Starting a business with no money may seem like an impossible task especially in today’s startup world of mind-blowing company valuations, multiple investment rounds and numerous funding competitions.
In fact, one of the biggest reasons people don’t take action on excellent business ideas is the perception that they need to have hundreds of thousands of dollars stacked up somewhere or have the backing of investors to build a successful business. This perception couldn’t be further from the truth.
While it’s certainly true that having investors or the backing of a generous relative will make the startup journey easier – money wise, there is no guarantee that this will ensure the success of your business and should therefore not be a blocker for you to start that business you have been dreaming about forever, there are other options and in this piece I will focus on one of my personal favorites – bootstrapping.
But guess what, it works great not only to get your business off the ground but almost every successful self- made entrepreneur bootstrapped their business at least for a while so there’s no reason to keep the lid on your business because of limited funds.
Though a bit unclear, the word bootstrapping is said to have originated in the 19th century from the common saying at the time, ‘’Pulling oneself up by one’s bootstraps” – which generally meant to do things yourself without outside help. Bootstrapping now commonly refers to the minimalistic approach to starting a business usually by implementing self-sustaining processes.
Many multi-millions companies today bootstrapped their businesses to success, sometimes maintaining 100% ownership throughout or taking in investment after achieving a degree of success.
Take Spanx for example. Sara Bailey started her now super famous women underwear business by investing all her personal savings – $5000. Today, a decade later, Sara still owns 100% of Spanx which sells undergarments, leggings, swimwear and maternity wear in 65 countries, had an estimated $400 million in 2016 sales, and hasn’t taken any outside investment.
Or learn from the story of GitHub. According to Preston-Werner, the founders spent only a few thousand dollars to set it up the company and launched GitHub first as a public beta with the founders working remotely because they did not have an office. Soon it grew to the point where private companies were willing to pay for subscription and the company’s revenue began to increase. Github was bootstrapped until early in 2012 when they finally chose to take an investment of $100 million dollars in funding at a valuation of $750 million from Andreessen Horowitz.
Inspired and ready to take to bootstrap your business? Here are some tips that can help you do so successfully.
1. Work with an MVP Mindset
The search for perfection can be the enemy of the bootstrapping startup. Get your idea off the ground and get your product/ service out there when it is good enough or when you can a minimum viable product. Start by focusing on the minimum features your product should have to send to your early adopters, test it and send it out so you can begin having cash flow as early as possible.
Don’t spend a lot of time and money getting the perfect product before you launch on the market. As you’ll be getting revenue from the product, you will be in a better position to improve and add additional features to your product/service. If you wait to build the perfect product, you will end up launching too late and drying up your cash reserve.
2. Keep costs down but focus on increasing revenue
This is surely a no-brainer. Processes and internal structures in a bootstrapping company should be aimed at keeping costs down especially pre-profit stage while taking every opportunity to maximize revenue. For example, as tempting as it will be to give your product for free and jump on freemium models, it’s not the best option when starting out.
Let your early adopters pay for your product as this will be a good way to test the market and know if the solution you are providing is one people are willing to pay for. Use free tools when you can – many of the tools you need for your day to day operations can be found online, often for free. Don’t spend money when you don’t need to.
Be determined to cut costs where you can. Not having enough money to have an office for your team, how about working remotely in the beginning or working form your home? Don’t be in a hurry to hire a lot of employees and build a big team rather hire carefully and hire to add value.
3. Provide excellent customer service
For bootstrapping businesses, your early adopters are your super important. These clients have taken a chance on an unknown brand and chosen your product/ service even though you may have bigger more established competitors so don’t be stingy with your customer service. Build a relationship with your early adopters as they will be your best referrers.
Learn what they are expecting from your service/ product, their pain points and the improvements they would like to see. Most larger businesses are not able to build these connections with their customers but now that you have the time and ability to give a concierge-style service, do it.
4. Test, Fail, ReStrategize
There is a common tendency among us entrepreneurs to get overly attached to our business idea. Your business idea or business plan should not be set in stone. There is a problem you want to solve (profitably) and there are many ways to solve that problem, so don’t get so stuck to your idea that you are unable to re-strategize even when after it has become obvious that your current idea is not sustainable.
Test your MVP, gather feedback from your users and use it to refine and redefine your idea. It’s important to know when to defend your position and when to give way to a different idea that might allow for more success – especially when you are bootstrapping and funds are limited.
This applies to every area of the business as well. Don’t be afraid to think outside the box and define the way you do operations, marketing or even design of your product if you have to.
Starting a business doesn’t have to take thousands of dollars, especially today when there are numerous online tools to make your business operations cost less. Starting your business under financial constraints will help you build strong processes and a sustainable business which will be very attractive to investors when/if ever you decide to take in some investment.