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When we think about “fitness,” we often envision bodybuilders at the gym, straining to bench press more weight. Or spin classes, with stationary cyclists pedaling faster and faster to the beat of loud, pulsing music.
However, for entrepreneurs, there is a totally different type of training with a totally different goal: financial fitness. That said, some of the rudiments of financial fitness can be compared to their physical fitness counterparts, especially when it comes to bootstrapping a business.
Related: 10 Tips for Bootstrapping Your Startup
Set intentions
A new year, job shifts and life changes often lead people to make fitness resolutions. In business, the intention to start a new business requires specific actions. The first step in flexing your entrepreneurial muscles is developing strong fundamentals for bootstrapping the business.
What exactly is bootstrapping? The U.S. Chamber of Commerce defines it as: “the process of starting a company with only personal savings, including borrowed or invested funds from family or friends, as well as income from initial sales. Self-funded businesses do not rely on traditional financing methods, such as the support of investors, crowdfunding or bank loans. Rather, as the name suggests, entrepreneurs must “pull themselves up by their bootstraps” by using their own capital to launch.”
That may sound as scary as a nautilus circuit in the weight room. However, even with a pool of investors, the intention for any new business is to launch and scale on a shoestring budget. The first thing that starting a new business requires (like trying out new equipment at the gym) is solid balance. For new businesses, that means:
- Maintaining lean operating expenses
- Minimizing unnecessary purchases
- Maximizing DIY duties
To be able to keep your new business growing while you build the customer base and begin to generate meaningful sales, you must do many tasks yourself. For me, it was to “DIY” everything, which meant learning new things to enhance my decision-making and avoid unnecessary mistakes.
For example, although I had very little experience with marketing, I educated myself on the best business practices for my business and employed them myself. With time, I was able to learn enough, often through trial and error, to become an expert. I learned that success comes if you focus on a good product and let word of mouth, social media and community relationships do the rest.
Related: 3 Bootstrapping Success Stories to Inspire Your Entrepreneurial Journey
Focus on flexibility
Stretching is essential for any kind of fitness. However, it’s mandatory to develop the financial resilience necessary to navigate inevitable economic downturns in business.
In 2020, the world was in shambles as millions of businesses around the country shut their doors. Although many have withstood that difficult time, many others did not. Research conducted at the Sloan School of Business at MIT identified “three fundamental ways to manage uncertainty: resilience, local agility and portfolio agility.”
The sad fact is that according to analysis of data from the Bureau of Labor Statistics, more than 18% of businesses fail within their first year and 50% within the first five years. For many, that is because they did not build flexibility into their financial fitness regimen. We found that managing expenses and mitigating risks are key to stretching your capabilities and resources during difficult times.
I can’t stress this enough: You must be able to diversify the services you provide to maneuver through difficult times. For example, we refocused our restaurant’s strategy on deliveries and optimized our delivery experience for our guests when everyone was home and not willing to leave. This was a pivotal make-or-break moment for our business since dine-in sales dropped significantly. We also operated for three years debt-free and continue to grow our business without taking on any debt.
Establish a routine
Like physical fitness, for financial fitness, you must establish a routine to attain your goals and track your progress. For entrepreneurs, there are three key actionable items:
1. Implement a budget tracking system
Always monitor expenses. We track all COGS spending, labor costs and marketing spend by deploying software that provides us with real-time data on our income and outflow. Each manager receives weekly reports for all expenses and projections/guidelines for the upcoming week to ensure optimal spending. Diversify income streams to reduce dependence on a single source.
2. Listen to your customers
Look for what other services you can provide for your customers. This will provide you with other streams of income, so you never need to rely on one single source that may not be sustainable over time or in a downturn.
Related: 5 Ways to Bootstrap Your Vision Into Reality Without Outside Funding
3. Build an emergency fund
An emergency fund is essential to navigate unexpected financial challenges. An emergency fund reduces stress for sudden expenses. Set a small percentage of your monthly earnings to an emergency fund. We set aside 15% each month for a rainy day that helped us weather the storm.
The most essential aspect of building an emergency fund is to implement a system for making consistent contributions. The U.S. government hosts a Consumer Finance website that offers helpful advice, for instance, “putting a specific amount of cash aside each day, week or payday period.”
4. Make physical fitness part of your financial fitness routine
Entrepreneurs can leverage their own personal physical fitness as a business advantage. It has been proven over and over that exercise promotes cognitive function and creativity while reducing stress. And, when the going gets tough times, exercise helps entrepreneurs get tougher.
Being physically fit takes motivation, information dedication and sweat. Similarly, bootstrapping your financial fitness requires a can-do attitude, knowledge and singular focus. The most important thing to remember is that to achieve any type of fitness goal, there are no shortcuts and no substitute for hard work.
This story originally appeared on Entrepreneur
