So you’re about to start a business and want to self-finance your business. If so, let’s discuss the bootstrapping principles you should abide by.
There are several financing options available to startup business owners.
One of such is bootstrapping.
Many startup entrepreneurs have successfully built six and seven-figure businesses using this means of business funding.
Good for you if you’ve decided to walk down this path.
However, ensure you’ve carefully weighed the pros and cons of bootstrapping before going ahead with this decision.
Once you’ve decided to use bootstrapping as your preferred means of business funding, you need to do it the right way.
Fortunately, this blog post aims to share insight on bootstrapping principles so you can get it right.
Ready to learn what these principles are? Read on!
First, let dive deeper into the concept of bootstrapping.
This concept started with a phrase popular in the 18th and 19th centuries- “to pull oneself up by the bootstraps.”
In today’s world, it connotes the ability to build or make something out of nothing generally and in the business world.
Bootstrapping in business parlance means building a business relying on personal finances.
In doing so, you would practically depend on your personal income and revenue generated from the business.
Like pulling yourself up by your bootstrap, this is also not an easy thing to do in business.
Running a business requires funds.
So, running a business with limited funds can make it even more challenging.
However, it is doable, judging from the success stories of several entrepreneurs who built their business from the ground up, relying on only their personal/business finance without external help.
Let’s see a few examples of businesses that proved to bootstrap is possible.
5 Examples Of Businesses That Bootstrapped; Principles Of Bootstrapping
These are real-life success stories of thriving businesses that started without external funding.
This Atlanta-based email marketing company is owned by Ben Chestnut, Dan Kurzius, and Mark Armstrong.
It started as a web designing company in 2000 and was transformed into a full-blown email marketing company with 30,000 paid monthly subscribers in 2007.
Mailchimp today is valued at over $10 billion.
However, it wasn’t an easy start for these entrepreneurs.
Ben and Mark started their web design company after being laid off.
So, at the time, they financed the business with their severance pay before Dan joined them after a year.
The trio realized that most businesses needed email marketing by handling several web design gigs for their clients.
So, they started offering email marketing services with the name “Wemailer” and later changed it to Mailchimp.
Mailchimp is one of the largest and most well-known email marketing companies globally.
Tobi Lütke is another seasoned startup entrepreneur who built his multi-billion dollar Canadian-based e-commerce company using bootstrapping principles.
Shopify first started as a snowboarding e-commerce site named “Snowdevil.
Tobi Lütke, Daniel Weinand, and Scott Lake collaborated on this.
However, it wasn’t much of a successful venture due to the dwindling sales of snowboards and some complexities with the site’s design.
So, Tobi had an idea to turn it into an e-commerce store, relying only on earnings from customers’ subscriptions to run the business for six years before accepting any external funding.
Shopify is one of the largest e-commerce companies, valued at over $166 billion.
Lynda Weinman single-handedly built an online content library of video tutorials tailored to meet her web design students’ needs.
However, what started as a solution to a personal problem became a valuable technological asset that caught LinkedIn’s attention.
Eventually, she sold her content library to LinkedIn for $1.5 billion in 2015.
Today, Lynda is part of the ever-growing professional platform LinkedIn with thousands of valuable learning resources.
This is another good example of a successful startup based on bootstrapping principles.
With an $800 camera, professional software development skills, and not-so-great photography skills, Jon Orninger built a million-dollar company from the ground up.
Jon had a frustrating experience using traditional stock-imagery companies.
This inspired him to look for simpler and more affordable solutions to get stock images, giving birth to Shutterstock.
What started as a media library with 30,000 images in 2013 is now one of the leading online media companies with 70 million pieces of content.
Shutterstock is now worth over $2 billion.
With a unique idea and $5000 (her personal income), Sara Blakely founded Spanx ( women’s shapewear) in 1998.
14years later, she’s turned her startup into a multibillion-dollar clothing brand focused on creating comfy wear for women that makes them feel comfortable and confident.
These examples have proved that it’s possible to bootstrap your business.
It may not be easy, but it’s doable with the right strategy.
Be willing to start small and be patient to see your business grow.
15 Principles Of Bootstrapping For Startup Success
1. Evaluate Your Business Idea
This is an essential step before even putting your business out there.
You want to make sure that your business has the potential for success.
Specifically, you want to ensure that your business idea solves your target market’s needs.
Otherwise, no one will be willing to pay for your product/services.
A great startup idea that doesn’t solve problems is just an idea.
So, evaluate your business idea to verify it’s worth your financial investment.
2. Always Find Ways To Reduce Your Expenses
This principle of bootstrapping can’t be overemphasized.
Evaluate your recurring expenses in business to identify things costing you extra money.
Once you do that, ask yourself;
- Are these things essential for my business?
- Are they bringing in profit?
- Can my business survive without them?
If you can’t answer YES to all these questions, you need to cut out those expenses.
Just because these things were part of your business expenses when you started doesn’t mean you have to keep up with them.
Sometimes the best way forward is to let go.
Let go of those extra expenses that don’t impact your business in any way so you can have room for other necessary expenses.
3. Be Frugal With Your Finances; Principles Of Bootstrapping
The next bootstrapping principle you should keep close to your heart is spending money wisely.
It’s easy to get carried away with everything you need to do to grow the business and lose sight of what matters.
Ideally, focusing on pleasing your customers, meeting their demands, and gaining their trust is essential for your startup.
However, you’ll need money to meet these demands and improve your offerings which will not be abundantly available since you’re bootstrapping.
Therefore, you’ll need to be extra cautious and selective with what you spend money on, all in an attempt to grow your business.
Focus on what matters the most and keep a list of future projects, ideas, and feedback to implement later on, one after the other.
This way, you’ll have enough resources to finance your startup.
4. Focus On Increasing Cash Inflow
Money is the fuel that keeps every business going, regardless of how little.
So, work to increase the money coming into your business (cash inflow).
You could focus on increasing your income streams by offering a wide range of services.
This way, money comes in from different angles in the business.
More importantly, you should focus on maximizing the most profitable income stream to generate more revenue for your business.
At this point, you shouldn’t be focused on expanding your business just because you’re seeing a massive cash inflow.
Expanding too soon could be the death of your startup.
So, maximize your cash inflow so the business can generate enough funds to power itself.
5. Find A Partner ( Co-Founder)
This is another way to successfully self-finance your startup.
Get a partner who can work with you every step of the way.
Now, this partner shouldn’t be someone out for the profit alone.
Instead, it should be a like-minded partner just as passionate about the business as you are.
Essentially, having a co-founder means having someone to share the upsides and downsides of bootstrapping with.
You both get to share the risks, profits, and financial burden of bootstrapping.
6. Do A lot Of D.I.Y; Principles Of Bootstrapping
Granted, some skilled professionals can get your tasks done excellently and swiftly.
However, these skilled professionals’ services don’t come cheaply.
You’re working on a tight budget, so you may be unable to afford their services.
So, this means you may need to get your hands dirty and get some jobs done yourself, especially when possible.
Most times, your basic skills or knowledge would be enough to get the job done and deliver expected results.
For instance, say you need to design some fliers for your business.
Hiring a graphics designer may cost you more than using some free and basic design software to do it yourself.
Granted, it may take you some time.
However, it will be worth it if it gets the job done.
Similarly, if you have a team working for you, it may be more prudent to train the in-house team to handle the task than to hire a skilled professional.
At this stage of your business, doing your tasks in-house may be more efficient than outsourcing.
7. Stay Focused; Principles Of Bootstrapping
It’s easy to get distracted by different models, best practices, and recommendations to grow your startup.
However, you have to maintain a laser focus on your goals.
Rather than copying what everyone else is doing and trying out different things at once, find out what works and implement it.
This will make reaching your goals easier than trying too many things at once.
8. Don’t Be Afraid To Review And Refine
Building a startup isn’t an easy task.
You may not get many things right at the first trial.
This doesn’t mean that you’re a failure.
It only means you have to take a step back, review and refine your process until you get it right.
So, keep an open mind and be flexible enough to try different approaches to reach your goals.
9. Start Small, Scale Later
With your limited finances, it’s only logical to start things on a small scale.
At the right time, you can scale your startup.
Avoid spending money on large office spaces when you can work well with a small office or from your home office.
Focus your time, efforts, and resources on getting your business off the ground.
Don’t be engrossed with how you can take your startup to the next level at this stage.
10. Reinvest Profits Back Into The Business
This is yet another essential bootstrapping principle to abide by.
You’ve started and launched your business with your savings.
Now you’re beginning to see profits from the business.
It’s easy to get excited and keep your profits to recover your investments.
However, this isn’t the right time to do that.
Putting your profits back into the business will help you afford other necessary business expenses.
11. Offer Services In Exchange For Other Services; Barter System
This is another way to run and manage your business on a tight budget when bootstrapping.
It’s called the barter system.
Although popular in pre-colonial times, it’s still an efficient business practice in this modern era.
The barter system is a mutually beneficial partnership that helps you acquire goods and services without money.
However, you’ll have to give something of equal value in exchange for the goods and services.
For instance, you could offer your business services/products to other businesses in exchange for theirs.
This way, you get what you want without spending a dime.
12. Practice Negotiation; Principles Of Bootstrapping
You’ll also need to learn some negotiation strategies when bootstrapping in business.
It could help you save a lot on your business expenses.
You’ll work with suppliers, vendors, and service providers in your business.
Don’t assume that there’s a fixed price for everything.
Try to negotiate so you can get the best deals.
Some negotiation tactics that could help include;
- Researching and comparing different price offers to find the best deal.
- Decide beforehand your break-even point (acceptable price).
- Be willing to settle at a mutually beneficial price but don’t be afraid to settle for what you want.
13. Recognize And Maximize Your Resources
Aside from money, other valuable resources could be helpful in your business.
These include your time, skills, talent, expertise, education, experience, connections, and reputation.
Identify the different ways you could use these resources in your startup and use them to your advantage.
For instance, if you’re a leader in a reputable group, you could utilize this group to promote your startup and get your first paying clients.
You could have a network of tech specialists to help you with certain technical aspects of your business.
Consider these resources your business assets and use them appropriately to achieve your business goals.
14. Prioritize Efficiency, Over Being Miserly
As much as it’s important to be frugal with your finances, you need to be careful not to be too miserly to the detriment of your business.
Certain unavoidable expenses directly impact productivity and efficiency in your business.
It’s not to ignore these expenses simply because you’re trying to be financially prudent.
For instance, refusing to get the necessary office supplies or equipment for executing tasks could be detrimental to your business.
It could make you lose money which is not what you want.
So, when cutting your expenses and making your budget, think;
- Which of these expenses will have the most impact on my business?
- What costs will bring better ROI?
These are the expenses you shouldn’t tamper with to ensure efficiency and profitability in your business.
15. Have The Right Mindset
Finally, this is the most important bootstrapping principle of all.
As you start your business, you need to frame your mindset.
Going in with high expectations to see massive profit shortly may mean setting yourself up for failure.
Indeed, some startups bloom early and see profits within a short while.
However, that isn’t always the case.
Most times, it takes some time to see significant results for all your hard work and efforts in the business.
So, focus on doing the right thing and trust the process to see your startup become a big enterprise.
Final Thoughts; Principles Of Bootstrapping
There you have it.
15 principles of bootstrapping to guide you as you’ve decided to self-finance your business.
Remember, it’s not going to be easy.
However, you can draw strength from other startups that bootstrapped their way to success.
So, stay on course and good luck!