Close to 50% of startups shut down within the first three months. Apart from scaling up the idea, managing finance /capital is really important for founders to know.
Here are some of the mistakes bootstrapping entrepreneurs often commit.
Not taking care of finance
This is an extremely important habit for any entrepreneur to build – i.e. taking care of one’s finance and always be in the know of runway one has.
No matter what your funding status is, you need to pay your bills, employee salaries, infrastructure costs (for e.g. website hosting) etc. You do know how much money you need to shell out every month – it’s really important to have a sense of working capital and the runway you have.
Finance management is a discipline – you let it go and there will be some really bad surprises on your way!
Not taking salary
In the first 4 years of my bootstrapping life, I wasn’t withdrawing any salary. While it looks good to the world outside, the reality is that I was in a very tight spot.
My logic was that I need to spend the profits/revenues back in the company, but when you woke up a day to realise that you just don’t have enough money to survive, you can’t think of running a healthy business.
The easiest corollary to this is when the air hostess tells you that when there is a low air pressure (i.e. tough condition), you need to wear the oxygen mask first and then take care of others (for example, kids). Because if you can’t take care of yourself, how can you take care of others (including your company)?
More than that, one needs to respect one’s time and efforts and while you don’t need to take market salary, you should withdraw enough to live a healthy lifestyle (assuming you/the business can afford it).
Make sure that you have a sustainable lifestyle and your family is comfortable with your entrepreneurial avatar.
Overspending Due to Peer Pressure
As a bootstrapper, you need to realise that you can’t take off your eyes from the target. While your funded competitors are spending on fancy office spaces, furniture, games and infrastructure, you need to be smarter with your money.
You may not be able to spend on fancy things, but ensure that you are spending smartly on employees and make your office a great place to work/spend time.
Be assured that sometimes your team/employees will ask you whether you are a miser when it comes to spending money (because your competitors are spending a lot), so always ensure that you align them the company vision.
Rethink Bootstrapping When the Timing is Right?
After a certain point in time, you might need more capital to scale the company. Don’t shy away from raising funds – just because you have been bootstrapping too long.
Happy scaling up!