Bootstrapping your Business
Peter is a recent University Graduate from the University of Kunku who majored in Agricultural Science. For his thesis, Peter discovered a unique strategy for improving poultry farming, by reducing the usual poultry health cost and cracking of fowl eggs, he could triple egg production in two months. Peter wants to start a business with this idea and is on the lookout for funds.
Peter needs “seed capital” or start-up funds to launch his business. He knows that banks in Ghana do not fund start-ups. He has heard of venture capital, but has no idea where one can find a venture capitalist in Ghana. Peter is going to have to fund his business through bootstrapping.
What is bootstrapping?
Bootstrapping is a term that originated in the 1800’s in the United States. It came from an idiom to pull oneself over a fence by pulling up one’s bootstraps (the loops at the top of tall boots to help you pull them on). Think about that. Go stand in front of a fence and pull up on your shoes as hard as you can. Will you ever be able to pull yourself over? What started out as a phrase to describe the impossible, today it means to start something with your own means.
For many young people, bootstrapping your business may seem as impossible as pulling yourself over a fence by your bootstraps, but there are three things you can do to make it easier.
1) Save, save save!
If you know that you want to start a business at graduation, start saving in your first year. Make a realistic plan of how much you can put away per week, open a savings account, and hold yourself to it. Many entrepreneurs in Ghana start their business as a side hustle. If you get a job to fund your business, you should still make a savings plan and make a contract with yourself to quit your day job and focus on your start-up once you hit your goal.
2) Make your business as small as possible
All you are trying to do at this phase is prove out your business idea. Do not hire employees. If you need someone to do something technical that you cannot do yourself, pay them on a short-term contract. If we take Peter’s example, he can start with 3 or 5 hens to prove that he can triple production instead of starting with 100 hens. If you need help figuring out what is called in the startup world, your Minimum Viable Product (MVP), chat with your OZÉ business coach. We can help you design it.
3) Reduce your living expenses
Imagine that you have GHC 1000 to cover your living expenses while starting your business. If you spend GHC 250 per week, you will only have a month to prove your business idea before you have to quit. If you can spend just 100 per week, you have 2.5 months. You can reduce costs by moving in with family, cooking inexpensive meals, walking instead of taking a trotro, and putting off any non-critical expenses (like a new pair of shoes or a night at the bar).
Even with these tips, bootstrapping is hard work! Just remember that bootstrapping will pay off down the road. If you already have a viable business when you take in outside cash, your interest rate on debt will be lower. If you take equity financing, you’ll have to give up less ownership.
OZÉ is a mobile platform that helps small business owners in Africa (starting in Ghana) to make data-driven decisions to improve their performance, tap into networks, and access capital. Entrepreneurs can track their sales and expenses, who owes them money and who they owe money to, see their profits on a dashboard, send receipts and invoices, and even access a business coach. Interested? Click here to try it today!