How to become a successful entrepreneur through bootstrapping

Entrepreneurs generally, raise funds through angel investors, borrow from family and friends, venture capitalist, private equity investors or through IPOs. However, there involves a lot of risks in it. Apart from scaling your business, an entrepreneur not just have to focus on scaling their business but also have to ensure that investors are informed well about business decisions taken on a regular basis. Starting a new business on a limited budget without investor involvement is called bootstrapping, and it’s the only way to go if you don’t want to spend months on the investment pitch preparation and delivery circuit.

I personally believe it is always better to bootstrap a startup and when you start to grow fast and need money to have an exponential growth, to enter new markets, develop products, develop technology, hire quality talent or for anything else you require to grow and build your company, you can look for outside capital/venture capital/investors. They will also show a keen interest, as you have a proven business model, product /service, customer base and there is stable and growing revenues in the company. Also with bootstrapping, you won’t have the added pressure and risk of an investor boss hanging over your shoulder and second-guessing your every move.

Several first-time entrepreneurs believe that they need a large amount of money to start a business. However, the fact is a lot of start-ups founders started their business with no money. Entrepreneurs, who are self – made, bootstrapped their way to success. Most of the entrepreneurs around the world have bootstrapped their business that is putting their own money and building a business by relying on as little money as possible. If you are just starting out, unless you have a rich father or rich uncle or you have won a jackpot, you are most likely to bootstrap your business.

You need to be creative and provide breakthrough solutions to the market need. You need to learn to become an expert in scarce resource utilisation. The key is to find smart ways to maximise the value of every resource you have. Bootstrapped entrepreneurs are resourceful, accountable and careful. Successful ones usually find at least one high-margin product or service to start out with. They build loyal customers, partnerships, and recurring streams into their business model. They gradually grow their marketing and sales, as they scale up when they have the funds. Their sales skills are also good.

Bootstrapped business never seem to have enough resources, people, cash, tight budgets, little or no growth capital to run the business. Key lies in managing your resources efficiently, facing challenges of bootstrapping your business head on and keep building and growing your business. Bootstrapping brings out the best in entrepreneurs and the best in those they work with, too. They are enthusiastic, passionate and relentless. They don’t give up on their dreams and they never stop learning. They also end up learning a lot more about themselves along the way and end up accomplishing a lot more than they might have originally thought possible. They are natural savers and they are also committed to the long-term growth of their business.

My successful entrepreneurship journey through bootstrapping

When I started my entrepreneurial journey, I had no money in my bank account, no contacts, no business network, not much business experience, all that I had was an ambition to make it big and fire in the belly to do my own business, and intense desire to travel around the world for business. To back this I acquired knowledge in international business and skills by getting an MBA with specialisation in International Business from Symbiosis, Pune.

I asked myself, what business should I do to meet my goals and very little money is required to start the business. Hence I thought to set up an international marketing company to start with, where you can represent Indian manufacturers in the international market. I bootstrapped my startup and once we started to make some money, we got into setting up Joint Ventures, foreign collaborations, marketing collaborations, launching brands in the global market. As I had no money and I learned early to do things in an inexpensive way.

When I co-founded apparel-manufacturing company Rajshree Apparels Private Limited, my co-founder and I invested USD 12,000 each to kick-start the company and we asked our family member to infuse another USD 12,000. So in total, we invested USD 36,000 in our company as equity. We wanted to utilise our time and energy to get our samples ready, meet potential customers, present them our samples and company and set up our factory rather than spend time preparing pitch deck for investors, connect to investors, meet and present them. We were determined to make this start-up success as we had the necessary skill sets, knowledge and above all, there was a demand for our products in the market.

Our customers were these large-format retailers like Pantaloon, Lifestyle, Shopper stop, FBB, Westside and they were looking for manufacturers who can supply them with good quality Indian women wear apparel at an affordable price. These retailers were expanding their business by setting up more and more stores and their sales of existing stores were also increasing. Hence they were looking for manufacturers of women Indian wear as there were demand and supply gap and we sensed this gap, and got into the business of Women Indian wear manufacturing.

Additionally, I had later bootstrapped XORA Retail under the brand name "XORA" which is a manufacturer and retailer of Indian women wear. Within two years we scaled up our business to more than 70 stores across states. We grew with our own money and cash flow generated from the company. We focused on growing and building our products, business and opening more stores and creating the system in the organisation. We were so passionate about growing our business that we did not want to waste our time in securing outside investors, and then these investors influencing our decision making process and strategy of our business.

Even our company NUVO Real Estate Private Limited has been bootstrapped. Nuvo is a research-driven global real estate investment, development, and management company. It focuses on delivering value to its investors through its business model that maximizes capital efficiency. In executing a business strategy that combines the roles of real estate investment, development and property management, Nuvo has generated consistently good returns for its investors.

Points to consider for a successful bootstrapping journey

1. You should utilise your personal income and personal savings, ask your friends and family to fund, or you may start as a side business where you keep your day job, and you work part-time in the evening to get the business off the ground.
2. Find team members to work for equity rather on salary taking cash every month. People working with you need to understand their failure means a startup's failure. Equity, profit sharing, and revenue sharing are your best assurance of commitment and focus.
3. Getting advance money from customers. This usually happens if you are into B2B business (Business to Business). On pitching to your customer about your product /service, if they like your product/service, they will place the order to you and pay you to advance to deliver the product/service on time. The customer funding is pumped back into the business to keep the business operating and fund growth. Ask for an advance from customers and defer payment to vendors/creditors. If your solution has real value, your customer will give you advance. For services, kindly ask for a retainer up front to offset your costs.
4. Build your strategic plans around your budget, rather than around your wishes: Entrepreneurs who start without a plan, spend more money. Likewise, those who feel compelled to keep up with the popular media will spend most of their time courting investors. Most investors agree that too much money leads to poor spending decisions and lack of controls.
5. Postpone your plan to find office space, until you have customers and revenue in the company: Remote startup team members are the norm today and can be very productive with smartphones, video and the high-speed Internet. Office space costs money upfront, requires equipment, staffing and travel expenses. With a website, your business can look as big as any competitor.
6. Defer your payments to your suppliers/creditors partners as they will understand your cash flow challenges.
7. Do inventory management with your suppliers/distributors. Ask your suppliers to manage the inventory on your behalf and ship to you when you need them and also ship your finished products to distributors and ask them to manage the finished goods inventory to be shipped to customers. This improves the capital efficiency in your business.

Make it large through bootstrapping: Here's How

Focus on cash flow: Bootstrapped companies should focus on generating revenue and cash flow every month to keep running their business operations and service their customers. I personally focus on cash flows when I start my business. This ensures the smoothing running of our operations and keeps track of our cash inflows and outflows. And if any correction in business is required then we are able to take quickly.

Focus on profits – Boost strapped companies must focus on profits to keep ongoing. Founders can’t afford to waste money. They must make money to survive. The profits they make funds the growth of the business. Usually bootstrapped businesses expect to be around for a long time, slowly and quietly growing, developing paying customers to meet the business costs; whereas, companies involved with outside funding will be expected to have high growth so that the investor can have a profitable exit strategy.

Make your revenue /expenses sheet, monthly cash inflow/outflow- Project your monthly expenses in your business and plan how you are going to meet these expenses. To generate the cash you can pre-sell your product / services to meet your monthly expenses. Plan your yearly revenue and expenses, cash inflow and outflow month-wise and based on the demand of your product/ services you should be flexible enough to make changes in the above to successfully run your business.

Development of Skills – People starting a business must develop a wide variety of skills, as well as passion, resilience, perseverance and courage, are usually required to make a bootstrapped company workable.

Becoming a Better Business Person – Improving one's core values matters too, including being resourceful, accountable and careful, as well as enthusiastic, passionate and relentless in the advancement of the company.

Bootstrapping requires guts, passion, and skill – Founders bootstrapping their business must have multiple skill sets, be creative, innovate on a regular basis should be able to fit into any role of the organisation quickly, in sales, purchase, product development, finance & accounts, strategic planning, and implementation, business development etc. Founders should have man-management skills, should be able to work under pressure and handle day-to-day challenges of business efficiently and calmly.

Learn to barter - when you don’t have cash, they learn to hire the right talent or outsource and stretch all the resources to make things happen. Founder’s hustle, they create and they make things happen.

Winning despite the odds

Although I have spoken much about bootstrapping and its advantages, there are certain precautions which one needs to take to avoid failure. It is because bootstrapping has its disadvantages and it can be avoided. Bootstrapped companies face huge barriers to growth. They tend to be strapped for cash especially during initial days of starting your a business may become risk-averse and may miss growth opportunities. They may not be able to hire talented individuals coming at high cost.

Lack of capital and cash flow – Problems can arise if a company doesn’t generate the capital it needs to develop products and grow. although bootstrapping allows for greater control and the profits are yours, it also involves much more risk where losses and failures may be experienced. One reason some bootstrapped companies are unsuccessful is due to the lack of revenue: Profit is not sufficient to meet all costs. Starting a business most often requires very long hours of work just to keep your business going, let alone the fact that in many cases, there is no pay check to go with this effort. All problems are yours, as hiring staff is not usually applicable; therefore solutions are limited to your ability, or friends and relatives. Other problems include stress and criticism from certain peers.

Avoid problems and still win your entrepreneurial journey

When starting a business, it’s no secret there are going to be risks involved and difficult decisions to make. It may take a while to find a steady stream of revenue. One mistake could end up costing you lots of time and money. You’re aware of the relatively high possibility that your company could eventually fail. But most entrepreneurs know this and are prepared to take challenges head-on with grit and determination.

Building a strong business with a sound foundation and value takes time and many bootstrapped companies have achieved this by providing amazing products or services. Bootstrapping companies, when seemingly doing the impossible, must constantly be looking for ways to improve their processes. One area to take particular note of is the financial management of your startup– sloppy practices and shortcuts will, at times, be disastrous and can take your business down the drains.

We often get stuck thinking about money for hiring, product development, marketing, growth and other investments that we ignore the very first and basic reason behind our startup; solving problems and addressing needs. You must have heard this a thousand times, but the first step in startup development is to validate your idea, and if there are customers for your product/service you are trying to develop. You will have to focus on cash flow. Only when you know what potential buyers are willing to pay for today, will you be able to decide your next move.

Based on my experience of bootstrapping all my businesses, I believe, bootstrapping brings out the best in entrepreneurs, as it is a tried and tested way to become a better businessman as entrepreneurs learn the hard way.