Financial bootstrapping

What is financial bootstrapping and what does it mean for ownership and profits?

Bootstrapping originates from the expression “pulling yourself up by your bootstraps”. In practice, it means using your own money, money from co-founders, or money that the business generates from customers to finance growth. Bootstrapping keeps full control with owners and founders, who also retain all profits. One of the most appealing by-products of bootstrapping is that it forces entrepreneurs to operate efficiently or organise the business model so business finance is covered by operating revenues. With successful financial bootstrapping, you can demonstrate cashflow and profitability, placing yourself in a greater position to secure the first choice of external finance on more favourable terms.