If you’re in the early stages of your business development, you’re probably very familiar with bootstrapping. That is, funding your business from your own savings or income. There are many benefits to bootstrapping as you are starting out, such as making you focus on what’s important in the business and getting creative with the allocation of resources. But there comes a point when bootstrapping will begin to starve your business. Here are some signs that you should stop bootstrapping and look for external funding for your business.
You Don’t Have Capacity
You’re so bogged down in doing the day-to-day activities and administrative functions of running the business that you just don’t have time to work on growing the business. You’re so busy trying to make ends meet that you don’t have the mental bandwidth or emotional capacity to think strategically and plan for the future of the business.
Your Quality is Impacted
Bootstrapping allows you to maintain control over your product or service development, marketing, and business processes. This helps you figure out how you want everything to work in the beginning stages of your business. But over time, bootstrapping can stretch you thin and might negatively impact the quality of your offering, your ability to market the business, or cause you to become a bottleneck in your business processes.
Your Decisions Are Based on Scarcity
When your business lacks adequate funding, you’re more likely to make decisions based on scarcity. You might take on a client that is not ideal or a project that requires more work than you are being compensated for in order to make some money. Or, you might make spending decisions on short-term fixes that could constrain your business’ development over the longer term.
Your Work-Life Balance is Suffering
As an entrepreneur, your business is a big part of your life – but, it shouldn’t be your entire life. Consider whether your work-life balance is suffering because you’re trying to do it all in your business and don’t think you can afford to make the key hires to take the pressure off you. It may be time to raise funding to begin hiring a team.
You’re Taking on Too Much Risk
Bootstrapping means that all the risk falls on you. You’re putting your own savings into the business. It may fine when you’re making a profit. But if you’re losing money, you’ll likely have to put more money into the business to cover the losses. Not to mention, you’re probably not taking much, if any, salary or owner draw from the business. As a result, you may end up with little to no safety net.