5 Ways to Bootstrap Your Vision Into Reality Without Outside Funding
For many startups, funding is an option. For others, it’s the only option. But bootstrapping can give you control over your business without relying on outside capital or investors’ management. Sometimes, it also means stretching your resources so thin that you risk compromising your vision. As your company scales or struggles, so should your budget, and failing to account for the ups and downs can very quickly turn what once seemed to be a future success story into an overnight failure.
Earlier this year, as part of my efforts to organize the virtual Bootstrapping Summit, I got a chance to interview more than 90 entrepreneurs who started and built significant business value before receiving outside funding. Many of them are still bootstrapped. Halfway through the list of interviewees, I started to see a pattern in terms of business execution.
In this post, I use a few examples from the summit of founders building different products and services to show you what I found to be the five common strategies that helped those entrepreneurs go from idea to first paying customer and scaling sales significantly under limited to no budget. The journeys of the founders I specifically chose as an example to support each one of the five strategies represent a perfect case study and sample for the whole group of interviewed founders. (Note: I have no business relationship with any of the people or businesses named.)
1. Investing long-term.
For bootstrapped startups, where short-term earnings are key to survival, long-term investments are rarely an option. Omar Sayyed, who built a background in SEO prior to joining Ties.com, decided to focus on the things he could control even if it meant a temporary dip in revenue.
Ties.com has been around since 2000. Today, the tutorials and guides the company offers on its site are the first results that show up in Google when you search "how to tie a tie."
The result of investing almost the entire marketing budget on SEO meant pulling money from ads -- which had contributed significantly to the growth of the company -- and instead focusing on the long-term benefits of organic search. Today, according to Google’s Keyword Planner, the questions, “how to tie a tie” and “how to tie a bow tie” get more than 800,000 searches each month.
Sayyed's vision of building an educational hub of top-notch guides that provide value and rank for highly searched terms and phrases entailed compromising short-term losses for long-term benefits. The investment paid off.
2. Minimizing expenses.
Maintaining tight control over expenses comes with an extra cost. While decelerating growth can mean leaving money on the table, helping funded competitors rise, and missing on key deals and partnerships, premature growth can be even more costly.
Steven Sashen, founder of Xero Shoes, used to buy big sheets of rubber and trace a person’s foot size on the rubber before customizing the shoes. This approach helped Sashen and his wife, Lena, validate the idea before investing in a scalable manufacturing and distribution process.
Before Drew Little, founder of Red Giant, a company that develops special effects tools, developed his company’s first proprietary tool, he partnered with other companies for a licensing revenue sharing partnership that enabled him to go to market sooner, validate his concept and generate revenue for reinvestment in his own proprietary products.
3. Building complementary value-adding products.
Brian Tracy notes, “if everyone is offering the same thing, these factors of the product or service become the basic minimum, or the expected norm in the market.” Ties.com’s investment in creating and acquiring complementary and supplementary products like Alynn, Sock Genius and Guapbox is the perfect example of building a competitive edge in a competitive marketplace.
To validate the concept of his personalized children products, Mike Wilson, founder of Tinyme, borrowed some equipment from his employer to design and manufacture every product by hand. With the money he generated from early sales, he invested in introducing complementary products that contributed significantly to the current success level.
4. Growing through retained earnings.
Maintaining cash reserves is important for survival and growth. For most businesses, retained earnings is what is left after everyone is paid. This formula rarely works for early stage startups still seeking to validate and scale a business model. For instance, by making the decision to cut advertisement expenses and boost investment in SEO, Sayyed knew the company’s sales would decline. To compensate, he did not take a salary until sales picked back up a year and a half later.
Debt can certainly add value to the business when used wisely; however, at a stage where uncertainty is at its highest, seeking funds through loans or investments can dig a bigger hole, and you may end up selling your company short. Patience and sacrifice are key.
5. Hiring the best.
“The only thing we ask from our teammates is to have passion for what we do and passion for the company,” Sayyed said. This is an important statement especially for bootstrapped startups -- given that a bad hire can cost the company up to $190,000, according to a survey by CareerBuilder.
Making the most out of every dollar means recruiting people that are truly invested in the vision. Motivation can be quickly lost. Passion and belief in the vision will differentiate the companies that make it from those that don’t.
Chris Castiglione, co-founder of the teaching platform One Month, notes that he has been most successful in starting new companies only when he surrounds himself with like-minded, passionate and talented team members.
The biggest lesson learned from all the interviews has been that no one has control over your success as an entrepreneur. You are in control of your own success. If you don’t have the funding to back your vision, make it happen without it.