Five Reasons Why Early Stage Startups Should Bootstrapping

When you want to start a startup, it takes an entrepreneurial spirit to make it happen, because there will be a lot of things to do. It should also be realized from the start, to start a new business requires investment funds that are not small in value.

How much should you invest to create a site? Should you buy equipment? What kind of office space do you need to rent? How should you pay yourself?

If you are still at this point, it is advisable not to think about taking credit, but to build a business entirely out of your own pocket. There are five alasan why startups in the early stages should bootstrapped. Here's a summary:

1. Business models usually change in the early stages

The first reason is because it is very likely that as you develop your ideas and business model it will fluctuate, while you will have to stay flexible with it. Usually the plan that you prepare carefully before actually being implemented does not always go according to plan. This is because there is an X factor, you also have to be prepared for these conditions.

When you're funding a startup out of your own pocket, you'll think twice before committing to spending so much money.

2. The phase that can balance the pros and cons of being an employee vs entrepreneur

There is a saying that goes, "Don't sink your ship,". This saying means don't quit your job too soon. There is a significant risk involved if you work from an office job too soon, as you will have to take full responsibility for all costs overhead. Starting from equipment, maintenance, IT computers, staff. Not to mention other things that are often taken for granted, such as health insurance, job benefits, overtime pay, and so on.

If you subsidize the entire initial growth of your startup with loans, you can easily lose track of the real business. So, make sure your business has progress to be able to support yourself and your employees before leaving the job that has been supporting you so far.

3. Be a stepping stone before deciding to scale up

If your business survives because it is subsidized by external funds, you may be tempted to scale up before successfully proving the business model accepted in the market. Let's say your business provides an art class service for couples in the evening. With your own money, you can test this business model by renting a room in a coffee shop for several meetings.

During that time, you consider whether this business model will generate loyal users? If it proves to be working, you can slowly rent the place out for a few months before deciding to go for a full lease. This step will minimize your funds being wasted.

4. There is an emotional connection when spending your own savings

You have an emotional attachment to your own money. Every receipt, expense, company expense and so on should make you say to yourself, "Do I need this?"

There are many business owners who struggle to run their business with a money-burning strategy, take credit for non-essential needs, such as business lunches, advertising, making merchandise, and others. Costs like this even though they never do it when they are with their families from their own savings.

For that, you need to start making a budget with a conservative nominal budget if things like this happen. That way you can continue a business that can make cash flow positive again.

5. You are in control of your own money

If the business you are starting carries debt, it means you carry the risk of having to pay interest to satisfy creditors. This is tantamount to meaning you lose control.

There is a business term commonly used for public companies in this regard, called the debt-to-equity ratio. This ratio is calculated to measure the ratio of all company liabilities to all assets or equity.

When the business is above the debt ratio, it could be a sign that your company is dying. Chances are your startup started with very small capital. In this case, the debt you incur will cause the debt-to-equity ratio to soar very quickly. That means it's a big risk.

The risk will be even greater when in the early stages you invite investors and exchange them for company shares. You will lose control, maybe even forced out of office by investors.

These five reasons directly encourage you not to borrow money at all from any party. Also don't rely on investors. When your business has found its market, but is reliable means you have the potential to scale up.