“If saving $$, DIY-ing new skills, & never taking NO for an answer,
it must be time for you to Boot-strap”
fm Fast Company.com Zine 10 Nov 14 enhanced by Peter/CXO Wiz4biz
Boot-Strapping? Not all startups have the luxury of getting investors right off the bat. Sometimes it takes Boot-strapping a business by funding it out of your own pocket. While this is an honorable way to start a company, Boot-strapping is more difficult than it might seem. First-time entrepreneurs often have trouble getting funding without first showing some traction & a plan for potential success.
Example. When my cofounder & I created our startup we used $10k of our personal funds, instead of immediately seeking outside investors. It took 10 months to go from $0 in revenue to a $300k run rate/month, but then only six weeks to get funding once we showed that traction. If entrepreneurs play their cards right, they can achieve significant growth and a payoff that’s well worth the wait.
Boot-Strapping is a Lesson in hard work & flexibility, but ultimately it can help accelerate a company’s success. From our experience, we’ve pulled together our top 10 tips for surviving the Boot-strapping journey:
1. Pick a Co-Founder wisely. Having two perspectives can be critical. When boot-strapping, the vast majority of the work is done internally, so cofounders need to complement each other’s skill sets. If you’re good at different things, you have a better shot at being able to do most everything between the two of you, keeping expenses low.
2. Design a Business Model that generates CA$H quickly. Not all businesses are equally ripe for boot-strapping. Without any cash inflow, you’ll burn out your reserves – before gaining any real traction.
3. Watch Cash like a Hawk. Spending out of a personal bank account is sloppy & risky. Instead, fund a bank account specifically for the business. By creating a separate business account, you can track and learn what adds & diminishes cash from the business. Free tools such as Mint can help track spending and calculate burn rate. Watch your cash like a hawk, weekly.
4. Cut Personal Expenses. Without a salary, you won’t have money to spend—so don’t expect to live a posh life – when first starting your company. Consider every purchase and only spend what’s absolutely necessary. If possible, bunk with a family member or friend to decrease rent expenses and come to terms with the idea of a less-than-lavish lifestyle.
5. Don’t Out-Source work you can do Yourself. When boot-strapping, hiring out for a job you could do yourself, is an avoidable expense and a wasted organizational learning experience.
6. Nothing is Impossible to Learn. If you don’t know how to do something, learn it. Neither my cofounder nor I, knew how to write code, but we didn’t have money to hire an programmer. He learned how to code himself, and programmed a website in just a few weeks. Building our own code allowed us to iterate quickly, because we knew the technology inside out. Don’t be afraid of learning new things; you’ll be surprised by your abilities.
7. Be Thrifty. Being fancy doesn’t always get the job done. Pick functional instead. Start with the free versions of QuickBooks. Print free business cards. Consider refurbished computers instead of the newest. Use a free banking service. Saving on little things goes a long way.
8. Invest in your Website Domain & Business form. Incorporating & securing your website domain are major exceptions to the “price over quality” rule. Don’t think you can buy your domain later – once you have more traction. It turns out that once you get traction, the price increases exponentially. Buy the domain outright from the beginning, and start building brand equity around it from day one.
9. Be Discerning when Chasing Revenue. Remember, your goal is to get as much traction as possible to raise $$$. While you chase revenue, you will randomly encounter tricky opportunities that achieve a significant bump in growth at the expense of modifying your operational model or product offering. Evaluate these opportunities before jumping on them: Seize them if they’re aligned with your long-term goals, & decline if they’ll become a huge distraction from achieving further growth. At an early stage, what might appear to be a revenue touchdown may distract you from building a real replicable business.
10. Don’t take “No” for an Answer. When you’re so small, vendors & suppliers won’t want to work with you. It will take a personal touch to get what you need. Work to build personal connections with partners that may help your business in the long run. This may help obtain the resources your startup needs to get moving, at a price that won’t break the bank. Don’t be afraid to share your story and appeal to people’s human side. To succeed as a boot-strapped Startup, you have to persevere for the answer you need.
Conclusion: Boot-strapping a business is difficult, but it’s by no means impossible. With the right amount of hard work, collaboration, & passion for your company, it’s almost easy to give up a chunk of your personal life today, for the sake of your future. Ultimately, boot-strapping is making an investment in yourself – that will pay off for your company in the long run.
Comments: Is there anything you can add from your experience Boot-Strapping?