3 Mistakes That Bootstrapped Small Business Owners Commit

Harry Trott

August 21, 2017

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Starting up a new business can come with a lot of capital expenses. There is equipment to procure, vehicles and furniture that need to be purchased, not to mention costs related to leasing and store setup. If you run a business that needs a license to operate, you may also have to invest in completing the necessary paperwork. All of these expenses before you start making any money can make a bootstrapped small business owner quite frugal. While frugality is not a bad trait, it is not uncommon for business owners to make bad decisions under these circumstances. Here are a few such mistakes that bootstrapped small business owners must avoid.

Failing to think long-term

How big an office should you get when you are just starting out? How much should you spend on getting a logo for your business? As a startup small business owner, it is easy to lose track of the long term vision of your company and instead invest in the short term. For instance, you could be signing a lease for an office space that can only accommodate five people when you could potentially grow to ten people over the next two years. Logos may seem like a frivolous expense although business owners understand how important it can be to build a brand. Keeping the long term vision in mind is quite critical.

This does not mean you should lease out an office space for ten people when it is just two employees in your early days. Rather, you should refrain from committing yourself to a two year lease on a small office space when you could clearly grow beyond capacity. It’s perhaps a better idea to work out of a coworking space in your early days till you outgrow this.

Skimping out on essentials

Running your own business would mean expenses that should not avoid. You may, for instance, not want to buy an insurance because it feels like an expense you don’t need. Similarly, you may find it economical to go with a shared hosting space since it’s clearly less expensive than a VPN or a dedicated server. But an insurance or a VPN is an essential component of business and skimping out on such expenses can land you in trouble when you least expect it. Shared servers are priced only a few dollars lower than a VPN but are extremely vulnerable to disruptions even when you are careful. The costs that your business can incur due to such disruptions can run into hundreds or even thousands of dollars. Identify such essential expenses and do not ever skimp out on them.

Not keeping proper accounts

Most lending institutions and investors look at your business revenues while gauging the size of your business. However, the real health of your business lies with your net profit and not operating revenue. Small business owners routinely fail to keep a proper tab on their income and expenses. In addition to this, business owners must also keep an eye out on wastage that arise from improper demand planning. Failing to keep track of your expenses can reduce your margin and could bring down the profitability of your firm.

Are you a small business owner with bootstrapped operations? Share the other mistakes that entrepreneurs like you frequently commit in the comments below.