Starting a New Business with Bootstrap Funding

Here's some great news for anyone who wants to start a business: most successful ventures don't require a lot of money to get going. Many entrepreneurs start with small sums — often $5,000 or less — and then finance their growth out of profits.

In other words, you don't need to have friends in the banking or venture capital business to build a successful enterprise from scratch. Consider this statistic: roughly half of the most recent Inc. 500 — the magazine's annual list of fast-growing small businesses — started at home. The average start-up cost for companies in the 500 was a modest $25,000, and many of the entrepreneurs behind these firms spent far less than that amount to start their enormously successful enterprises.

Clearly, there are ways to start a thriving business without spending a lot of cash. Here's a sample that might get you started:

Keep your day job — for now. You might be able to start your business by working on it during weekends and evenings. That way, you can afford to experiment with different versions of your business until you find the one that seems most likely to succeed. Ideally, you can get your business on track and accrue a healthy backlog of orders before you quit your job.

Work part-time. Try shifting from full-time to part-time work when you start your business. This move makes the most sense in the early stages of your new venture, when you need to devote more time to finding customers and delivering products and services to them.

Go from two incomes to one income for a time. If your spouse is employed, his or her income (and benefits such as medical insurance) might cover basic living costs long enough to get your firm started. This may mean creating a new spending plan for your family, but adhering to new budget guidelines for a few months is a small price to pay for long-term success in a business that is all yours.

Turn your employer into a client. You might be able to start your new business as a consultant or supplier to your old firm.

Get creative about financing. You may be the best source of financing for your new business. For one thing, you won't charge yourself interest. So begin your search for start-up cash by rummaging through your personal treasury. But be wary of tapping into retirement accounts; you probably can't afford to risk these funds. Instead, design a budget that will boost your savings rate, and set that money aside in an account for your new business.

If you need money right away, you can also consider borrowing money from family members and friends. But don't borrow more than you are willing and able to repay over time in the event that your business doesn't work out. Alternatively, some family members or friends might be willing to risk their money in exchange for an equity stake in your business.

Credit cards are a tempting — but expensive — source of starting capital. If you resort to them for cash, your business plan should include a schedule for paying back that money within a year or so.