Join our Waitlist for Expert Advice!

5 Quick Bootstrapping Tips for Entrepreneurs How to finance your own business.

By Nathan Resnick

Opinions expressed by Entrepreneur contributors are their own.

JGI | Jamie Grill | Getty Images

Bootstrapping your business can be a smart and effective way to go. It gives you an added level of control and independence, as you can follow your own vision (within your financial limits) and not be bound to the opinions of investors.

It will likely require a great deal of patience. Here are a few tips to get the ball rolling.

1. Get acquainted with the term "burn rate."

Know your budget better than the back of your hand. Many burgeoning entrepreneurs are too optimistic about expenses, often underestimating how much they're actually spending and finding themselves dealing with severe budget issues.

As you engage in the budget-building process, err on the side of caution, increasing your burn rate estimate by 15 to 20 percent of your initial number. From this point forward, you can monitor your monthly spending until you can gain a clearer picture of your actual burn rate.

Additionally, you can look to cut expenses to line up with your projections. Do this in all aspects of your life, not just in business -- as a business owner, your outside financial decisions still impact your overall success.

For example, if you're paying off a car, look into refinancing your car loan. According to Auto.Loan, there's a good chance you can lower your monthly payments and interest rates as long as you've been on time with previous payments.

Related: How to Start a Business With (Almost) No Money

2. Become a C corporation.

While becoming a C corporation won't give you the sexy LLC label, it minimizes the personal risk involved in bootstrapping a startup. As a C corp, you won't be taxed in conjunction with your business, or rather, you and your business are separate entities.

This way, you aren't held responsible to pay taxes on everything your startup makes, which, if business is good, can end up being quite a bit. Operating as a C corp gives you a bit more safety and motivates you to keep good track of both individual and business finances.

Related: Need a Business Idea? Here are 55

3. Stay away from credit card debt.

This is where patience really becomes a virtue. Many business owners form an unhealthy reliance on credit card debt as they try to grow. Do whatever you can to avoid this. This debt will stack up, and eventually you'll have to reckon with it.

As difficult as it can be, you'll have to learn to operate within the bounds of the money you actually have. This is what makes bootstrapped startups rare, but it is also what makes them special.

4. Focus on becoming well-rounded.

Bootstrapping a business is not for the faint of heart nor is it for the one-dimensional businessperson. In order to successfully bootstrap your startup, you'll have to wear many hats.

Get ready to become a financial wiz. Be prepared to earn your keep by coming up with a marketing strategy for your product. At least for the first while, it's going to be your responsibility to fill in wherever there's a gap.

Related: 63 Businesses to Start for Under $10,000

5. Make connections.

Making a connection doesn't necessarily mean financially getting involved with an outside party. In this case, making connections can help you find new customers and, more importantly, facilitate the learning process as you associate with established successes.

Remember: Just because you're funding yourself doesn't mean you can't look for help. As you connect with experienced entrepreneurs, pick up as much knowledge from them as possible. Learn what works and what doesn't. Take their advice on how to apply these lessons to your business. These connections will often prove just as valuable as a financial investment.

Ultimately, you're responsible for your own success. Bootstrapping your business makes this doubly true. But, if you can patiently navigate the waters of building a startup, it will be worth all the time and effort you put into it.

Nathan Resnick

CEO of Sourcify

Nathan Resnick is a serial entrepreneur who currently serves as CEO of Sourcify, a platform that makes manufacturing easy. He has also brought dozens of products to life over the course of his career.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.

Money & Finance

The Government Is Forcing Business Owners to Share Personal Data or Get Fined $10,000 — So Why Don't More People Know About It?

The Treasury Department wants to know who owns your business, and the smaller your business, the more attention you should pay.

Money & Finance

Customers Have a Favorite Payment Method — But 30% of Businesses Don't Accept It. Are You Driving Business Away?

This article examines the surprising gap between what consumers want in payment options and what small businesses currently offer. It also provides strategies for small business owners looking to adapt to these preferences and enhance customer loyalty.

Leadership

Could We Have The First Native American Woman Governor? DEI Expert Weighs In On What Allyship Should Look Like If History Is Made.

We can all learn more about what it means to be a better ally for those who are the "firsts" in their space. Here are three strategies around allyship this DEI expert recommends to her diversity, equity and inclusion (DEI) consultancy clients.

Business Ideas

63 Small Business Ideas to Start in 2024

We put together a list of the best, most profitable small business ideas for entrepreneurs to pursue in 2024.

Business News

'Additional Human Touch': Starbucks Has a Turnaround Plan That Includes Buying 200,000 Sharpies. Here's Why.

Faced with declining sales, Starbucks has a comeback plan that involves several changes to stores and menus. Here's a look at the changes coming to your store.