3 common bootstrapping mistakes entrepreneurs make

“Bootstrap is a situation in which an entrepreneur starts a company with little capital. An individual is said to be boot strapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company.” says Investopedia. 

When we observe the founding trends of startups, it may come as a surprise to see that majority of startups choose to fund themselves with their personal savings. Though it is the personal savings of the founder, yet finances are meant to be treated separately and carefully. There are times when you start taking things for granted, just because the money is your own and you are not answerable to anyone. But that’s not right – it is important to have a plan in place for all the finances. Even while bootstrapping, there are lot of things that can go wrong intentionally or unintentionally. That’s why it is necessary to keep a track of the possible common mistakes while you are bootstrapped –

1) Not planning for emergency funds

Most businesses take at least six months to start making any revenue. And also depending on what category your business falls into, the sales cycle may vary and it may even be a year before you get the payment. Based on your plans and visions, the bootstrapped amount is just sufficient. But what about emergencies? What if there is a new market opportunity which you wish to grab, but you have no sources of fund? Planning for budgets is good, but including emergencies in it is the best way to plan. An emergency fund ensures that when you are in dire need of financing, you don’t have to rely on lenders or other sources that will only increase your debt.

2) A fancy office space

A fancy office space can cost quite a bomb and may burn a big hole in the pocket even before we realise. Yes, we all dream of having our own office space, but forget that apart from the initial infrastructure, there will be a lot of other overheads like maintenance , internet, etc. It is advisable to start from a coworking space which not only helps you keep the costs low, but also allows you to meet like-minded people and stay in the startup community. (You can find a list of coworking  spaces in Hyderabad here)

3) Not having an MVP

A lot of entrepreneurs spend all their energy, time and money on building the complete product functionality at one go. The best way to do it would be to get a minimum viable product out, test it, get a first few customers and then invest on  creating a custom website/app according to the requirements.  Unless it is a ground breaking idea there are several available platforms/resources one could use to get started. For example, if you would like to start an e-commerce website, try shopify before investing in a website.

Bootstrapping is surely a great way to start off because this is a way where you are free of any re payments or investor’s questions on a daily basis. Bootstrapping gets you the liberty to invest wherever and whenever you want. But like everything has its own pros and cons, so does bootstrapping if not managed properly. So, be aware of the common mistakes that people tend to commit while they have bootstrapped themselves, and avoid committing them yourself and you are good to go.

 

 

 

 

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