When it comes to business financing, some may have a trust fund. Some can take out a substantial loan. Others may not be so lucky. This is when the business term of “bootstrapping” comes into play.
Bootstrapping is, simply put, spending frugally. Enreprenuer.com defines it as “one of the most effective and inexpensive ways to ensure a business’s positive cash flow. Bootstrapping means less money has to be borrowed and interest costs are reduced”.
Irrespective of whether you are starting up your business, or expanding an established one, the amount of cash you can spare is limited. And therefore, you need to prioritize where the money is spent. Refrain from considering yourself a ‘scrooge’ because bootstrapping is an actual business term – so it’s cool to be a penny-pincher. There are four common approaches to bootstrapping.
Less is More
First, there’s the ‘less is more approach’. This can be applicable to almost all elements of your business. From interior design (minimalist is actually a trendy style of design), to use your personal computer at your store, from refraining from buying an entire year’s stock and settling for only 6 months, to taking the social media route instead of paid advertising. Make a list of all your costs and then ask yourself: Does the business really need this? Prioritize and then what doesn’t make the cut – cut it.
Government grants and
support funds
The second approach is applying for a grant or a government loan, and in Bahrain’s case – Tamkeen. Tamkeen has a number of programs that you can benefit from. Thousands of businesses have already benefited from their subsidized loans and support funds. You do need to invest time to prepare all the paperwork, fill out the relevant forms, go through the right channels, and meet their specific requirements – but it is worth the effort and the wait.
Partnerships
The third approach is to find a partner, a venture capitalist, or an angel investor. Yet having a partner can be a double-edged sword. On one hand, the additional capital can be of great value, however, the drama that can come with it can be detrimental. It is, therefore, crucial to outline your responsibilities (on paper) so that both parties are aware of what is expected of them and any potential rifts can be avoided.
Crowfunding
The final, and perhaps most unusual approach in our region, is crowdfunding. Crowdfunding, as the name implies, is when the business asks for financial support from the general public. It can be considered as a type of microfinancing (which does not require repayment, think: Kickstarter.com). In a conservative culture like Bahrain, one might shy away from such an approach. But I believe the idea has merit – especially where the business idea has real value and can impact society in a favorable way. This can make the fundraising easy, popular, and in fact, a humane obligation.
So, depending on your business idea, you may find one approach more appropriate than the others. Regardless of which approach you opt for, being careful about your spending is wise and sensible, being stingy is trendy! So go on – tighten the belt and bootstrap your business away.
