You don’t need money to make money, just a solid idea, concept or product along with some dedicated employees, a growing community of clients and a strong shot of determination with a chaser of resilience! Bootstrapping is a business term derived from the 186-year old idiom to “pull oneself up by one’s bootstraps,” which means to succeed without outside help. So, put on your Timberlands because we’re about to get to work!
What Exactly is Bootstrapping?
Simply put, bootstrapping is an organic concept based on a solid belief in your product combined with $500 or so from your savings account along with the available balances from your credit cards and other resources (hint, hint: family and friends) and some sweat equity. Add some dedicated employees and a growing community of clients, and there you have it, bootstrapping at its best! According to Forbes “Companies that use their own resources to start and grow are often stronger and more dynamic.” With only 1 percent of the 30.2 million small businesses in the US getting a portion of the $614 billion invested in 2017 of venture capital dollars, as reported in a press release by Pitchbook, a financial data and software company that promotes transparency in capital markets, a lot of bootstrapping is happening.
Why Consider Bootstrapping?
Many start-ups don’t have the access to or a desire to take on big financial burdens. This lean start-up approach allows you to finance your business by using everything you have to get what you want. Some bootstrapping ventures that may ring a bell include SPANX, GoPro, Mailchimp, Wayfair and GitHub, the latter of which was bought out by Microsoft for a whopping $7.5 billion, just to name a few.
Bootstrapping Pros, Cons and Strategy
Bootstrapping requires a business model that encourages cost minimization. Surviving and thriving off of success promotes simplicity and flexibility and will yield a cost-conscious foundation on which all else can be built upon. Like all business decisions, the commitment to bootstrapping comes with its pros and cons, a few of which you will find here followed by responsive and strategic mitigating tactics.
- 100% ownership.
- You answer to no one but yourself.
- Less/no dilution of direction, focus or creative control.
- No pressure to satisfy or concede to external investment sources and the priceless ability to look back and say, “I built that.”
- Personal financial risk
- Potential cash flow shortages
- Sweat equity intensive, especially if a team of one
- Limited visibility and connections
- Potentially slower growth
Whether your business is intensively concept driven, reliant on heavy equipment or as simple as a refreshing childhood lemonade stand on a hot day, stringent funding practices and careful budgeting in business is integral to a successful bootstrapping strategy.
There is something to be said about going into your neighborhood hardware store and asking someone in the paint department about drill bits, and for them to show you exactly what you need. From its uses to its limitations, know your product inside and out. The strong, prompt delivery of product knowledge will classify you as an expert, eliminate the need for client research and secure timely sales. When you know, you grow! Knowledge that exudes from the leadership on down aids in swift client and stakeholder decision making and buy-in.
When marketing dollars are short, business relationships pick up the slack. From getting new customers and retaining current clients to managing and enhancing the company’s image and reputation to pushing your business plan’s essential mission and vision forward, relationships are resources that, if cultivated, can yield spectacular growth.
As you scale up, if seeking a venture capitalist is the next step, bootstrapping will demonstrate the execution of a strategic management style built on providence, resourcefulness and accountability, demonstrating how business savvy you are. In a world of successful big businesses, many relish the grassroots approach of bootstrapping as it secures organic buy-in from everyone involved. Whether by choice or limitation, if the boot fits, put it on, lace it up and let’s connect!