Federal Reserve Survey Reveals Truth About Bootstrapping

Bootstrapping Never Stops

Bootstrapping is the primary source of funding for most businesses, forever. That’s why we say “Bootstrapping is Plan A.”

It starts even before you start the business: strengthening your personal balance sheet, managing down your personal burn rate, choosing a business wisely.

Then you have to put your Assets On The Line.

A huge survey of 10,000+ businesses by the Federal Reserve Banks shows that this method of startup bootstrapping is the primary way companies fund their first two years, one-third of the time.

Another half of the time, customer funding is predominant for young companies. That’s also bootstrapping!

Profits from revenues, better thought of as positive operating cash flow, just increases in importance over time as a source of funding.

This is not to say that grants, debt and equity are never helpful. Many companies have “all of the above” funding strategies. But this survey shows that bootstrapping by using your company’s excess cash – and sometimes your own cash, again – remains the biggest source of funding for most businesses. Forever.

 

 

Don Gooding

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