If you just started up your business and have no initial funding other than your and your partners’ sweat equity and some investment from your family or friends, then you’re probably trying to build a business that pays for itself every day. You’re practically bootstrapping – starting up on a shoestring. In order to help you we’ve gathered a few expert advice from other successful entrepreneurs and have come up with a list of the most important 10 that we hope will prove useful for you.
The early days of a startup – might or magic?
If you’re a startup and you are unfamiliar with the term, you are surely not unfamiliar with the reality of it. Or maybe you’re just very lucky. Bootstrapping is what you need to do when you start a business without external capital and therefore you need to fund the development of your company through internal cash flow and cautious expenses. The term “bootstrapping” comes from the story The Surprising Adventures of Baron Munchausen by Rudolf Erich Raspe, where the main character, the Baron, pulls himself out of a swamp by his bootstraps. The metaphor is, in my opinion, a very successful one as this is exactly the kind of magic startups need to perform in order to survive those early early days.
Can any business be started from scratch without any funding?
In my opinion the answer is no. And it definitely means that you should realise right from the start what kind of business you’re getting into. If your business has short sales cycles and recurring revenue bootstrapping is a valid solution. However if your startup means that for each sale you need to perform an 8-month effort to close and actually see some money or if you need to work for 2 years in order to have a valid product, then you should definitely consider finding some funding before starting up. Another idea if raising money seems a too long shot plan for you is trying to offer some services to your customers until you finish the product you’re working on.
– 10 easy tips for better bootstrapping –
1. As long as you still have money, you’re still in the game
In other words, focus on cash flow. You probably heard this a zillion times already. Guy Kawasaki has a nice article about the Art of Bootstrapping where he explains this concept very well. Although you may think that business is in fact about profits, the reality is that you pay your bills with cash. Therefore you should focus on cash flow.
2. An A Team is golden, but an understaffed team is silver
The tendency is to hire people in your team for the skills you may need when business explodes. However, until your business goes boom you still need to support yourself and your team. This is exactly why you should always hire people for your current most immediate needs and go step-by-step in expanding the team. Having people on a part time basis can also prove effective as it means less costs and sometimes more efficiency for you. Automate your tasks whenever possible and especially for your regular tasks and humanize the exceptions. Other ideas for a more cost-effective team could be forming parthnerships in order to get some of the tasks done or to give sweat equity instead of salary to your potential employees.
3. Do It Yourself!
And I don’t mean that you shouldn’t try to delegate whenever possible. I just mean that as you’re starting up on a shoestring you’ll probably have to do a lot of things on your own during the early days. And this is sometimes for the best. As you’re the founder, you’re singularly accountable for your company’s success or failure. Therefore, why blame it on a consultancy firm or service provider? Doing all the important things yourself or at least having them taken care of is the shortest path to success for a self-funding start-up.
4. Working from home can be just as cozy
Don’t get an office space until you’re sure you have a revenue base to support yourself. Work from home in order to save rent and commuting costs and get your team to work from home as well. They may even see this as an advantage. If you think that the lack of an office space would seem like a lack of professionalism to your clients or potential employees and partners, then how about finding a fancy and creative solution for this? You can have all your business meetings and even team or partner meetings at a business glam coffee-shop and still save the rent costs.
5. Consider barter deals, renting or leasing instead of purchasing
You probably will need a lot of equipment when you first start up your business. And especially when you have to hire a few employeess as well. However you should consider leasing or renting equipments instead of buying them. And the best solution available would be to barter your products or services in exchange for some of the equipment you want.
6. Cut through unnecessary bureaucracy
Don’t get your employees or partners to go through or fill in unimportant and outdated bureaucracy. And save yourself from it as well. This is one of your main advantages as a start-up against bigger and better funded competitors: your size and lack of bureaucracy empowers you to make faster decisions and to move more rapidly than any other company on the market.
7. The customer is King
And the cash you get from your customer on the short and long haul is Queen. Allocate all your time to building customer value. Don’t forget that your greatest asset is the value you and your company adds to your clients through your sustained efforts. Therefore, you should put your best resources towards getting and keeping customers and making life measurably better for your customers. You cannot afford to ignore your customer or to not put him first!
8. Creative buzz, viral and guerilla marketing
In order to get to your clients and to let everyone know you are out there on the market you need advertising. But, ooops! You can’t afford advertising the big way. You have to start small, of course, but this is not necessarily a disadvantage. Bootstrapping marketing is actually about using your creativity instead of cash in order to promote your business. Think buzz marketing. Think guerilla marketing. Get viral. Use your team’s creativity and come up with unexpected innovative ideas that will draw your customers’ attention.
9. Get out there in the media
Leverage media in order to get free publicity. Present yourself as an expert in a certain field and contact journalists, newspapers or websites in your field of expertise to offer them your help for future articles. It’s not a lot of effort and it’s a great way to get some free publicity and personal branding for you as an expert in your startup’s field.
10. Think big. Start small.
Last, but not least, don’t forget that bootstrapping is not only a reality or a way of cutting expenses and starting up smart, but also a state of mind. You should always stick to your vision but you should never forget your present time reality. In other words, you have to keep thinking big while starting small.
If you have read this article and think you have other useful bootstrapping tips for startups we’re looking forward to hearing them.