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Bootstrapping is a term used to describe the act of starting a business without the help of outside investors. In some cases, however, the term may be used to describe a business that does use outside investments, but strives to keep them to a minimum. A bootstrapper may also avoid loans from banks and lending companies in order to keep business debt under control. Often, bootstrappers use their own savings and credit cards in order to get their businesses up and running. Sometimes they seek start-up loans from family members and friends, or even fund their new businesses with paychecks from their current jobs.
Bootstrapping represents a risk to the owners of the business. Since they often put their own money up to finance their businesses, they stand to lose their investments if the business doesn't succeed. However, there is a major benefit to bootstrapping as well. Without outside investors, business owners are free to develop their businesses as they see fit, without the input or interference of others. Furthermore, they don't have to share their profits with others or deal with repaying loans and struggling to pay sometimes-high interest rates.
While some people may view bootstrapping as a recipe for disaster, or at least a difficult road to travel, many successful businesses have been founded with this approach. People who have been successful at bootstrapping often list time and effort as their most important investments in their companies. To be successful at starting and running a company with little capital and no outside investors, an entrepreneur may have to work harder, at least initially, at developing his ideas, finding customers, and meeting their needs, so they'll continue to purchase his products and services.
In some cases, the lack of start-up capital may actually help the bootstrapper move towards success. Since a bootstrapping entrepreneur may need to generate cash quickly in order to keep the business afloat, he may be more aggressive in seeking customers, rather than spending time on other details that may be important but can be tackled at a later time. He may also seek out the most efficient and inexpensive ways of handling business-related tasks, which may help him to stay out of debt. Likewise, a bootstrapping entrepreneur may seek creative ways to get the word out about his business since expensive advertising may be beyond his means. Though this creativity is born of necessity, it may catch the eye of his target market and secure more customers than traditional, and perhaps less imaginative, methods would.
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