I was having a discussion with another entrepreneur over the weekend about the difficulties faced by first time entrepreneurs in raising capital for their businesses. The conversation naturally shifted to the importance of bootstrapping in the early stages and getting the business to a point where it is either generating substantial revenue or has a product/service that has got attention and hence is easier to raise financing for. Either way, getting to the point where your product/service has reached some sort of traction is where an entrepreneur is tested. This stage is the time frame between 2007 and 2009 in the chart below

When I launched my first business in the printing and designing industry, my partner and I used our personal savings. Both of us are extremely conscientious about saving money and even though we were only 22, we had enough to get us started. I have heard many entrepreneurs tell me they followed the same path and this habit of personal savings had been something that they had inculcated at a very early age. The good part about this is, that it is almost never too late to start saving. Spending money is by far one of the easiest and instantly gratifying things to do. Saving on the other hand and giving up somethings in the short term requires a completely different mindset.

In the context of being an entrepreneur I would strongly recommend that you make your savings as “Automatic” as possible. For further reading I would encourage you to get hold of “Automatic Millionaire” by David Bach. The process of taking out a fixed percentage from your monthly income is an extremely powerful one and can become a substantial cushion for you to fall back on. The next question that I am usually asked at this stage is “If our startup is not making money, how can we save?”. Limiting oneself to a single stream of income can be a dangerous strategy. If you are currently working 24/7 at your new startup and not bringing in any money from other sources your motivation level and drive is soon going to dry up. This will not only affect your performance at your startup it will also have a negative impact on your personal life.

Whenever I am asked this question I usually respond by asking the person about his/her talent or skillsets. Is there something that he/she can be doing on the side without distracting their primary responsibilities. I have had many partners do consulting part- time, sell insurance, give private tuition or take up an odd job to pay the bills and actually have an additional income. One needs to keep goals and objectives in mind and then find ways to reach them. Do all entrepreneurs survive the boostrapping stage? Unfortunately not. Getting past this stage requires an enormous amount of patience and passion to get you through.

If you are thinking about starting your own business or are already in the bootstrapping stage, don’t give up hope, remain focused on your end goals and handle your finances with the utmost care. The lessons you will learn through this stage will be invaluable when your startup finally breaks into the profitability stage. One last thing, the bootstrapping stage will be a very challenging stage in your startup’s life, it is therefore important to really enjoy what you do. If you are having fun,  it will be only be a matter of time before  you start seeing the results you want.