3 Mistakes To Avoid When You’re Bootstrapping Your Business

bootstrapping your business
The definition of bootstrapping your business is to use existing resources to go from startup to successful enterprise.

Most of us solopreneurs and small business owners don’t pitch our companies to big venture capitalists to raise funds, and as a result we tend not to grow as quickly. But we also retain full ownership over our businesses, and that means we get to call the shots.

Bootstrapping Your Business? Watch this.

So what are the 3 biggest mistakes I’ve noticed and experienced myself while bootstrapping my business? Here they are.

1. Not having enough startup capital

This is a pretty obvious one, but if you don’t have enough money in your bank account to pay your rent or put food on the table, your business isn’t going to survive very long.

In this situation, I’ve seen people give up on their businesses entirely. Another approach might be to get a “bridge job” where you work in someone else’s business or in a regular dollars for hours job to make ends meet while you grow your business on the side.

The definition of a bridge job is that it isn’t a full time gig that zaps your energy. It’s also usually not another business where you are required to get clients and make sales for it to support you.

During this phase of your business, you’ll want to focus on bringing money into your business as quickly and easily as you can, so you can phase out of your bridge job. But there’s nothing wrong with taking on a part time contract to help cover expenses while your business is starting up.

2. Having too much startup capital

What? You might be wondering how having too much startup capital could be a bootstrapping mistake. Well, technically it’s not a problem unless having a lot of money in the bank keeps you complacent.

This was the case for me when I first started my business right out of college. I had the good fortune of having paid internships during college and I graduated debt free, with enough money in the bank to feel safe and secure for many months.

As a result, I didn’t do the daring things in my business that would have really gotten me the clients, experience, and money I needed to build my business right from the get go.

I ended up spending most of this money buying information products, and not implementing what I was learning. Trust me when I say that I believe in the power of knowledge and training, but I just wasn’t taking things seriously enough to put things into practice and put myself out there fully as a business owner.

It wasn’t until my startup stash had all but dwindled and I made a big investment into a high level mastermind program that I finally got my butt into gear and started making serious money in my business.

3. Paying yourself at the right time

Investing in your business is usually a necessary thing. It’s part of the entrepreneurial path to invest time and money into something when you don’t know whether it will work or not.

As a bootstrapper, you’re likely hardwired to re-invest all of the income from your business back into it, to help it grow and prosper. I certainly was, and for many years while my business income was increasing, my net at the end of the year wasn’t.

It wasn’t until I recognized that I had to pay myself like a regular employee that I realized my bootstrapping mistake.

If you don’t pay yourself a salary, and you believe that you’re working for free as you build your business… you might end up with a rude awakening when you need to hire someone to replace you or close down your business, with little to show for it in your personal bank accounts.

Paying yourself a fair market wage out of your company means that you treat your business with respect, and it treats you with respect too. It helps you make better hiring and outsourcing decisions, because you know what the value of your time is worth to the company.

It also makes things easier at tax time, and can even save you money – definitely check with your accountant and attorney on how best to approach this topic.

So these are my biggest realizations around successfully bootstrapping your business.

What are your tips for bootstrapping your business?

Now I’d love to know what you’ve learned along the way about growing a business from scratch – any tips and tricks you’d like to pass along to your fellow entrepreneurs?

Leave a comment below!

 

18 Responses to 3 Mistakes To Avoid When You’re Bootstrapping Your Business

  1. Natalie great advice here. My hand is up on No.2. Who would of thought having good cash reserves when you start can actually stop you from being daring!! I definitely ask myself the question when I am about to invest in training this question: Do I really need to know about this right now – will this knowledge move my business and life forward! Often no is the answer!

  2. I can definitely relate to #1, as I’m in the process of deciding when to leave my full-time, energy-zapping job to find a bridge job that allows me to build my business and not go completely nuts. I think this is so important! I believed I needed to stay full-time as long as I possibly could stand it, but this really takes a toll emotionally/physically. I’m looking forward to having a little more breathing room!

    Thanks for this video, great reminders.

  3. Thanks Nathalie for this post!

    In my personal experience, I finally got a handle on the moola sitch when I focused less on making the perfect budget and more on understanding what was reality RIGHT NOW. So I keep track of every purchase and I categorize it. After a few years, I was able to see exactly what I needed to spend and what was extra, and my budgets are more informed and accurate (not to mention more achievable) because of understanding the state of my spending! I also pay myself a set % every month into my personal account, so when I have a good month or a not-as-good-month, I know that at least something is getting contributed to my personal finances!

    Loving the 30 day list building course- day 23 today (my lucky #).

    ~Cheryl

    • That’s such a great way to do it Cheryl! I love the percentage concept, because then it’s not as scary to start paying yourself a set salary when your income is still fluctuating (and when is it ever fully stable?) and it still builds that muscle to get you taking care of yourself, too. :)

  4. So much resonated! First the need for a bridge job that doesn’t sap your energy. I still have a full time job and it is frustrating being tapped out before I have a chance to work more on my business!

  5. Great tips! I’m currently struggling with the concept of paying myself as an employee. Having lived under the “self-employed” mindset rather than being a business, I still tend to treat my personal funds and my business funds as one big pool. When I get money in, I’ll put it into whichever account will need the funds most. It really is a mindset shift to separate the entity of my business from me personally. I appreciate your explaining the reasoning behind why this could be important in the long run.

  6. Thanks for this Natalie. My mistake was just as you describe in #2…too much cash at startup. This really held me back because it allowed me to “wait” for courage and confidence. Now that the nest egg is gone, I do it scared…and guess what? I’m having more fun in my business. Who knew?

  7. Hi Nathalie!

    Love these tips – especially #3 – Paying yourself at the right time! This has been something that I’ve been mulling over in the last few months because it’s the first time that the scales have tipped in that I have the urge to keep funneling money back into my business but also a need to pay myself.

    One tip before taking the big plunge of paying an hourly wage that I’ve implemented is taking time to get clear on some “fun” purchases that I would like to buy with my earnings and then paying into a savings account that is set aside specifically for these types of things.

    These can be vacations, spa treatments, new clothes, etc. Fun things that are extras that I know I need to stay balanced and also need to be saved up for.

    So while I didn’t start with an hourly wage, I started with a fun fund that felt like getting paid.

    Thanks again for such great reminders – always so happy to see Nathalie Lussier Media in my inbox!

    xoxo
    Licia

  8. Nathalie, this hit home for me! I’m currently struggling with Problem #1 and I’m relieved to know that my decision to find a bridge job to fund my efforts is validated. I’m on the right track!

    I also love the idea behind #3. I realized that I never paid myself for my efforts online (I was growing a freelancing blog) and I aim to change that with my new venture.

    As for tips, I’ve been reminding myself constantly to never pay more than what you can afford. It forces me to be creative with my options and to be realistic with my budgets.

  9. This is an awesome video, Natalie. I recently ended my consulting gig when I looked at my bank account and thought ‘that isn’t nearly enough money to help me through year 1 of my business’ – when in fact it was ! It was just my insecurity talking.

    So number 2 is a winner for me.

    The other thing I’ve done is calculated exactly what I’ve invested in my business so far (technology, courses, consulting) and decide what I’ll be investing in the next 12 months. This will help me stay focused and not over spend.

  10. Nathalie, great honest conversation about money, which is needed more. I did hire on an accountant who is great with taxes and he set up my corporation in that I can take draws AND my company invests in dividend-bearing stock. As I pile up the stock, the dividend income will eventually be enough to retire. :0) Huge incentive to ‘pay myself’ through that means.

  11. This was a great post, Nathalie!

    For me, a hybrid of #s 2 & 3 resonated, in that thanks to my husband’s previous job (and our habit of being constantly in saving-our-money mode), I have “too much” money, personally, to make me take any kind of money from my not-quite-yet-on-its-feet business.

    But I’m noticing that it feels bad to be working so hard for no financial return (I know, duh!). So I’m working on knowing how to pay myself before I resent this business that I love! Cheryl’s suggestion of a monthly % was a great one!

    Thanks!

  12. Oh Natalie, I’m so in the middle of mistake number 2! Should stop buying more info products and finish implementing them ASAP :)

    Thank you for this reminder. The world needs me to step up and the sooner I start making bold choices and take actions that matter most, the better… for everyone. :)

  13. LOVE these tips. I’m in this unique position of leaving a corporate job with a great paycheck and feeling broke because I don’t have a regular cash flow, but also knowing I have this pretty little cushion to keep me going for awhile. Also wondering if you have any advice on how to find a great accountant and attorney to help with all things business! I want someone affordable(as I’m just starting off), but knows their shit and understands my vision and biz strategy. THANKS!