Using bootstrapping to start your business.
Bootstrapping is a method for starting a business with minimal costs. You can harness free resources, borrow equipment, and use creative means to build your business without breaking the bank.
What is bootstrapping?
If you have an idea and the right financial advice, you can start a business today. Bootstrapping is a 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. Here's some information on getting started as 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 quickly. Moving online is a part of growing a successful business, see our growing your business online section for tips and more information.
Get active on social media
Speaking of social media, you can also start generating demand for your products through:
- Facebook - use friends, shares and 'likes' to get your offerings on potential customers' walls. Paid advertising is relatively inexpensive too
- LinkedIn - connect with complementary businesses and create articles.
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.
Take the time to post suitable content regularly. The more you post relevant content, 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 little to 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 workshop1.
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 could be to obtain a Westpac credit card2. 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 & 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 may serve you 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 items 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 it may not be creative, you can always tap into your personal savings. 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 worksheet3.
Things you should know.
1 The content of the Managing Your Money workshop is general in nature and is not intended to constitute financial advice or an offer of any financial products and services by Westpac.
2 Lending criteria, terms and conditions apply.
3 This tool is intended as a guide only and is not intended to constitute financial advice.
The material on this webpage is provided for information purposes only and is not a recommendation or opinion.
The material on this webpage is does not take your particular financial situation or goal into account. We recommend you seek independent legal, financial and/or tax advice.
Links to other sites are provided for convenience only and Westpac accepts no responsibility for the availability or content of such websites.