5 Bootstrapping Mistakes to Avoid

Bootstrapping is how many businesses start. The term bootstrapping is, as it suggests, to pull yourself up by the bootstraps. In an entrepreneurial sense, many businesses begin through this type of funding as a means to fund a business idea when many formal financing institutions will not yet fund a business without a track record. But this is risky business, and leaves space open for bootstrapping mistakes…

According to Old Mutual, 99% of start-ups are self-funded. Bootstrapping might seem like the harder, tedious route, however, bootstrapping your business has benefits like having full control as an entrepreneur. Yet, you may make mistakes and come across pitfalls along the way.

In this article, we aim to help you avoid making certain mistakes when bootstrapping your business.

1. Not Having a Business Plan

A business plan can seem intimidating, but it is important to remember that the main benefit of a business is to give you direction. Look at it this way, imagine driving to an unfamiliar destination without a map or any direction. That’s what you’re doing, running your business without a business plan.

You can easily draft a business plan to serve as a GPS for you and your business, setting a clear direction for where your business is headed. You can include aspects like your financial plan, giving you an idea of your financial projections.

Additionally, your business plan should include your marketing strategy. This will help you identify milestones along the way and understand how to progressively invest in your marketing efforts as your business grows.

2. Spending too Much on Marketing

As an SME, the last thing you should do is allocate a huge budget towards your marketing efforts and burn through your funds before you see any results. While it’s good to have marketing strategies for your small business, you must be conscious about your spending.

For instance, instead of paying the cost of an arm and a leg for your website, you can look for an affordable freelancer on platforms like Upwork to create a website for you. When you’re looking for a freelancer, make sure you have a look at their reviews and ask for their portfolio to get an idea of their previous projects.

3. Not Paying Yourself

You have to treat yourself as an employee of your company. As a solopreneur, you might be tempted to keep pouring into your business, so much so, that you neglect paying yourself. This isn’t a good approach, because firstly, not having an income to cover your financial obligations will inevitably have a negative effect on your ability to run your business. Secondly, paying yourself helps you acknowledge the value of your work in your business.

Thirdly, it gives you a better idea of the finances of your business, and lastly, it makes it easier for you to allocate that salary to your future employee when the time comes that you need to hire someone to help you.

Paying yourself is important, but you need to be careful not to pay yourself an unrealistically high salary, as you will still need to comply with income tax regulations.

4. Not Separating Your Business and Personal Expenses

It’s easy to get tempted to use your business card for a personal expense, it’s also very easy to use your personal finances for your business without adding it on record.

When you’re bootstrapping your business, most of the finances will come from your pocket, but you need to keep a record of all that was spent on the business. By doing this, you’re able to effectively manage your business’s cash flow.

This also adds to why you must pay yourself a salary to avoid overlapping your personal and business spending.

5. Neglecting Customer Research and Customer Feedback

When you’re a bootstrapper, one of the ways to accelerate your business is by having a good understanding of who your customers are and knowing how to please them.

It’s easy to miss this, especially when you’re doing everything on your own, but your customers are key to your growth, and it’s important to use your customer relations to your advantage. Understanding how to reach your audience will allow you to gain new customers, and maintaining a good relationship with them will help you keep them coming back.

Additionally, customer feedback not only helps you improve your business for your existing customers, but receiving reviews from your happy customers can be used as a way to market your business to attract more customers.