The Success You Never Reach Is the Financing You Didn't Take
A guest column on Inc.com argues bootstrapping is a smart tactic early on but a ceiling once it becomes an identity; the cost of not acting is invisible, while the cost of capital sits on a term sheet.
Prompted by “Bootstrapping Is Not a Badge of Honor, It's a Business Strategy”, Inc. (Jared Feldman, Fora Financial; labeled paid content).
Plenty of owners wear “bootstrapped” like a badge of honor. A guest column on Inc.com argues it's a smart tactic early on, but a ceiling once it becomes an identity.
Worth saying up front: the column comes from the CEO of a business lender, and the research it cites is the lender's own. Read it with that in mind.
His example is a flooring contractor who ran nine years without outside capital and spent three of them turning down commercial contracts because he couldn't cover materials before getting paid. The column says that once he got financing, he took two commercial contracts in one quarter. The author's point is a good one: the cost of not acting is invisible, while the cost of capital sits right there on a term sheet.
Bootstrapping doesn't have to mean no outside financing. It can just mean no outside investors. Compare that with tech startups, where taking money for equity is the culture. It feels less risky because there's nothing to repay. Is it? A loan is a fixed obligation you can see on day one. Equity is a permanent partner in every future dollar, and the risk shows up later.
How fast do you want to grow?
Whether you're a CEO or an owner-operator, that raises a better question than bootstrap versus borrow: how fast do you want to grow? Some owners are stuck in a founder trap.
They can't grow because the cash isn't there, and sometimes because they don't trust that their team is strong enough to carry a bigger load. Loans feel risky, and they are.
You owe the money whether the growth shows up or not. But they let you keep the equity and fund the growth. The risk is only worth taking if you trust the people who will deliver it.
Test it out: list every contract, hire, or purchase you passed on in the last 12 months. Next to each, mark whether the blocker was cash or doubt that your team could deliver. Then take the list to your accountant or a peer you trust and ask them to tell you where your thinking is wrong.
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Originally posted on LinkedIn ↗