The truth is that the most startups never receive any sort of significant outside investment. But should it prevent you from creating your own startup? Definitely no. You can use your own resources. And in this article, we will tell you about 4 strategies for the startup bootstrapping.
Like we said before, bootstrapping is the process of building a hugely successful company by funding it entirely through the use of your own resources. Sounds great, isn’t it? But of course not as easy as sounds. So we prepared for you 4 strategies that will help you to get your startup on the right track.
First of all, bootstrapping is the opposite of creating a business by accepting significant funding from venture capitalists and/or Angel investors. That means “no help” to be expected, you should rely only on yourself. In most cases bootstrapping consists of:
- personal income and savings
- ‘sweat equity’
- lowest possible operating costs
- fast inventory turnaround
- (and sometimes) a cash-only approach to selling
But that is the true way to start. Actually, Facebook, MailChimp, HP, Microsoft, and Apple were bootstrapped.
Today there are 4 crucial strategies you can use to create the next bootstrapped high-growth startup.
- Data validation
Validating your product idea will make you understand the prospects of your business. One of the very first aspects of successfully bootstrapping your startup involves identifying and validating a monetizable customer pain, calculating the size and demand of your projected target market, creating, testing, and refining your minimum viable product, and achieving product-market fit. And you can do it without having to spend much money at all.
To validate your product idea before launching something in the market you can:
– ask random people about your objectively-presented idea;
– use online surveys and polls to gather feedback;
– create a test ad campaign to measure the effect;
– promote your app to testers (beta adopters) with beta promotion site;
– attend meetups and in-person events;
– meet leaders in your market niche and listen to what they say.
- Hustle embracing
When you operate as a bootstrapper you learn as much as possible. That is not just about building a business but about constantly developing in something more powerful. The founders who do not take on external investment typically cannot afford to hire sales or marketing teams or public relations (PR) firms. Instead, they have to do it all themselves — at least during the early stages of their startups. You need to hustle to make a bootstrapped startup work.
Invest time into studying sales, marketing, PR, recruitment, accounting, general business practices, and so on — these are crucial aspects of a business that you can learn and apply yourself. Remember that true hustling is ultimately about doing what 99% of the population won’t, i.e., doing everything possible to create a growing business and refusing to quit no matter how many obstacles are thrown in your path. Make cold calls and send cold emails, attend conferences and meetups, talk to your customers in person, blog about the ongoing growth — the trials and tribulations — of your company with your online followers, etc.
- Focusing on profits
To gain some profit you have to be very meticulous with money. Watch your cash like a hawk and implement a business model that generates cash quickly. This strategy makes it crucial for bootstrapped startups to focus on generating profits by utilizing short cash conversion cycles, i.e., processes that allow every dollar you spend to return to your business as quickly as possible so that you can reinvest those earnings and achieve growth. Your insistence should produce the profit – this is the “first law of bootstrapping”. Bootstrapped companies can’t afford to waste money. They must make money if they want to survive. The profits they make are what fund their business.
For example, you can make positive cash flow with discounts on monthly payments if users buy an entire year all at once.
- Resourcefulness and courage
Bootstrappers have to be resourceful — never give up and exploit every last angle and opportunity. Harvard Business School professor says: “Entrepreneurs don’t worry about the resources they lack, but about the resourcefulness required to get a big idea done”. The skill of resourcefulness must be developed.
– Find some extra money with numerous government grants that can help push your company forward, from local and national to supranational and even private support offered by the likes of Google and Microsoft. For instance, check out Google for Entrepreneurs;
– Use powerful and free tools like Google Docs, Slack, MailChimp and many others, which make it very easy to establish a fully operating early-stage startup;
– Don’t waste money. When you think about an office, pick functional one over posh office space. Start with the free versions of QuickBooks and Dropbox. Print free business cards. Consider refurbished computers instead of the newest MacBook Air. Use a free banking service. Saving on little things goes a long way.
Consider these all and you will become able to create a successful startup.
And, of course, there are some pros and cons of bootstrapping you have to be aware of:
You have to think carefully of both variants: to rely on funding or to go bootstrapping. However, you have to believe in yourself and don’t stop creating something awesome even if you don’t have money. We gave you some tips for this case.
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We’ve been inspired by 4 strategies for successfully bootstrapping your startup.