the Internet to raise funds and get your idea off the ground. You can encourage people to give by offering incentives. This way you’ll have a support team already in place when your product or service launches.

While this may not be creative, you can always tap into your personal savings account. If you’re a few months away from getting your business started, open a Westpac business savings account and begin saving money today – specifically for bootstrapping your business.

Manage your money well

When you start with very little cash, every cent counts. Keeping a vigilant watch on your income and expenses will ensure you spend your money wisely. This doesn’t mean you’ll never spend money. Rather, you’ll never spend it unless you know exactly how it will affect your balance.

Few people like working on budgets. However, they’re necessary if you want to maximise your cash. You can start by taking advantage of Westpac’s cashflow forecast worksheet**. See the next steps below for more advice.