Bootstrapping Strategies For Your Startup

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Table of Contents

• 1. Start Small
• 2. Prioritise Revenue
• 3. Bootstrap from Personal Savings
• 4. Protect Your Assets
• 5. Control Operating Costs
• 6. Take Advantage of Tax Incentives
• 7. Choose the Right Business Structure
• 8. Utilise Low-Cost Tools
• 9. Seek Grants and Competitions
• 10. Engage with the Startup Community
• 11. Reinvest Your Funds
• Key Takeaways

While sometimes challenging, bootstrapping is often the only means available to fund a new New Zealand startup initially. The benefit of bootstrapping for as long as possible is it enables a founder to maintain control over the business by avoiding giving equity to external investors such as venture capital firms or angel investors. Nevertheless, self-funding your startup venture requires a high degree of resourcefulness and careful financial planning. This article will take you through 11 strategies to help you successfully bootstrap your New Zealand startup. 

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1. Start Small

It is crucial to keep your initial startup expenses to a minimum when bootstrapping. This will require you to focus on developing a basic version of your goods or services that will fulfil your target audience. This is referred to as offering the minimal viable product. You should also avoid unnecessary costs, such as large office spaces or costly market campaigns. 

2. Prioritise Revenue

Another critical strategy is to focus on generating revenue as early as possible. Your startup’s survival will depend solely on its ability to generate an income if you are not seeking external funding. You should consider offering discounts or incentives to attract customers and encourage them to try your goods or services in the early stages. 

3. Bootstrap from Personal Savings

Bootstrapping requires you to lean on your personal savings or assets. Access to such funds will provide a financial cushion to cover your essential expenses without taking away equity. As such, you must carefully consider your personal expenditure and ability to liquidate any assets to facilitate this.

4. Protect Your Assets

You must take any measures possible to protect the assets of the business and minimise legal risks when bootstrapping your startup. There are various ways to do this. For example, you should be meticulous with your contract management, including having detailed contracts with all customers and suppliers. All contracts should be geared towards minimising potential legal conflicts to protect your assets. Having an experienced legal professional to review all contracts is one way to safeguard your bootstrapped startup.

5. Control Operating Costs

It is essential that you carefully manage your startup’s operating costs. While this is true for all startups, it is mainly the case for those bootstrapping. This requires you to have a clear operating strategy. You must routinely analyse your expenses and identify ways to reduce your overhead costs. Some tips for this include:

• negotiating with suppliers;
• searching for alternative vendors; and
• being cautious with discretionary spending.

6. Take Advantage of Tax Incentives

A benefit of New Zealand’s startup landscape is the various tax deductions available to startups. You should familiarise yourself with the tax incentives that will help you manage your financial resources while bootstrapping. For example, various tax incentives apply to startups focusing on research and development. 

Further, New Zealand also has a tax regime that benefits startups, including a lower tax rate for businesses that are just starting. It is also recommended that you seek financial and legal advice to ensure you are making the most of these opportunities.

7. Choose the Right Business Structure

Choosing the most appropriate business structure is a critical decision when bootstrapping your New Zealand startup. The structure you choose will significantly impact the legal, financial and operational aspects of your business.

For example, common business structures in New Zealand include:

• sole proprietorships;
• partnerships;
• limited liability companies (LLCs); and 
• corporations.

Each of these business structures comes with its own set of legal implications. For example, a sole proprietorship or partnership business model is the most simple and gives you direct control. However, it exposes your assets to business liabilities. 

The most appropriate business structure will vary significantly depending on the assets you are leveraging and your future growth plans. As such, you should seek advice from a legal professional to ensure you strike a balance between protecting your assets and growing your startup. 

8. Utilise Low-Cost Tools

There are numerous affordable or completely free resources available to startups. Taking advantage of these tools will help you operate efficiently while keeping your overhead costs low. Such free tools might include free software or low-cost marketing platforms. Social media and email marketing are two great ways to reach your target audience without blowing your budget. 

Further, bootstrapping your business requires you to be meticulous with tracking your expenses. This is important to ensure you keep records that align with New Zealand’s various accounting and taxation regulations. Utilising low-cost financial and record-keeping tools is one way to keep costs low while adhering to legal standards. 

9. Seek Grants and Competitions

The New Zealand government offers various grants, competitions and awards for startups. This means there are extensive opportunities for both funding and visibility for your startups. You should research and apply for any opportunities that might be relevant to you. 

10. Engage with the Startup Community

The New Zealand startup community is supportive and collaborative. Attending networking events and participating in incubator or accelerator programs is a great way to access mentorship and potential customers without spending much of your funds. Surrounding yourself with a network of supportive mentors and fellow startup founders will give you access to guidance and insights money cannot buy.

11. Reinvest Your Funds

You should reinvest your earnings into your startup as it generates traction and revenue. You should strategically allocate resources to areas that will drive further growth. This might require you to focus on: 

• product development;
• marketing; or 
• customer retention and acquisition. 

Key Takeaways

Bootstrapping is a great way to fund your startup without giving away equity in your business to external investors. However, it does require a high degree of resourcefulness and careful financial planning. Some key strategies for bootstrapping your New Zealand startup include:

• starting small;
• prioritising revenue;
• bootstrapping from personal savings;
• protecting your assets;
• controlling operating costs;
• taking advantage of tax incentives;
• choosing the proper business structure; 
• utilising low-cost tools;
• seeking grants and competitions;
• engaging with the startup community; and
• reinvesting your funds.

If you need assistance understanding how to fund your New Zealand startup, you can contact our experienced startup lawyers to assist as part of our LegalVision membership. You will have unlimited access to lawyers who can answer your questions and draft and review your documents for a low monthly fee. Call us today at 0800 005 570 or visit our membership page.