“As an entrepreneur, one of the biggest challenges you will face will be building your brand. The ultimate goal is to set your company and your brand apart from the crowd.” (Ryan Holmes, Founder and CEO of Hootsuite)
Trying to get a business off the ground is challenging. Every step of the process requires a mountain of time and investment. Choosing between going it alone or involving others as partners or investors is a decision that should not be taken lightly. In this article, we’ll break down the options available and take a look at the pros and cons of each.
- Going it aloneSelf-funding, also known as bootstrapping, is when a business owner goes it alone, providing all funding, time and energy themselves.
Pros of bootstrapping
Whether you’re finding the money from savings, or your monthly pay cheque at another job, bootstrapping is perfect for the entrepreneur who wants full control over their business. With no partners on board, all decisions are yours to make, and all the profits, achievements, and losses are yours alone.
Apart from the independence it offers, bootstrapping can also be easier. There’s no time spent filling in application forms or putting together pitch decks to impress would-be investors. There is also no accrued interest on the debt involved and no loss of equity in your own business. This makes running the business far simpler.
Cons of bootstrapping
On the downside, bootstrapping can be much slower. Each cent spent on the business needs to come from your own pocket and so necessary investments need to be prioritised from month-to-month. Things that are essential for success may need to wait another month – and this can mean your break-even point takes longer to arrive.
Bootstrapping also increases your chances of failure, as some expenses simply can’t wait if you want to make money. Bootstrappers are also more likely to become frustrated with the slow pace and give up.
Tapping into venture capital
Venture capital (VC) is one of the most popular routes for finding funding in entrepreneurship. This is where a company or an individual provides funding to your business in exchange for a percentage of ownership.
Pros of VC
Venture capitalists can offer significant investment in the company and can often provide all the funding necessary to take the company from start-up to established business. What’s more, venture capitalists likely come with significant experience in business and a strong network of contacts.
Cons of VC
Working with venture capitalists requires that you give up some control of your business. This new partnership can create friction if the person who pays the bills doesn’t share your ideas of where the company should be headed. In some instances, their investment may even give them a majority stake and the dream you had of being your own boss might now be a thing of the past…