Following of form my article earlier this month What have I learnt from bootstrapping my latest venture, 6 months in? I have spent some time reflecting on how the experience of bootstrapping this latest venture has helped me nurture some key areas of expertise which I'd not wholly tapped into prior to this period of bootstrapping.
Every entrepreneur faces this question are pretty much the same time as they decide on the idea they wish to work on in a start up….. how can I fund this start up?
The answers to this question are pretty much limited to looking for outside funding, which for most is a remote possibility, or rolling the sleeves up, and taking a long hard look at the bank statement to access if you are in a position to finance the venture yourself, by bootstrapping.
6 months ago I faced this question and choose the bootstrapping option. I had not bootstrapped a business before though the decision I made has taught me many things about building a business and honed my ability as an entrepreneur.
I believe the 6 months of bootstrapping my latest venture has driven me to become a far more effective and hardened entrepreneur, the insights associated with this personal evolution are considered here:
1. Size does matter…small wins every time
Bootstrapping is certainly about thinking big, but from an execution perspective I have found small to be the clear winner. With limited funds I was forced to start small, test my thinking and scale as I gained confidence from my customers feedback and an improving bank balance.
2. Superior Products
With limited funds my focus on the product became close to obsessive, and by placing customers centrifugal in the development phase the product we evolved through the build phase generated revenue from day 1. This attention to detail coupled with constant listening to our customers resulted in a far superior product and formed a strong basis of our product roadmap for the next 12 months.
3. Control Freaks work just fine in bootstrapped businesses
Let this be heard I’m a control freak, but here’s the good news; Bootstrapping a company with your own cash buys you the right to run the show your way with no external forces (e.g. investors), so nobody but you, unless you choose to invite others, has the right to calls the shots.
4. Deliver more with less
The art of spending money wisely in business comes a whole lot more naturally when it’s your own hard earned cash that you are deciding to spend. You soon learn the habit of delivering significantly more than you would normally for the same time or cash outlay, and heck you learn quickly how to be an effective and hardened negotiator.
5. The accelerator pedal is full on, there’s a need for speed
With limited cash comes limited time, in this finite time period the product must be completed and be in market. Adopting the Minimal Viable Product approach to product development was a gift which ensured we worked on the absolute necessities and on none of the nice to have’s. This challenges your instinct and there is no room for perfectionism, good enough was a term we used frequently and thanks to Nike, “Just do it” became our mantra.
This absolute need for speed is created by the sheer lack of funds, interestingly when funds are injected into bootstrapped businesses there is a tendency for the accelerator pedal to be lifted, as the pressure to hit the deadline, dictated by when the cash runs out, significantly shifts in proportion to the $$ invested.
6. Frugal does have an upside
The skill of keeping costs low as you get the product to market has a tremendous upside beyond not leaving you cash-less, it helps deliver a great lift to the bottom line, in terms of early profit.
With this lean approach to running the business instilled in the DNA of the business through the bootstrapping phase, you are set up to deliver industry leading margins which not only deliver great profitable earnings but are a key indicator used by investor to access investment opportunities.