What does it mean to bootstrap a Startup?
A Startup Vitamin: “Don’t start a company unless it’s an obsession and something you love. If you have an exit strategy, then it’s not an obsession”
A ‘startup’ is a company that is confused about – 1. What its product is? 2. What kind of service will they provide? 3. Who the customers are? 4. How to make money?
In general, bootstrapping usually refers to a self-starting process that is supposed to proceed and succeed without external input. In this scenario bootstrapping doesn’t limit itself to only startups, even big business owners need to adapt to this form of investments so that they can treat their resources valuably at all stages of their growing business.
“You don’t need to have a 100 person company to build that idea” – Larry Page
- Believe in what you want to do
The social media critiques are showcasing that most of the startups are making millions of dollars of investment every quarter to get their business running. It may seem that every startup is successfully raising VC (venture capital) money, but in reality it’s not. In fact, you should be able to start and grow a business without outside capital. But at some point you might need some extra cash, is this okay? Yes, for expanding your business, it is okay if you need some extra push to cross the limits. Some businesses solely believe in VC money and when this doesn’t happen they fail. Some of the reasons for failure could be hiring more than required number of employees, renting out expensive work spaces, spending too much in R&D of the product. A favorable advice to all the budding entrepreneurs is please try to build business plans that can quickly generate revenue. If you can succeed at building the perfect business model and also able to bootstrap the basic salary for your employees then eventually you can succeed with or without the VC money.
- Sell your product soon
If you want to survive, you have to get money flowing through your business. You can’t wait months (or years) before you bring your product or service to market; you’ll go broke. Which is not what most of you have planned for, to shut down the business even before you hit the market. In a business, if we are not able to generate sales quickly enough, which might result in failure. Consider a business model which was based on having a steady stream of leads coming into the funnel. The time and expense required to get the required leads into the funnel killed the business over time. Sad to learn that the business owners had to shut down their business because they ran out of cash.
“Investors are pinched between two kinds of fear: fear of investing in startups that fizzle and fear of missing out on startups that take off” – Paul Graham
- Definite answer for “How?”
You must know specifically HOW you’ll make money. Very obvious, right? Yet many people don’t have a clear plan of action for how they will make money. They keep beating around the same bush saying they will make money and build castles. The failure of a company will partially result if we do not know the answer to this question. Consider a company who knows their target audience, but has not come up with proper sales strategies to sell their product to make money. Having a clear understanding of the “how” before you start would have helped to see that the business model you built will work or not. The sooner you realize this, you can re-design your business models and make it right.
- Invest MORE, Spend LESS!
Don’t spend money on anything that doesn’t have the ability to put money directly back into your business. Don’t spend money on lavish work spaces, which is not required at the starting stages of your business, don’t hire so many employees where you will not have cash to even pay your core team members their basic. Always look for investing in plans that would give you a definite ROI.
“Your reputation is more important than your paycheck, and your integrity is more important than your career” – Ryan Freitas
- Never impress anyone
Don’t worry about impressing others. When my uncle started his startup company, he spent almost a year and a half working from coffee shops and his house. Definitely, he could have afforded an office space but he followed my 4th rule to save money. At the same time, let me quote another example here, a startup company that my friend worked for which is yet to reach the customers with their product, was almost ruined in the beginning stages because they violated this rule. When the business began acquiring minimal investments, they immediately went out and rented a lavish new work space because her bosses wanted others to believe that the business was very successful. This mistake almost lead them to freeze their operations when they were not able to pay the required lease amount. Fortunately, they were able to settle the arrears. But they encountered additional payroll for employees who had to be paid which resulted in a mistake of settling nearly 1 million against their pay even though they never worked for over a month because their work space was shutdown.
- Awe them
Awe your customers and prospects, and do it consistently. In relevance to our digital age, one simple way to woo them is by shooting “thank-you mails” after every interaction with your clients and vendors. The cheapest startup to implement and develop is a Customer Centric company.
- Always Lookout for investments!
Keep an eye out for people who may be willing and able to invest in your business. Build relationships with them, but don’t keep asking for money until the time is just right! Securing your company’s first investment is therefore much harder than landing subsequent ones. You’re asking investors to take a leap of faith with you.
All of the rules above will help you successfully bootstrap your business, but rule No. 1 to understand what you want to do? Is the most important.
“If you can’t bootstrap your business, then it’s time to strap your boots and leave the arena”
See you soon!!
Regards,
Kavya Rao Addepalli