In recent times, it has become very difficult to get the right funds and investments in order to establish a new venture. Not all entrepreneurs are fortunate enough to have the luxury of getting investors. But this should not put them off from starting their own venture. Bootstrapping a business can prove to be very beneficial for entrepreneurs and can help them to fulfill their dreams.
What is bootstrapping?
Bootstrapping a business means building a business out of considerably less resources, or virtually nothing. A business generally relies on personal income and savings, and tries to maintain less operating cost till its establishment. Many of the monster companies like Apple, Dell, and Microsoft began their journey as boot-strapped ventures and have gradually turned into large and successful organizations.
Here are some tips you can use to bootstrap your business to success. I’ve also included success stories of companies that have benefited by implementing these tips.
1. Control spending
Bootstrapping is undoubtedly a cheaper means of starting a business. It also allows you to be more efficient as all the decisions can be made by the founder. It also, however, brings in huge responsibilities, and you need to be very careful and thrifty about spending. One must be ready to cut down on the personal expenses and should monitor the expenses like a hawk.
Take GoPro, Inc., for example. GoPro is a firm established by Nick Woodman that develops, markets and manufactures high definition personal cameras. Nick was determined to pursue his dreams and he did everything to make it feasible. Initially he had to do all the odd jobs by himself, ranging from emailing to truck driving, which he did in order to save the funds and design his product. This helped him to control his spending and put more funds towards the development of the product. GoPro has attained the heights of success and currently the firm is worth more than $2.5 billion.
2. Leverage PR and advertising opportunities
The only way to sell the product is by creating the awareness of the product. There is no use having an excellent product if people are not aware about its existence. However, unlike other companies, bootstrapping a business doesn’t allow for hefty spending on marketing and PR activities. Hence, it becomes very difficult to choose where to allocate spending to achieve the required attention without huge spending. While firms can engage in activities like social media marketing, which is cheaper and can help to gain visibility, bootstrapped companies can’t.
For more tips on acquiring new customers cost-effectively, check out this guide on Acquire.io’s blog.
Brightwork was co-founded by Greg Gianforte in 1986 to develop network management applications. They did not have the money to invest in marketing and PR, but their service did work in Novell Netware’s environment, which was the dominant company in the market at the time. They decided to try and get Novell’s attention so that they could benefit from Novell’s reputation. In order to get their attention, they decided to buy 48-foot long billboard across their headquarters that read “Don’t just network, Brightwork,” costing them only $200 a month. The idea worked for them and they were able to gain Novell’s attention and negotiate a distribution deal with them. This step proved to be a great milestone for their business. Brightwork was able to pass the IPO in 2004, and has already passed $100 million in revenue.
3. Focus on the customer
In order to make a business venture successful, the first priority should be to provide best products or services to the customers. The success of a business relies heavily on its customers and the business’s ability to provide them with a niche service. Moreover, bootstrapping a business gives owners the liberty to make decisions that will help them go the extra mile for their customers.
Litmus is an email marketing tool that allows 30,000 customers to test their designs in all major mobile and email clients. They achieved success by doing what their customers demanded. In their first version they had added a “coming soon” section that listed all the additional features they had planned to add. At the end they did not add any of the features they had listed, instead adding features that customers requested instead. Their approach towards customers has made the firm highly admirable and currently they are growing at the pace of about 10% month.
4. Choose your team wisely
For a bootstrapped business, the majority of the work has to be done by the individual or a small deployed team. Hence, it is imperative to choose members who are competent, who can do variety of work, and who can complement each other’s skill sets. Instead of outsourcing the work, the team should be proficient and willing to learn the different tasks required to do the job on their own. The aim should be to create a team that can be a full package for a business and can do all the basic necessary tasks for a business. It is better to hire people with different abilities and skill sets in order to reap maximum benefits.
Huckberry is a bi-weekly web magazine featuring curated apparel and gear, along with the stories behind the products. They have turned into successful business and their success mantra lies in hiring people who can work with them and not for them. They hire people who are doers, who go out and get work done by any means. Because of their people and culture, Huckberry has been able to flourish in San Francisco where bootstrapping is really very hard.
Another company that has a similar bootstrapping and employee methodology as Huckberry is United Capital Source, a provider of small business loans out of New York City. They’ve written a guide of simple strategies to use in order to see that employees feel they are working with you toward a common goal instead of working for you.
5. Cut overhead costs
If you are bootstrapping then it becomes very important to have minimum expenditure and save at every possible place. One cannot afford to make overhead expenses, as there are very limited numbers of resources. Instead of renting the office, you can run a startup from a coffee shop, apartment or, if feasible, go virtual. Instead of spending on overheads, money should be spent to expand your team and, eventually, your company.
Gawker is a media company founded by Nick Denton in 2002. He operated from his home during the initial years and rented a storefront for his bloggers instead of office. Only after he was well settled did he go on to buy a new office in 2008. Because of such wise decisions he has been able to successfully grow his venture and is currently estimated to be worth $150 million.
In conclusion:
Bootstrapping a business may seem very difficult during the initial days but it isn’t impossible. By playing the right cards, entrepreneurs can attain a lot from bootstrapping and can take their venture to new heights. Although you might need to make sacrifices initially, in the long run bootstrapping can take a business to the zenith of success.