A Word on Bootstrapping.

We will talk about bootstrapping today. Bootstrapping refers to a self-sustaining process of acquiring funding that moves forward without much external help. An entrepreneur is said to be bootstrapping when he finds and builds the company from personal finances or from the operating revenues of the business.

Compared to seeking investment, bootstrapping can be beneficial because the entrepreneur is able to have a control over all decisions. In addition, it saves time spent on hunting for investors. Also, since you would not have huge sums of money when bootstrapping your restaurant business, you will spend wisely and learn financial discipline, which could be beneficial for your food business.

The biggest challenge of running a business in bootstrapping mode is to solve cash flow problems before they start impacting operations. One advantage that the restaurant business has over start-ups in other industries is that while most purchases are done on credit, sales is done in cash or credit card sales. You would still need to negotiate suitable credit terms from your suppliers so you can shorten the operating cycle when needed. The operating cycle of a business marks the period from cash outlay to cash receipt – this is an important concept for controlling cash flow.

Working in bootstrapping mode will force you to be more customer-focused since all the money is coming from them and not investors. But if you plan to open up a fine dining place; which needs large sums of capital to get started, bootstrapping might not be enough. You might need to take a loan or secure investment in that case.

Tips on Bootstrapping:

1. Leverage all your personal assets and use all your savings to finance your restaurant;
2. Take help from family, friends and relatives. Take on funding partners;
3. Explore creative ways to generate turnover such as bartering services with other businesses;
4. Talk to your suppliers and extend your credit periods.

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