Bootstrapping

Bootstrapping is building a company from the ground up with nothing but personal savings
and, with luck, the cash coming in from the first sales. The investment made towards the start-
up by personal savings is 16 lakhs. This personal saving would be invested by the each member
of the start-up by the various means. The bootstrapping would be there for six months and
later on if it needed can be continued otherwise after six months angel investors would be
approached for the funds and would be given the percentage of the share. The need of
bootstrapping required by the start-up is as follow:

 It preservers the value of wealth of business and there is no load of paying to the
shareholders, so wealth can be used for enhancing the product’s quality.
 And the difficulty of getting the funds within the first six months at least so this plan
would help to run the start-up till the time funds are being raised and wouldn’t also
lead to the loss of the credibility with the lenders.
 Helps to keep the cost low as possible.

The problems faced by the start-up due to bootstrapping are as follow:

 We wouldn’t be expand in greater areas and would have to limit ourselves to smaller
areas due to smaller capital.
 The competitors may get a chance to expand much faster than us and the amount of
the capital invested may vary to a greater extent and they might have reach to greater
areas and cover a larger audience.
 The development process would slow down for the start-up and it would create a
market development.

The plan of action by means of the bootstrapping would be as follow:

 Bootstrap Marketing
o It is necessary for us to focus on the target customer and try to expand the
reach on them in the target area as quickly as possible which would help us to
make more sales in shorter time and would help us to retain to the earnings,
which would help us to expand in less time and increase sales.
 o The marketing should be done in a way that it uses less amount of capital and
the message should reach the maximum of the people. The advertisement
through Instagram or Facebook which uses less capital and reaches out to
maximum people rather than going with the conventional television
advertisements which are mostly as compared to Facebook and other social
networking sites.
 Human Resource Bootstrapping
o In initial phases the employees hired could be experienced in various domain
so that the amount of work can be done with lesser but versatile employees
rather than more and specialised employees. This would help to reduce the
personnel cost and the cost saved can be reinvested.
o Another way to get the work done is by independent contractors, like for
Momzfood the legal procedure to be done are outsourced rather than in –
house, similarly other activities like marketing, sales prediction are also
outsourced that reduce the cost of the keeping a full-time or part-time expert
and also is done on the yearly contract basis.
o Employee leasing or temporary employees would be also appointed for the
case of data and web-hosting which are hired on temporary basis and aren’t
needed to be there at the office for all the time and thus can come when
needed.
o Keeping interns would benefit the start-up as they have the knowledge and
would like gain the experience whereas the momzfood benefitted by having
new ideas and completion of the project at lower cost.
o Momzfood would try to provide its employee with non-monetary benefits like
free food service once in a month or getting employee discount when ordering
from the own website. This would help the employees to increase some
morale and would help the start up to save some cash.
 Administrative Overhead Bootstrapping
o The space would be used as office for the start-up would be rented rather than
buying out the office space. This would help to save a large amount of cash
that can be invested for other activities and would also save the cost such as
renovating them.
 o Furnishing and office equipment can be brought both in the combination of
the second and first hand depending upon the condition of the furniture and
equipment in case of the second hand and the quantity required as per the
need. Buying of the second equipment would help to save the cash and thus
allowing the start-up to reinvest.
o Administrative salaries would be adjusted by the means of bootstrapping as
the each member of the start-up would participate in diverse activities that
would save the cash and reduce the amount of personnel required too, also
helping to know more information about the market and its condition and how
to get the solution of the same.
 Operation and Inventory Bootstrapping
o Outsourcing – it would help the start-up to outsource the activities like delivery
and cooking home food are outsourced helps to save a lot of formalities and
are affordable cost-wise.
o Effective cost accounting also help to capture the company’s cost by assessing
the input cost of each step and fixed cost such as depreciation of capital
equipment. Then later on the assessing the input and output and adjusting the
operation as per the results.
 Other activities that help are as follow:
o Coordinating purchases with other business like for yearly contract by paying
on monthly basis and thus helping not to let go of huge amount of money at a
time.
o Minimizing the personal expenses and letting the money for the development
of the business.
o Avoiding the unnecessary expenses and postponing them for later stages when
the revenue is higher or there are funders available for the business.
o Sharing off the office space and equipment with other business that would also
help to generate a bit revenue which can be used for the development of the
start-up.
o In initial phase focusing upon cash on sales rather than cash on credit so that
it would help to start-up to run in a cycle.