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There are many different ways that you can start a business without burying yourself under a mountain of debt, paying sky high interest rates on business loans or handing over stake and ownership to venture capitalists or other investors.

What if I told you that I could introduce you to an investor who knows exactly what you what you want to do, knows what you need to get it done, has the knowledge and dedication to make it work, has access to all of the resources that you need, is dedicated to making your business a success and has only your interests in mind? And, on top of all of that, this perfect investor is local.

It may be hard to believe that such a person exists but all you have to do is look in the mirror. That’s right, it’s you. Building a business using your own resources can be a daunting task but, it can also be very rewarding. The financing and resources that you need to get things up and running are all around you. You just need to know where to look and learn how to take advantage of them.

There’s only two questions that need to be answered before you can tap this valuable investor – Where do I get the money and how do I get started? We’re here to help. So, pull up your bootstraps and get ready to build a successful business on your own.

WHERE DO I GET THE MONEY?

You have to have money to make money. Whether you are able to use money that you have saved in the past or you need to rack up a temporary balance on your credit cards, there are plenty of places to find money. You just need to figure out which method best suits the needs of your business.

1. Personal Savings: This is the place to start when it comes to bootstrapping a business. Dip into your personal account and fund your business from money that you have saved. There may not be enough for this to be the sole form of financing but, if there is enough, you won’t have to worry about any debt or interest rates on loans.

2. Friends and Family: Ask your family and friends if they have any extra money that they would like to invest. Agree on a payment plan, with interest, and offer them future stake in the business if it turns out to be a success.

3. Your Home: A second mortgage or home equity loan is traditionally used for repairs and upgrades to your home. However, if you do own a home, this can also be a great source of funding to get your business up and running.

4. Credit Cards: It’s rare that you hear somebody suggest that you should accumulate credit card debt. They do come with high interest rates and you could end up paying them off for the rest of your life. Think of it as an investment in your future. The beauty of credit cards is that you can pay them off whenever you want without being penalized for it. When your business does start making money, use as much as you can to pay down this debt.

5. Licensing: Instead of sinking a bunch of money into producing and marketing your product, sell licenses to companies that have the need and the resources to make it work. The company gets the product they need, your product is in the market and you can sit back and collect the royalty check.

6. Trade Credit: Basically, this entails receiving goods from a supplier without having to pay cash up front. You may be able to get 30, 60 or 90 days to pay for the goods. This is a good, short-term method of freeing up working capital that can get you on your feet. Of course, you will have to sell the goods before payment comes due or you will be paying with your working capital anyway. If you use trade credit, expect to pay interest on the goods.

7. Customer Financing: Ask your customers to pay up front and use that money to buy the materials that you need to do the job. The most common place you might have seen customer financing is when a builder or contractor asks you to pay up front to put up a fence or hang gutters. The contractor then uses that money to buy the materials before he returns to complete the actual work.

8. Equipment Financing: Equipment can be real expensive. Talk to different equipment suppliers and find out what kind of financing options they have available. You can also look for rent-to-own deals on furniture and other equipment.

9. Lease: Until you get your company on its feet, consider leasing office space and large equipment instead of purchasing. This will free up thousands of dollars in the short run. Plus, when you outgrow your space or bigger, better equipment becomes available, you can upgrade without worrying about selling or being stuck with the older model.

10. Sell Your Accounts Receivable: This is a financing method referred to as factoring. A “factor” buys your accounts receivable at a discounted price and takes over all of the paperwork involved. You receive the cash that you are looking for and you no longer have to deal with the paperwork.

Once you’ve figured out which financing option is best for you the seed has been planted. Now, all you have to do is water it so that your business can sprout roots and begin to grow.

HOW DO I GET STARTED?

Simply having sufficient funds to start a business is not enough to make it successful. You’ve got to know how to spend efficiently. You have to know when to spend, how to spend, how much you can spend and when not to spend so that you are not wasting any money. A startup business usually doesn’t have a lot of financial wiggle room, especially in the beginning. Spend smart, watch your business grow and enjoy the benefits when it becomes successful.

11. Know Your Limits: Before you drain your savings and max out your credit cards to turn your revolutionary business idea into reality, step back and take a look at your situation. The plan is, of course, to pay off all of the ensuing debt and rebuild your savings from the piles of money that are going to be laying around after your business takes off. But how realistic is this plan? Can you achieve this goal? And, most importantly, can you afford to take the hit if the business fails?

12. Map Out Your Finances: Start from day one. Figure out how much money you are going to need for development, production, advertising, payroll, distribution and any kind of overhead that will be associated with running your business. Don’t overlook the small things like rent and utilities. Take into account that it might be days, weeks or even months before you see any money generated from your goods or services so don’t plan to use accounts receivable early on. You need to have a plan to cover all of your expenses three to six months in advance.

13. Cash Flow is King, Profit is a Plus: Forget about profits for now, cash flow is your primary concern. Keep track of everything – how much you have, how much is going out, where it’s going, when it’s going, why it’s going, how often it is going and, eventually, how much is coming in from where, when and why. Most of your cash is going to be flowing out at the beginning so there won’t be any profits to worry about. But, when you do start to see extra money accumulating, you’ll know you’re on the right track.

14. Create a Realistic Forecast: Top down forecasting is a big no-no for a startup entrepreneur. Don’t determine your goals from the size of the market. Determine your goals through the ability of your business. Forecasting from the bottom up, you can figure out what kind of numbers are achievable from the projected output of your business and how much of the product you will be able to get into the market. Planning to attain 1 percent of the market and trying to boost productivity to reach that goal is unrealistic and bound to fail. If selling 100,000 widgets in the first year gets you one percent of the market while your company is only capable of producing 10,000 widgets a year, then you have no chance of reaching your goal. Planning to sell 10,000 widgets in the first year would be a winning strategy.

15. Hire a Young Team: The knowledge and expertise that proven teams offer comes with baggage. They have expectations about the way a company should be run and are accustomed to a lifestyle that you simply can’t provide. They are expensive. Hire young people, straight out of college who are looking to make a name for themselves. They are cheaper, eager to please and can be easily molded into the productive and efficient workforce that you will need. You get cheap labor and they get to build their resume. It’s a win-win situation.

16. Hire Who You Need, Not Who You Hope You Will Need: If you are expecting to need 20 people in the next six months but only need 10 right now, only hire 10 people. If you hire 20 people then you be paying 10 people to work and 10 people to wonder what they are supposed to be doing. And you may never need the other 10 people. Keep your team small enough to get by and if you need more people in the future you can always hire more people.

17. Limit Yourself to the Bare Essentials: If you have five people working for you then you don’t need ten computers. The same thing goes for licensing. If you have five people working for you but only three of them will be using Adobe Photoshop, then you only need to have licensing for three Photoshop programs, not five.

18. Keep Your Day Job: To minimize the risk of losing everything, continue working and build your business on evenings and weekends. This way, if your business doesn’t work out, you will have something to fall back on. If it does take off, you can quit your day job as soon as you are able to sustain yourself through the business alone.

19. Start With Basic Services: Let’s say that you are wanting to start a landscaping business. Start by mowing peoples lawns. After you’ve established a source of revenue, start offering to plant flowers around people’s trees. You can move up gradually by planting bushes and trees and eventually you’ll be able to afford to offer complete landscaping services.

20. Get Your Product Out the Door: If it’s not ready at all then disregard this advice. But, if you are just tweaking and adding bells and whistles then stop and ship. You won’t make any money until you sell your product and you can use the opportunity to collect feedback from the customers. Find out what they like and what they don’t and adjust accordingly.

21. Be a Frugal Spender: Buy only the essentials and look for deals. Do you really need brand new, top of the line computer equipment? Look for older or used equipment that will do everything you need for a lot less money. Cut corners wherever you can.

22. Negotiate: Whether you’re trying to get more money from your customer or pay less money for goods or services that you require, always try to get a better deal. Offer an extra service to your customer in exchange for more money or trade your services for someone else’s services. If you’re making headway in your landscaping service, maybe you could offer to put a sign advertising the garden store in your customer’s yard in exchange for some free flowers or a free bush.

23. Operate from Home: Working out of your home can eliminate the cost of renting a space and you won’t have to waste gas commuting. Plus, all of the supplies, equipment and commuting costs related to your business are tax deductible.

24. Eliminate the Middle Man: Deal directly with your customers. You will be able to offer better service, cheaper prices and develop a great relationship with your customers. Keeping your customers happy will create a buzz about your company and as demand for your product grows you can eventually expand into stores to fill that demand.

25. Do Something Different: Any lawn care service will come to your house, mow the lawn, trim the weeds and edge the driveway. Include watering in your service. If you’ve become a full-blown landscaping service, some plants require more care than others do. Include detailed instructions on how to care for everything, tell them to call with any questions and maybe even schedule a return visit to ensure that everything is going well. Go the extra mile.

26. Get the Word Out: Buy some paper and business card stock and make your own fliers and business cards on the computer. Take your cards and fliers door to door. Introduce yourself to everyone and tell them what you do. Add a second phone line under the name of your business and get listed in the phone book. Get out there and build a customer base.

27. Create a Joint Venture: Find a similar business in its infancy with identical needs as your business and join forces. You can share office space, supplies, equipment, cost, employees and profits. Once you are both ready you can split and go your separate ways.

REFERENCES

1. How to Change the World – The Art of Bootstrapping

2. BusinessFinance.com – Bootstrap Financing

3. Entrepreneur.com – 6 Sources of Bootstrap Financing, Bootstrapping Your Startup, Secrets of Bootstrapping 4. trizle – Why Bootstrap Financing 5. morebusiness.com – Factoring – Bootstrap Financing, Bootstrap Financing Your Way To Business Success

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Staff :: Jun.03.2007 :: Features ::