What does it mean to bootstrap your business? Understand its advantages and disadvantages.

If you are a new business owner, you might have gone through many obstacles. One of the major challenges in building a new business is funding. To overcome this, some entrepreneurs will go for self-funding.

Let’s get into bootstrapping

Have you heard about bootstrapping?

Bootstrapping occurs when a person attempts to build a business from their personal finances. It is the process of starting a business with your personal assets, including borrowed or invested funds from your family or friends.
Because you are investing your own money in bootstrapping, it is critical to keep track of your cash flow.

Each process has different stages, so bootstrapping

It’s not clear, huh?

If you are bootstrapping your SaaS business, you will progress through different stages of bootstrapping. They are

The beginning stage
The customer-funded stage
The credit stage.
Let’s look into each stage.

The beginning stage:

The beginning stage starts with the saved money and any borrowed or invested money. For example, the founder continues to work on their main job and, at the same time, starts a new business with their own assets.

The customer-funded stage:

When money from a customer or client is used to operate a business, it is called the customer-funded stage. When the revenue exceeds the business operations, you can use it for your business’s growth.

The credit stage:

At this stage, the founder may come to realize that funding cannot be done alone. So the entrepreneur seeks venture capitalists for funding or tries to take out loans from the bank for massive financial growth.

Now you are almost clear about bootstrapping and its stages, right?

Let’s discuss the pros and cons of bootstrapping

To begin with the pros of bootstrapping,

By being involved in self-funding, the entrepreneur will gain a wealth of experience in understanding the whole financial structure and the cash flow at each stage of the business.
2. If there is a loss of business, there is no need to pay off the loan.

3. If the business succeeds, the entrepreneur can take the business to the next level or invest in further development of a product or service.

4. The entrepreneur can make his own decisions There is no need to depend on the investor’s ideas.

5. You can develop the reserved right to create unique features.

6. Self-funding forces the entrepreneur to think in unusual ways to solve the problem through creative thinking.

7. Bootstrapping gives you the freedom to work as you wish.

The Cons of Bootstrapping:

The liability will be greater when you start your business with short-term cash.
2. When you have short-term cash, there may be a chance of causing unwanted problems, which leads to stress problems.

3. The growth of bootstrapped businesses will be slow because of the low capital.

4. Without outside capital, the marketing you do and the process you use to serve the customers will be limited.

5. You have to hustle a lot when you have low cash flow. Hard work is needed to grow your business and optimize your product.

If you think bootstrapping doesn’t suit your business, there are many ways to raise funds to grow your SaaS business.

SaaS startups will find bootstrapping an attractive option. It brings lots of benefits. Though it has advantages, bootstrapping will also have cons. You have to be conscious while making decisions in your financial planning.