When you’re building a business from the ground up, funding decisions shape everything that comes next. Early-stage founders often face a choice: raise external funding or rely on their own resources. The latter approach is known as bootstrapping a business, and understanding how it works can help founders manage risk and grow internationally.
In this article, we’ll cover how bootstrapping works and explore its pros and cons. You’ll also learn practical steps for managing costs and scaling sustainably as your company grows.
What’s bootstrapping in business?
Bootstrapping is a way to start and grow a business using the founders' own resources rather than relying on external investment. This approach preserves control but requires careful financial management due to limited resources.
Unlike heavily funded start-ups that can invest aggressively in hiring or equipment early on, bootstrapped businesses typically grow at a more measured pace. Their spending also tends to be more constrained. Success depends on making deliberate decisions, prioritising essentials, and using limited resources as efficiently as possible.
How bootstrapping works
What does bootstrapping mean in practice? Let’s see how the process works and what founders should prioritise.
Common bootstrapping methods
Here are some common approaches to bootstrapping a startup:
- Use personal savings: Savings are the most common source of initial bootstrapping finance. You can also tap personal credit cards or ask loved ones for support.
- Keep operations lean: Focus on essential expenses, use low-cost tools, and track cash carefully so your business doesn’t burn through funds too quickly.
- Reach break-even quickly: Venture-funded startups can take years to turn a profit. Bootstrapped startups, on the other hand, need to generate revenue and break even before initial funds run out. This is necessary because they rely on limited personal resources rather than large external funding.
- Reinvest revenue carefully: Even with a steady revenue stream, manage expenses wisely so you can reinvest profits into the business and support sustainable growth.
Financial considerations that founders must evaluate
With limited funds, founders of bootstrapped businesses need to be on top of their finances from day one. Controlling costs↗ is essential — spending too freely can deplete cash before revenue starts flowing in.
A clear business plan with realistic financial forecasts is critical. So, use smart technology like expense management automation↗ and spend management software↗ to track spending, enforce policies, and categorise expenses. Monitor liquidity as you work towards break-even, and adjust your plans as your resources and cash flow↗ evolve. By maintaining visibility into upcoming revenue and costs, you can make informed decisions that keep your business on a sustainable path.
Pros and cons of bootstrapping
Bootstrapping a business has some powerful advantages, but it’s not for everybody. These are the main bootstrapping benefits and drawbacks.
Advantages
- Retain full ownership: You don’t have to grant equity to other investors, so you keep 100% ownership of the business and its profits. This means you can chart your own course without pressure to meet investors’ targets.
- Stay agile: Many start-ups succeed by pivoting and experimenting with different ideas. This is much easier to do when you don’t have to answer to outside stakeholders.
- Promote sustainability: Angel or venture-funded start-ups often need multiple funding rounds. Bootstrapping encourages self-reliance, cost discipline, and growth based on generated profits.
Disadvantages
- Experience slower growth: Keeping costs tight limits investment in people and equipment that could fuel growth.
- Lacks a safety net: Cash flow and working capital are limited. Therefore, unexpected expenses like urgent equipment repairs and sudden supplier price hikes can put the business under severe strain.
- Time: Bootstrapping takes a lot of time. You might have to juggle a day job, manage other responsibilities, and work on your start-up, stretching your project over months or even years.
3 effective steps for founders who want to bootstrap
Take these three simple steps to give your start-up a strong chance of success.
- Set clear revenue goals
Without external financing, it’s critical to start generating revenue quickly while keeping costs under control. Founders should set specific targets for both bringing in revenue and reaching break-even. This provides a clear roadmap for growth. As revenue begins to flow, continue keeping costs low and reinvest profits strategically to retain customers and support long-term growth.
- Reduce operating costs strategically
Running a lean start-up is about achieving more with less. Prioritize essential spending, postpone non-critical purchases, and find creative ways to save money. You don’t have to sacrifice quality — focus on smart solutions that keep your business running efficiently.
- Build partnerships
Contrary to the idea of the lone entrepreneur, start-up success usually depends on working with others. Building relationships helps you refine ideas, solve problems before they arise, and access resources you wouldn’t have on your own. Connect with other professionals by using an online platform like LinkedIn or attending industry events. Ask for advice, and share expertise to help each other grow. For example, offer a financial start-up free technical guidance in exchange for their financial expertise.
Examples of bootstrapping in real businesses
Massive venture capital investments make headlines, but plenty of successful start-ups began with bootstrapping. Here are a few examples:
- Airbnb: The travel giant’s founders relied on personal savings and creative tactics, like selling election-themed cereal and limited-edition merchandise, to raise early funds. Their ingenuity and hustle attracted early customers and investors, helping the business grow.
- Virgin: Virgin: Richard Branson started small with Student magazine and reinvested what he earned into new ventures that eventually became Virgin.
- Apple: Apple, now one of the world’s most valuable companies, bootstrapped in its early days. Steve Jobs sold his Volkswagen van and Steve Wozniak sold his calculator to fund the first Apple I. They also relied on money from friends and family to fulfil their first major order.
How Moss helps bootstrapping businesses stay efficient
Cost control is critical when bootstrapping, so the right financial software↗ makes a big difference. Moss helps bootstrapped teams oversee spend by centralising budgets, outgoing payments, and receipt-backed card spending, with role-based access to features like wallet balance visibility. Moss features include:
- Built-in receipt collection and automated receipt processing (OCR↗) help teams submit receipts and extract key details for expense receipts↗ and documentation.
- Real-time visibility into team card purchases, budget status, and outgoing payments processed in Moss.
- Full visibility into upcoming budgeted spend (planned spend in budgets) and scheduled upcoming payments (invoices and reimbursements).
Moss’ automation features are ideal for founders running a lean start-up. With cash constrained, you need to track working capital and prevent overspending — and Moss helps you do that. Now, you can focus on strategising and building revenue instead of wrangling expense reports↗. With visibility into spend in Moss and the company wallet/account balance (available to Admins and Accountants), founders can make better-informed spending decisions.
Bootstrap your business with help from Moss
Understanding bootstrapping and how to apply it puts founders in a stronger position to make smart funding decisions. It’s a viable, strategic, and adaptable approach that lets you retain full control and grow at your own pace.
To succeed with bootstrapping, you need to stay focused on costs and run a tight operation. Moss’ spend control↗ provides real-time visibility into spend managed in Moss, including team card purchases, budgets, and outgoing payments. Moss helps teams stay on budget through budgets with overspend alerts and by automating payment runs with scheduled payments.
Begin using Moss↗ today and take control of your start-up’s spending.
