Her CFO Tips: Bootstrapping Finance Strategy During Your Business’s Growth Stage
Updated: Jan 9
When you think of bootstrapping finance, you probably picture a company seeking financial funding in its early startup stage. But what if the business reaches its growth stage, where it's ready to expand further in different aspects? Does bootstrapping finance have a place in this critical phase? The answer to this is a big yes, and there are smart ways to use this to your advantage.
In this episode, we talk about using bootstrapping as a financing strategy for growth-stage businesses. We examine when it makes sense to bootstrap during this phase. We also discuss the steps on how to successfully bootstrap for business growth, along with concrete examples you can follow.
If you want to know how you can successfully bootstrap your business growth, then tune in to this episode!
Here are three reasons why you should listen to the full episode:
Learn the definition of bootstrapping.
Understand when it is appropriate to use bootstrapping for funding business growth.
Find out concrete tips on how you can bootstrap your business growth to success.
Visit Christina Sjahli'’s website for more insights on business finance on the Her CEO Journey™ podcast.
Episode 124: The Circular Approach: Decreasing Plastic Waste with a Sustainable Business — The Journey of Plaine Products
Episode 125: Getting Lean: Reduce Waste and Production Costs through Lean Manufacturing — The Journey of Meliora Cleaning Products
Episode 126: Changing the Future of Business: Slow Growth and Sound Financial Planning are the Secrets — The Journey of Badger
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Financial Tips On Bootsrapping Finances
Bootstrapping is a form of financing strategy where the founder doesn't use outside investment or cannot access outside capital. Meanwhile, some founders believe that money borrowed from close people or personal funds is also bootstrapping.
[02:47] Bootstrapping for Growth Purposes
You use the cash flow produced from a viable business model without sharing ownership with outside investors in the growth stage. The female founders did this in Her CEO Journey™'s Business for Good Series.
We'll look at when it makes sense for founders to use bootstrapping during the growth stage in the following sections.
[03:40] Bootstrapping Reason #1: Your Social Impact Mission is Front and Center
Having a social impact mission is common among the mission-driven female founders in this podcast. They don’t want their social impact to be secondary. And so, they give importance to their mission and profitability over fast growth.
[04:02] Bootstrapping Reason #2: You Choose Profitability Over Hypergrowth
Bootstrapping makes sense if you prefer to grow slowly with a healthy profit — the opposite of hyper-focusing on growth without reaping profit. Remember: focusing on sales and revenue doesn't always translate to a profitable business; they are only one piece of the puzzle.
[04:30] Bootstrapping Reason #3: You Want to Attract Better Deals in the Future
Having a track record of profitable growth and an overall healthy business will attract more qualified investors.
[04:58] How to Implement Bootstrapping During the Growth Business Stage
If you decide that bootstrapping is the right strategy to finance your business growth, then what's next? In the following sections, we'll look at seven tips you can implement to find success in bootstrapping your business growth.
[05:11] Tip #1: Be Creative
Be creative so you can minimize overall expenses without sacrificing your social impact mission. If you think outside the box, you can find ways to save money. For this, inspiration can hit you by listening to other founders and learning from them.
[05:52] Tip #2: Take Advantage of Project-by-Project Financing
Project-by-project financing means borrowing money for a particular purpose. You can do so either from a traditional or non-traditional lender. Some examples of a project are purchasing a warehouse or equipment to manufacture new products.
Here, you use cash flow from the current operation to finance the day-to-day operation. Then, you use debt to finance a new project. This type of financing leverages the asset from the project as guarantees. Tune in to the full episode for a detailed example of this from Episode 124!
[07:15] Tip #3: Finance Your Social Impact Goal Through Partnerships
Look at your business partners or suppliers. Then, see if you can enter an agreement that is a win-win for all stakeholders.
One company that did this was Badger. They partnered up with another B Corp certified business and structured a power purchase agreement financing deal. In a way, this is also an example of project-by-project financing using a non-traditional lender. You can learn more about this on Episode 126!
[08:12] Tip #4: Reduce Costs by Continuously Improving Your Internal Processes
The key point is to look at your everyday internal processes and make them more efficient on a daily basis. That's how you can lower costs without hurting your social impact mission.
For example, Meliora Cleaning Products implements the lean manufacturing process. This process leads to the just-in-time inventory process. You can learn more about these processes in Episode 125!
[09:14] Tip #5: Develop Financial Discipline
Remember that you live and die by your cash flow when you are bootstrapping. Make sure you have an excellent financial discipline to deal with emergencies and sudden opportunities.
[09:29] Tip #6: Review Financial Statements on a Monthly Basis
Keep a close eye on your financial results. The best time to conduct a financial review is at the end of each month. This way, you gain a better understanding of your revenue, expenses you can reduce, and potential investments for future growth. The goal is to make timely adjustments before you run out of capital.
[10:00] Tip #7: Obsessively Track Profitability
In bootstrapping, all your capital depends on how profitable your business is. Thus, you need to keep a close track of your overall profitability. It’s especially critical when you’re adding products, new locations, or new customer segments.
[10:33] Bootstrapping and Business Planning
Bootstrapping requires you to create a business and translate that into financial numbers. Many founders find little success in this either because of capacity issues or lack of joy and motivation.
Enjoyed this finance bootstrapping episode?
Are you exploring the right financing strategy for your business? If you're in the growth stage, bootstrapping may be your answer.
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Bootstrapping Finance Strategy Transcript
Christina Sjahli: Many founders think bootstrapping is a strategy only for the early startup. In reality, bootstrapping can also be a financing strategy for the growth stage. The growth stage, for example, means when a business is targeting a new market segment, creating additional products, or maybe expanding to a new geographic location. Some experts said about 75 to 85% of businesses did some form of bootstrapping to finance their growth.
You're listening to Her CEO Journey, the business finance podcast for mission-driven women entrepreneurs. I'm your host, Christina Sjahli. If you are new here, a big warm welcome. If we are not connected on LinkedIn, please reach out and say hi because that's where I hang out and share my business finance tips. If you have been listening to this podcast for a while, and you are a regular listener, I want you to know I appreciate you. My podcast won't be around without your support. This is a free weekly show where my guests and I want to inspires you to balance between mission and profit, to create an impact in this world, and to achieve financial equality through your business.
We are not here to telling you that bootstrapping is the best way, and getting outside investment is wrong. Instead, we are here to share knowledge and strategy so you have the confidence to decide on your own based on what aligns with your purpose. But first, let's start by the definition of bootstrapping, specifically for growth stage business. Furthermore, in this solo episode, I'm sharing when it makes sense for you to bootstrap your way during the growth stage and seven tips to successfully bootstrap your business growth.
Bootstrapping is actually one form of financing strategy. It is a financing strategy when you, as the founder, don't want to have outside investment, or when you are unable to access outside capital. However, depending on the stages of your business, bootstrapping can mean different things. When your business is still in the pre-revenue level, or trying to figure out the minimum viable product, those are considered the initial stage. One definition of bootstrapping means no outside money, including no capital from friends and family. On the other hand, some founders believe taking money from people who are close plus some of the personal fund, that can be considered as bootstrapping as well.
Now, bootstrapping as a financing strategy for growth purposes means using the cash flow produced from a viable business model and not having outside investors with a share of ownership in the business. In the Business For Good Podcast series, which is Episode 124 to 126, all of these female founders bootstrapped their way during the growth stage. I invite you to head on over to christinasjahli.com/herceojourney, and have a listen. So you understand how bootstrapping look like for growth stage businesses.
Let's discuss when it makes sense for a founder to use bootstrapping as a financing strategy during the growth stage. So reason number one: when your social impact mission is front and center, you want to use bootstrapping as a financing strategy. This is common reason among mission-driven female founders I spoke to. They don't want their social impact mission to be secondary. They don't want to sacrifice fast growth over their mission and profitability.
Now, reason number two: when you choose profitability over hyper growth, you prefer to grow slowly with healthy profit instead of focusing on growth, but no profit. You may think if you focus on sales and revenue growth, then automatically you have a profitable business. But that's not always the case because sales and revenue are only one piece of the puzzle.
Number three: when you want to attract better deals in the future. Because when you have a track record of profitable growth and healthy business, likely you attract more qualified investors. These are the three reasons when it makes sense for you as a founder to consider bootstrapping as a financing strategy to finance your growth stage.
If you decide to bootstrap and this is the right strategy to finance your business growth, then next we are sharing seven tips you can implement and be successful to bootstrap your business growth. Number one: be creative so you can minimize overall expenses without sacrificing your social impact mission. Thinking outside the box and being creative will always present opportunities to save money. In Episode 124, the founders of Plaine Products share how they plan to minimize the renovation costs of their newly purchased warehouse by utilizing their spouses' construction skills. Now, that's one way of being creative. I'm sure there are so many other ways that you can do this within your business. Sometimes, you just need to listen to other founders and learn from them.
Number two: take advantage of project-by-project financing. Project-by-project financing means borrowing money for a specific purpose from a traditional lender or non-traditional lender. Example of a project is purchasing a warehouse, or purchasing equipments to manufacture new products, or upgrading current equipment to increase capacity. The idea of project-by-project financing is to use cash flow from the current operation to finance the day-to-day operation. And then using debt to finance a new project. Normally, this type of financing leverages the asset from the project as guarantees.
As an example, in Episode 124, the founders of Plaine Products shared they purchase a new warehouse using a combination of a commercial loan and a government grant. Then they take it a step further. Once fully renovated, the warehouse building also has extra spaces, which they can rent out and generate rental income to pay for the commercial loan. So the bootstrapping strategy they are using is a combination of creativity to minimize expenses and project-by-project financing.
Number three: finance your social impact goal through partnership. In Episode 126, Rebecca Hamilton, the co-CEO of Badger share one bootstrapping way they did to finance their journey to net zero. They financed the construction of their solar panel through a partnership with another B Corp certified business. The financing deal is structured through a power purchase agreement whereby they pay their energy partner each month as if they are paying for their regular electricity bill, but a portion goes to owning the solar panel. This is another example of project-by-project financing using a non-traditional lender. So look at your business partners or even your suppliers and see if you can enter into an agreement that is win-win for all stakeholders.
Number four: reduce waste and production costs by continuous improvement in your internal processes. In Episode 125, Kate Jakubas, the co-founder of Meliora Cleaning Products credits the success in their bootstrapping strategy by continuously improving their internal processes. In this case, Meliora implements a lean manufacturing process, which leads to the just-in-time inventory process. If you want to learn more about the lean manufacturing process and the just-in-time inventory process, you can head on over to christinasjahli.com/herceojourney and find Episode 125. The key point here is about looking at your internal processes daily and make them more efficient on a daily basis. That's when you can lower your costs without hurting your social impact mission.
Number five: develop financial discipline. You live and die by your cash flow when you are bootstrapping. So make sure you have a good financial discipline to deal with both emergency and sudden opportunities.
Number six: review financial statements on a monthly basis. You want to keep a close eye on your financial results. So we recommend conducting a financial review at the end of each month. This way, you gain a better understanding of your revenue, what expenses should be reduced, and the type of investment you need for future growth. The goal is about making timely adjustment before you are running out of capital.
Number seven: obsessively track profitability. When you are not interested or not ready to have any type of investor, angel or venture capitalists, know that all your capital depends on how profitable your business is. That means you need to keep very close track of your overall profitability, especially when you are adding products, new geographic location, or new customer segments.
Bootstrapping your business requires you to create a plan. And it's not just any plan. You need to create a business plan and then take and translate the business plan into financial numbers. And this is an area where many founders can drop the ball either because of capacity issue, or maybe it's not something they enjoy doing.
When you are ready to have a trusted partner to take care of your business finances and allows you to focus on what you love building, connect with us at christinasjahli.com/let-s-chat. In the meantime, we have created a quiz to identify any financial gaps you may have, which can stop you from building a sustainable and profitable purpose-driven business. You can find a link to the quiz in the show notes. And take action to fill in the financial gap you may have in your business.
And that's bring us to the end of another show. Thank you so much for listening to another episode of Her CEO Journey, the business finance podcast for women entrepreneurs. If you want to create a proactive financial plan and process for your business so you are ready to weather the financial storm over the next few months, let's chat and see what's possible for you. Book in a time to speak with me at christinasjahli.com/let-s-chat.