Starting a business with no capital

It is not the strongest that survives but it is the ones that can adapt. This article presents one option to help you fund your business start up or expansion with little or no capital. Complaining about the economic environment will not help. Get up, adapt and get sh*t done. Read on…

One effect of the “Liquidity crunch in Zimbabwe” is that businesses are not able to access the requisite funding for their operations. (1) Banks are not lending and when they do… (2) bank lending comes with either unreasonable interest rates (20%-35%) & upfront deductions from the loan (up to 10%) or request for collateral at 5 times or six times cover (kkkkk…) (3) The culture of angel investing, business incubating is still foreign to Zimbabwe. So unless, your bhururu lends you some cash, you get stuck with a brilliant idea that may never see the light of day. Don’t get me started about the loan sharks charging you 45% interest over 30 days (seriously…)

In comes Boot-strapping. Boot-strapping can simply be defined as helping oneself without the aid of others or getting yourself out of a situation using existing resources.

Boot-strapping…

 Investopedia – A situation in which an entrepreneur starts a company with little capital. An individual is said to be boot strapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company. Boot-strapping can be beneficial as the entrepreneur is able to maintain control over all decisions.

Business Dictionary – .Building a business out of very little or virtually nothing. Boot-strappers rely usually on personal income and savingssweat equity, lowest possible operating costs, fast inventory turnaround, and a cash-only approach to selling. Many of today’s largest corporations (such as Apple computer, Clorox Co., Coca Cola, Dell Computer, Hewlett-Packard, Microsoft) began as boot-strapped ventures. Most of world’s startups still follow this road; either because there is no alternative, or because of the unmatched control and independence it offers.

Boot-strap Strategy

Once you decide to bootstrap, you need to come up with a suitable strategy. The gist of such a strategy is that you work with what you have to get your business idea off the ground. Some capital requirements will prove too heavy for bootstrapping and others will be light enough. It is not a one size fits all approach but one whose suitability will vary on a case by case basis. Listed below are some of the items that may be included in a typical bootstrap strategy. The list is by no means exhaustive. What worked for one may not work for another.

Dont be afraid to get dirty..
Don’t be afraid to get dirty..

Cut on outsourcing – getting a consultant or an employee for a job you could do yourself is an avoidable expense. For example, you can make your own teas and run office errands. This avenue also accelerates your personal development as you would be constantly learning new skills.

 Pick a co-founder wisely – Boot-strapping means that the vast majority of the work is done internally. Find a cofounder who has a different set of skills so that you complement each other. If you’re good at different things, you have a better shot at being able to do everything between the two of you, keeping expenses low.  Even though this co-founder may not invest physical capital into your business, his or her expertise could pay off in the future. This is sometimes called “sweat equity.”

Call to Austerity...
Call to Austerity…

 Austerity. Watching every penny like a hawk – Being fancy or lavish does not always get the job done. Saving on little things goes a long way. Pick a functional over posh office space. If you are in Harare, consider starting from a small office at Robinson House instead of Eastgate. Start with the free versions of QuickBooks, Dropbox etc. Consider refurbished computers instead of the newest MacBook Air. We also know of business founders who have gone without salaries for years. Be prepared to go hungry…

 Negotiate With Your Suppliers – If your business requires an inordinate amount of equipment in order to function, you might find that a lot of your capital is tied up in equipment purchasing. Often, you can purchase this equipment from manufacturers on a credit arrangements such as  lease financing and/or hire purchase.

…these are some of the items that may form your strategy. I hope you are getting the principle. The cocktail of measures to be applied to any business can not be prescribed (remotely, at least) but will be decided in the specific context of each business. At the optimum, boot-strapping ceases to be confined to a mere strategy but would have developed into an attitude. Once boot-strapping begins to flow in your blood, it becomes possible to found, build and grow your business into a lean and cost efficient entity.

Homework

The purpose of this article is to get you thinking. My objective is to introduce boot-strapping as another funding option for your business idea. The ball is in your court, now. Get to the drawing board and (1) educate yourself on this principle (2) decide how best you can apply it in your business (3) come up with a strategy (4) work at it until it becomes an attitude and culture. Happy boot-strapping.

Remember, you can do BIG things…

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