I prefer the definition given by BusinessDictionary.com of bootstrapping:
Building a business out of very little or virtually nothing. Bootstrappers rely usually on personal income and savings, sweat equity, lowest possible operating costs, fast inventory turnaround, and a cash-only approach to selling.
Much to Learn Grasshopper
Early 2008 I was getting my entrepreneurial journey started. I had experience with Dreamweaver and could dabble with websites (I did it as a hobby) so I decided to start by offering that as a service.
At the same time, I was helping a friend get his business off the ground. I was fully immersed in starting up and obsessed with trying to find ways to grow a business.
My days consisted of 16 hour days of work. I was a father to a 2 and a half year old. It was hectic and incredibly stressful. My back was against the wall and I remember saying:
“This has to work!”
I was stubborn and relentless, but sure enough I eventually got through. Both of those businesses are still around today!
It is these lessons of business management, developing sales skills, learning marketing techniques, exploring partnerships, outsourcing, bartering, and more that make you a MUCH stronger entrepreneur and will aide you in future endeavors.
Consulting First, Full-Fledged Startup Later
6+ years later I have begun a new journey by transitioning from service/consulting to product. I think this is the best route for a Bootstrapper, simply because you can start to scale back on your consulting work as your product begins to take shape.
In my case, my web development business became a full-fledged digital marketing agency with a team I can trust to run it.
In my opinion, I think it is going to be a pretty long road if you are working full-time and just working on your startup during weekends and off hours. It was hard enough for me when I was working 16 hour days!
Bootstrap First, Then You Can Consider Investment
An alternative to bootstrapping is to obviously secure an investment. This comes with its own set of hurdles (not to mention a chunk of your time in trying to find investors, creating pitches, etc).
Typically, you aren’t going to get any serious investment based on an idea anyway. So to secure a decent investment in the several hundred thousand range or more, you are going to need to show your business model is working, you have customers paying you, etc.
So even if you are going to try securing capital, you are going to need to go through a bootstrapped phase to begin with anyway in order to get your first customers onboard.
Here is why I prefer bootstrapping, especially when you are just getting started as an entrepreneur.
Benefits of Bootstrapping
1. Keeps Focus on Revenue
Since you need to pay your bills and you won’t have an influx of cash from a large investment, you will be driven to make as much money as you can as quickly as you can.This helps you stay focused, makes decisions easier (is it making you money or not?), and prevents you from wasting valuable revenue early on.
2. Keep More Profit
Simply put, you own all of your business (unless of course you have partners). Even still, at least the profit is in your network. Later on, when you are more equipped to secure an investment, you can turn the table on this benefit and say would you rather have 30% of $3 million or 100% of $300k.
3. More Control
You get to make the final decisions. Even if those decisions end up being wrong, is valuable experience. If you make enough wrong decisions with investors behind you, it could mean you get removed from your own company.
4. No Investor Meetings
Investors expect updates and regular meetings. By not needing to spend countless hours preparing for these meetings every month, you can focus on growing your startup.
5. Securing Your Future
The lessons you learn can be carried into future endeavors. I am comforted by what I have learned about business and marketing over the last several years and what this means for my future.
6. Stay Lean
Because you don’t have big marketing budgets, or the ability to bring on employees whenever you see fit, you are forced to think of creative ways to get the results as if you did have that budget. The Lean Startup methodology is perfect for a bootstrapper.
7. Move Fast
Because you don’t have the layers of decision makers to go through, you are afforded the ability to move fast. It also means you can “pivot” to a different business model, should one present itself as more profitable, without needing to go through hoops.
8. A Complete Understanding
You have a more complete understanding of your entire business simply because you have to wear all the hats. You’ll know what customers expect, develop sales skills, learn marketing techniques, understand general business management principles, and more.
Start with What You Know
Going forward, I plan on sticking within my domain of expertise. This means my products will be directed towards startups and/or use my knowledge of digital marketing and product management.
I have more insight into these areas which helps me be able to better identify needs and lets me have a better understanding of who my customers are right out of the gate.
Most aspiring entrepreneurs I know want to be the next Zuckerberg. They have their “billion dollar idea”… It isn’t happening.
Try to launch with the smallest version of your product as possible. It ends up costing you less, it gets you talking to potential customers sooner, and gets you working on the ultimate iteration of your business that may lead to success. Chances are it won’t be the first iteration that makes it.
Remember, Facebook started as a way to rate how hot chicks were on campus.
Along the lines of thinking small, I also am wanting to follow Rod Walling’s model of no employees and just using contractors on an as needed basis. He outlines some great tips for developers in his book, “Start Small, Stay Small.”
Obviously I have a team in place for my agency, but going forward my goal is to not grow a large organization.
Failure Can Be Good
There is value in failing.
You learn a tremendous amount when dealing with failure. Not just learning from mistakes for business purposes, but you learn a lot about yourself as well.
I recently wrote a blog on my previous venture failing and some of the things I learned through that process. Failing is MUCH harder to swallow when you have investors to answer to though.
Don’t get me wrong, having investment in an idea or early stage startup can certainly help grow your business substantially. That doesn’t necessarily increase your odds of succeeding though.
Chances are, if you can’t get your business off the ground in a bootstrapped fashion then your business isn’t going to succeed anyway since you are going to need to validate the model regardless.
You don’t know what you don’t know, so taking the lumps as a bootstrapper allows you to learn some pretty important lessons. These lessons and the experience make you that much more likely to land investment in the future while putting you in a position to be able to negotiate a more favorable equity split.
I have prepared a guide for bootstrappers and startup founders which you see below.
In this guide, you will learn the key people to follow, tools to use, blogs to read, LinkedIn groups to join, communities to participate in, and even cheat sheets and templates to use.
It is best viewed by clicking the button in the bottom right corner to see it in full screen, or simply grab your own copy by tweeting this.
If you click the download link you’ll get sent this guide in PDF format in exchange for a tweet.