Startups have brought with them several complicated business terms. I’m talking about Lean Startup, Bootstrapping, Growth Hacking… and many more. Today we look at bootstrapping. What is bootstrapping and what are the advantages of bootstrapping for startups?
What is Bootstrapping?
Bootstrapping sounds like a very complicated concept at first, but it actually has a very straightforward definition. This is when a company finances its own growth from its cash flow and revenue without any external funding from investors or lenders. In short, a company spends as much or as little as it makes. Generally, this would be a business whose workers earn nothing for a while because the initial cash goes back into the business to grow the business. People in such startup models work really hard to make sure the business is making money to survive. With time, they invest money in making sure the startup reaches stability and eventually thrives.
Merits of bootstrapping
From the startups that have done this before, to the business industry and speeches from investors, I have come up with 8 merits of bootstrapping you should know about:
1. Total Control
Probably the biggest advantage of a bootstrapped business is that it maintains full control of its future. The founders also maintain full control of the business. This could be bad if the founders aren’t sure of the direction to take but mostly it’s a very good thing because successful startups are usually founded by people who have a strong belief in what they want to do with their business. For a bootstrapping business, it is crucial for the founders to believe in themselves. By maintaining full control of the direction and decisions of the business, you avoid bringing conflicting interests onto the table by taking on any venture capitalists, investors or lenders. Most of these investors come into the business proposing different directions. For this reason, if you want to maintain full control of that, then bootstrapping is a good model to adopt.
For a bootstrapped business, the customer is the chief investor, buyer, and determinant of the existence of that business. If the customer stops buying for whatever reason the startup will stop making money, eventually dying or going into debt. Bootstrapped startups are usually very customer-focused. They make every decision with the customer in mind. They make every decision to improve customer experience and get more customers. The customer is the lifeline of such a business and for startups that have bootstrapped well, they usually have very loyal customers who keep them in the business.
3. Sustainable and Profitable business models
Bootstrapped startups survive because they are making money. Enough to grow, albeit slowly, and pay the workers. This is a sustainable business model. It is a proven profitable model that the startup finds to continue to grow in their field. For startups that depend on external funding, the same cannot be guaranteed. Other externally funded startups may even run on debts because they haven’t found a sustainable business model but for a bootstrapped business, they had to find a sustainable and profitable business model to survive. Such a business is therefore a guaranteed profit-maker.
4. More money distorts product growth
When you have a lot of money for your startup, it’s very easy to miss the most fundamental aspects of product development. More money means you can easily make all the changes you wanted to make for your product. As soon as you get this money, you can go ahead and hire expensive developers to develop the product further. Such stances distort customer-centered product growth. A bootstrapped business will implement features over a long time instead of doing everything at once. Being restricted in cash forces businesses to invest in perfecting each aspect of the product before moving on to the next.
As you create a few features and add to the product, while the customers continue to use the product with the new changes, they provide feedback to your startup. With this feedback, you get an idea of what to tweak when the money comes next time. When you eventually make the changes the customers are satisfied that you gave them time to provide feedback that worked and now you are both happy. On the other hand, having access to a lot of money at once usually pushes businesses to start making their own idea of a great product without realizing that slow growth gives you the customer’s perspective. Eventually, you will find that you have spent a lot of money making a shoddy product and have lost direction, and maybe several customers too.
5. No time spent finding investors
Finding investors for your startup is not an easy thing. It could take hours, days, weeks and even months. Sometimes years. That’s a lot of time that you could spend working on the product and sourcing for more customers. That’s time you could spend growing the business.
6. Efficient Management
Have you realized how efficient you can be with spending money when you know that you have such little money left? As a young person, I know that sometimes I spend such little money in a week and the spending is so efficient that it feels okay to be broke. That’s exactly how bootstrapping works. You learn to be so efficient in everything involving management and spending. You only want to spend money on meaningful things. Usually, for a bootstrapped startup, meaningful spending improves the product and customer experience. Efficient management learnt from the art of bootstrapping is a virtue you will never learn from any school or college, it’s first-hand experience. It can only make you and your startup better.
When you know you can’t afford something in a bootstrapped startup, you learn to improvise and get things done using the next best alternative. Ultimately, bootstrapping improves creativity for the startup team. You find ways of doing things more efficiently while spending less money. In fact, sometimes having less money than you need is a blessing because it pushes you to innovate.
8. Lean Company
A lean company is attractive to investors, lenders, VCs and all. A lean company will get you all sorts of attention when you are making a profit and that’s good for your business. By bootstrapping, you will find yourself in the company of a strong, winning startup team. That is always a good thing. When there are many people in a team, efficiency goes down because the levels of accountability are lower. Keeping a small team means your expenses are lower, and everyone is the best at what they do. There is also little chance for mistakes and management issues.
9. You invest in building a network
When you realize you don’t have enough money to throw at every business problem you encounter, it’s natural to invest your energy in building a professional network to support your brand instead. By building positive long-term relationships with members of the media as well as other thought leaders, you can boost brand awareness without spending a single cent. After all, successful PR relies heavily on positive long-term relationships with the public.
When you can build relationships with journalists, bloggers and influencers, you can create a buzz for your startup without having to spend thousands of dollars on paid advertisements. Likewise, establishing positive relationships with your target audience helps them feel valued. And, ultimately, customers who feel valued eventually develop brand loyalty.
Do you need help building this professional network?
Do you need help building this professional network? Backed by a team of experts with years of experience doing public relations, Pressfarm can help you do that. By creating quality content which captures media attention and inspires your target audience, we can help you grow your business without spending an unreasonable amount of money. With a winning press release, some compelling guest posts and a creative media kit – all from Pressfarm – your brand can make a splash and create a memorable impression in public.
Besides creating a newsworthy brand story for you, Pressfarm can help you share it with the world. With our media outreach and distribution strategy, you can put your memorable content in front of the right eyes. Once we’re done with content creation, we give you custom media lists designed personally by an account executive to help you connect with the best journalists in your niche. In addition, with access to our media database, you can work with over 75,000 journalists across different industries to share your story with the world. The best part is that you don’t have to rob a bank to do PR for your bootstrapped business. Rather, we give you all of this – and more – in one of three affordable packages. Sign up with Pressfarm today and start telling your story to a wider audience.