Whether you are starting a business, or scaling up an existing one, the importance of having enough capital cannot be overstated. The question then becomes, how do you get that capital? Almost every entrepreneur has used bootstrapping or small business loans at some point in their careers. This approach is common with first-time entrepreneurs because it is often the simplest and can work. This approach also allows the entrepreneur to retain ownership and control over their company.
However, bootstrapping entrepreneurs may find themselves being outpaced by their competitors, who are accessing much larger amounts of cash through outside sources such as angel investors and venture capitalists.
Entrepreneurs must decide between bootstrapping and seeking outside funding – and there are pros and cons to each.
Bootstrapping means that you are using your own resources to start or scale your business. The clear advantage to this is that it allows you to retain complete control over your company. This means that your timelines are flexible, and you can pivot the direction of the company whenever you see fit.
The drawbacks, of course, are that you will likely have fewer resources which can slow down the growth of your business. This could put you at a competitive disadvantage.
On the other hand, when you can obtain funding, you will typically have access to more resources, and these resources aren’t just financial either. Working with investors, you will instantly grow your network and have access to business expertise. This typically allows you to grow your business much more quickly.
The drawback, though, with funding is that you go from having full ownership of your business to having part ownership. Your new investors may want to have input on the direction of the business, and you will be accountable to meet the timelines of your investors.
Deciding what form of capital is best for your business
In addition to basing your decision on the obvious pros and cons of bootstrapping and outside funding, you may also need to consider how much money you actually need. This will vary depending on your business.
And then there are the costs of working capital to consider. How much do you need to pay for rent, advertising, and wages? The more money you require, the more difficult bootstrapping will be, and the more attractive seeking outside funding will become.
Contact CBGF today
Are you considering seeking funding to continue scaling your business? If so, give us a call today. We’d be happy to discuss your options with you and help you find a solution that suits your business.