Bootstrap your business - Perfect the ultra-light start-up

Managing growth

But if you want to bootstrap well, slow growth is vital - and that means avoiding overtrading at all costs.

Ben Gladstone started IT consultancy firm Conosco in 2003, and realised right from the beginning, bootstrapping was going to mean growing slowly. "The bigger you are, the more working capital you're going to need," he explains. "We always tried to make sure our growth was cash-neutral."

I know people who would hire rooms in a business centre and get people to sit in the offices, look busy and talk on phones which weren't ringing.

"We could have taken a large pot of money and done a big marketing drive, but if that was successful, we'd have needed more money to ramp up our operations side. In a services business, you've got to keep delivering. It's a real balancing act."

Gladstone says his business has grown around 14% each year since its inception - but different businesses can withstand different growth rates. If your business is highly scaleable - a web business, for example - you may be able to take on more customers than, say, a party planner. Work out how much you can manage, and limit yourself to that. Once you make a profit, reinvest that to build the business up.

Marketing will require a bit of creativity - but with a surge in social media (according to figures, 67% of internet users spend time on social networks, and if Facebook were a country, it would be the fourth most populated place in the world), marketing on the cheap has become considerably easier. Create special discounts for Twitter followers or Facebook group members, and keep your customers up to date with your business using groups on LinkedIn.

Other costs are just as easy to keep down, as long as you are creative. Molian recommends offering to pay to use others' spare capacity. "If you're a manufacturer, find someone else in your sector, and rent time on their machines - or if you feel you need an office, find a business with spare desks who can sublet to you."

Subletting spare desk space is a simple way to put yourself in an office environment without incurring the costs. That person will already be picking up the fixed costs, and will already have their office connected to phone lines and the internet - so all you need to do is pay the variable costs of renting in a small building. Use a service such as Desk Space Genie, which advertises thousands of spare desks all over the UK.

If you need to give a more professional impression to prospective clients, your kitchen might not be the best place - but there's nothing wrong with faking it. "Getting a business up and running is all about managing that gap between where you are an where you aspire to be," explains Molian. "I know any number of people who would hire rooms in a business centre and then get people to come in a sit in the offices and look bus and talk on phones which weren't ringing to create that impression of size and activity." If that's what it takes to inspire confidence in customers or suppliers, don't hesitate about it.

"In the early days, what you say will almost always exceed your capacity to do it."

Getting investment-ready

Bootstrapping gives you the proof and trading track record investors look for. They're happy knowing your model words, you've make mistakes - which means they're investing at a lower risk versus reward balance than if you were looking for seed funding.

When Shah and his co-founders launched Mixcloud in September this year, they received widespread - and very complimentary - press coverage. The business now has an expanding userbase and its founders are considering scaling up, which means the time has come to consider approaching investors for finance.

Although the climate is still tough for those on the hunt for finance, Shah maintains the business' bootstrapping history will give it the edge over others. "We'll get credibility borne out of the experience we've had. They'll be able to see we've had to learn the hard way how to manage our finances, and that we're smart about how we approach business. They'll know we can do so much more with the money they invest."

Molian agrees wholeheartedly. A background of bootstrapping will show investors the team behind the business is resilient, creative, prepared to find ways around challenges and ready to deal with the setbacks which inevitably happen to any new business. "It's about character," he says.

For Shah, raising finance is just the next step. "We've had our year off, being three guys in a warehouse living off soup. Now we're ready to smarten up our acts. It's just about taking it to the next level."

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