Is bootstrapping worth the risks?
Deciding whether your company should be bootstrapped is not an easy decision, but it is a very personal one. Depending on your circumstances the risks will vary, and it’s definitely not for everyone. Let’s unpack some things that may help you decide.
Pros of bootstrapping your business
There’s the option of selling equity, which is the value of the shares issued by a company. So, in simpler terms, selling equity means selling ownership. You can give employees options as to how much salary vs. equity they'd prefer.
Full control of company
Having full control (majority control at 51%). This depends, initially, on the number of co-founders, but having control of your vision at a smaller scale is one of the pros of being bootstrapped. You don’t have investors trying to input their opinions. It’s your vision, your money, and your company.
Not paying interest on a loan
Not acquiring debt is also an obvious benefit of being bootstrapped. Many people take out a loan when they first start a business or during the business formation stage, and while this may help get their feet off the ground, the interest on that loan can become quite expensive.
Cons of bootstrapping your business
Running on fumes
Being your own boss is great, but with it, come long days and nights. Not only is it challenging to do a lot with a little, but you also begin to spread yourself thin. You and your company will then both be running on fumes, and that can lead to a negative impact on your business.
Very limited expansion
A limited budget means limited staff, resources, and limited amount of risks you’re able to take. This can result in slower growth and expansion.
Any mistake you make feels significant because of the limited resources. Every decision seems crucial and that pressure can create high-level stress, resulting in possibly making poor decisions.