Mr. Yemi Hassan is a technology entrepreneur. He has only 500,000 naira in his chest as the capital. His startup needs at least 5 employees to get off the ground.

His revenue projection for the first quarter is 1 million naira. But operating cost would take 400,000 naira monthly.

To increase revenue, number of employees would have to double and operating cost will rise by 50%. What does Hassan need to do to remain afloat until he breaks even and possibly attract seed investment?

As an entrepreneur, it is not strange to find yourself in Hassan’s shoes today.

But just like myriads of successful entrepreneurs before you, you can successfully explore an essential strategy in business management called bootstrapping to successfully start and operate your startup venture.

Bootstrapping is a situation where an entrepreneur starts a company with little capital.

Also Read: How To Invest In Treasury Bills

According to Investopedia, an individual is said to be bootstrapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company.

“Bootstrapping in Nigeria and Africa is not just realistic, it is essential. Because, the fact of the matter is that compared to other places, you almost always need to use your own money to get your business to a certain level,” said Mark Essien, Founder/CEO of hotels.ng who was a guest at Bounce Masterclass recently.

*CEO of Hotels.ng, Mark Essien teaching bootstrapping strategy during Bounce Masterclass. 

According to Essien, bootstrapping is imperative because, “you need to demonstrate traction before raising money. It is very rare for people to invest money when it is only an idea”.

“That means that every entrepreneur must learn how to bootstrap. And almost every entrepreneur who has raised some investment started off bootstrapping and building their company with their personal money,” added Essien who bootstrapped his startup for a year and half before raising seed investment.

Rules Of Bootstrapping

Like everything else in life, there is a rule to this as well.

1. You Cannot Bootstrap On Zero-Income

To successfully bootstrap, you need some level of consistent cash flow.

So, to bootstrap a business, you are going to have to realise that you are going to build a product. Building the product means you are going to invest your time, if you are the software developer yourself. Or you are going to have to invest money if you are working with somebody else.

You May Also Like: How To Invest In Bonds

Now, that other person you are working with? It is not the best idea to immediately make that person a partner.

This is because a person may be good to build your minimum viable product, MVP but the person may not be good to be in your business long term. So, it is better that you hire somebody and let them build the product for you.

And now, if you are hiring someone, you need to pay salaries. And to pay salaries, you need money. Now, if you are non-technical, and are a business co-founder of a product, then you must have a way of making money.

How To Earn Income While Bootstrapping

There are several ways to earn the much-needed income during your bootstrapping journey.

A) Maintain A Job: If you already have a job, you must continue working at that job. This will help you earn the money from the job and in the evening, you spend a couple of hours every day working on building your business.

This is safe, because you have a salary. If things go wrong and the business does not take off as you thought, you can always fall back on your job.

B) Become A Consultant: The alternative method that you could do is consulting. This means you are not working directly for somebody, but you are working flexibly, meaning you get contracted every now and then.

Read More: How To Reduce Your Tax Burden 

So, you now space out your time, maybe working like 3 days a week on fulfilling your contract and then the other time, you are now using it to build your business.

A good trick is to try and consult in an area that you are building your business in.

Let’s say, you are building an online accounting product, you could be consulting as an accountant for companies.

So, all the lessons you learn there, you may bring them into your products and even all the clients you are meeting, you can then sell them your products later.

It is always best to have some form of plan on how to get revenue while you are bootstrapping.

To be continued….

Also watch: Treasury Bills - How To Calculate Your Earnings