Gaining external investment without showing early traction can be a challenge for many startups and can leave you feeling left out in the cold. But is there a way to support your early stages internally, to ensure your idea has time to grow and be as attractive as it can be? The answer could be bootstrapping.
In this blog series, we look at bootstrapping, and a number of alternative investment options, is VC or angel investment isn’t the way forward for your business.
The term Bootstrapping is the act of building a company from the ground without external funding and reinvesting income back into the business to faciliate this.
When starting a business, most entrepreneurs will think of seeking external seed investment such as venture capital investment or angel investment to get the company going. As we have discussed though, seeking external investment can take a long time, and can be a challenging process which may not bear fruit, so it may be worth looking to bootstrap before you become irresistible to investors later down the line!
What are the benefits and disadvantages of bootstrapping?
The main benefit of bootstrapping your startup is that you keep control of your business. This means you can follow your original business plan, or change things when you see fit without having to report back to investors.
This can seem very attractive, but conversely all the pressure is on you to succeed – you will have to learn every element of running a business really quickly and if things don’t work out, it’s your money on the line. And funnelling all money back into the business to support growth may seem tricky when you want to see some return yourself.
But if this is the way you’d like to go, here’s 5 tips to stay lean to facilitate your growth.
5 tips for bootstrapping your business:
1. Avoid getting into debt.
There’s no point going it alone then being indebted to credit card interest rates and worrying about making bill payments each month. The main benefit of bootstrapping is having autonomy, but if you get stuck in debt and suddenly need to seek investment to pull yourself out or spend sleepless nights worrying about bills, that autonomy and the slog to get there will be for nothing.
2. Set yourself up with a remote office.
Prime real estate is the quickest away to throw money down the pan. It’s all well and good having shiny new office space, but the key thing to focus on is your product or offer and how you get that out to customers, not where you do that. So money saved on a remote office can be used for customer acquisition and marketing or PR.
Technology has come along leaps and bounds and there’s a hundred and one easy-to-use and affordable platforms that facilitate working remotely. This provides the added benefit of having your pick of a global workforce to engage with, and not tie yourself down to one location with hefty upfront investment costs.
3. Accept growth will probably be slow.
As you probably don’t have millions of pounds at your fingertips for product development and production, not to mention associated PR and marketing campaigns, embrace the fact business will likely grow slowly. Even if you’ve built in a model with quick returns, it’s never going to be as fast as if you have loads of money to work with.
Growing slowly can support growing a more sustainable business, and ensure you make more measured decisions to ensure surefooted growth. Having a high amount of investment could just increase your burn rate or mean you grow too fast to catch your breath.
But be mindful that making decisions too slowly could mean your great idea is now shared by other companies growing up from the ranks. So don’t be scared to make decisions, or too afraid to make mistakes. Everyone will make mistakes – it wouldn’t be something new if you didn’t.
4. Keep work internal until you grow enough, and then look to outsource rather than employ.
When you’re starting out, the amount of money you can save by doing things yourself is astonishing. Website development, customer service, project management and finance are skills that not only will save you money if you learn to deliver internally yourself, but will enable you to run your business better as you develop and give you better oversight of it too.
And when you get to the point you have too much work to do yourself, look to outsourcing tasks rather than employing someone full time. It is a way to ensure your business remains agile during a period of growth, plus, as mentioned above, gives you the pick of a world of people rather than those in your postcode.
Outsourcing could work for you long term depending on the type of work you are bringing them in for. The traditional business structure of permanent staff can be a huge drain on money and space, and to become an agile business, you don’t need the full complement of staff at all times.
5. Network, network, network
Whether it’s with potential customers in networking meetings or chance meetings, or press contacts on Twitter, being your own personal PR machine can do wonders for your brand. After all, you do know your company’s offer the best. And if you can’t big it up, then is it worth bigging up?
Is bootstrapping worth it?
Only you can determine this yourself, but if you’ve got the idea and a strong will, bootstrapping can provide you with the autonomy to build the company you have in your mind today. Just be prepared for a huge amount of work and less money than you thought until you’ve grown to the size you want!