Bootstrapping Your Company - All You Need to Know in 2020
With globalization, you can do a lot of things on your own to set up a business. The information is out there, available in just several clicks, which allows you to build a website, create and implement a marketing strategy, and advertise your product or service. So you do not only have everything to create a business on your own but also do so with a minimal budget.
Putting it differently, you no longer need external investments to launch a business because of the wide variety of alternatives you can choose to run a company using your just savings. Creating a company without involving investors is called bootstrapping and does not only allow you to start living off it sooner but also make independent decisions by being your own boss.
In this article, I am going to cover the main guidelines on how to bootstrap a business and succeed. Since Starkflow is a 100% self-funded company, our team has learned some things about what to do and what to avoid when growing a company without investors! Keep reading to find out what they are.
Bootstrapping implies starting a new business on a limited budget without investor involvement.
First things first, let me highlight the difference between a traditional way of financing a company and bootstrapping. Usually, you come up with a business idea, create a business plan, and start looking for investors. As soon as you make a deal, you start working on making the plan come to life.
By contrast, with bootstrapping, you use the money you have available as your savings to start and grow a company.
Bootstrapping allows starting a company at a comfortable pace. It provides:
- Creative freedom
- Less outside influence
- Focus on quality
- High stakes (which equals higher rewards)
- Opportunities for smarter decisions
- Better profit margins
- Faster progress
Putting it differently, it offers valuable benefits to the process of establishing a company: you do not have to spend months on the delivery circuit and investment pitch preparation, let alone the pressure of an investor hanging over your shoulder.
How to Bootstrap Right?
Of course, starting your own company for the first time with bootstrapping can be tough and turn your start-up into a failure if you do not do it correctly. The following recommendations are what the Starkflow team has learned to work to keep growing your self-funded business.
1. Stick to a business domain you know and love
Start a business in an area where you have some experience because the insider’s knowledge will be a great help. In addition, make sure that there is a significant demand for the product or service you are going to offer; otherwise, you will just have no opportunities for growth if nobody needs what you provide.
For example, numerous service-based businesses, regarding what they offer and their sizes, need mobile versions of what they provide. Therefore, a mobile app development company can be a successful choice for a freshly established business, especially if you have some background in programming. Focusing on a niche is also a great way to succeed, such as doing iOS app development only. This way, you are going to supply what is demanded on the market.
At the same time, do not dive into something unfamiliar just because it seems to have potential. By having background knowledge, you can stand out among the competitors because you will know how to offer a better alternative. To do this, be sure to utilize not only the local resources but also the global ones, including the Internet.
2. Find team members preferring equity over cash
The failure of a team member is the failure of the entire business. Make sure that your team realizes this. Therefore, people you work with must be reliable and capable of taking responsibility.
To find the executives you need, develop detailed job descriptions, and set clear expectations. Further, make sure that you take time to standardize working processes, especially those related to sales, and gather them in one place to avoid misunderstandings in the team.
Hire people who work well with little supervision and definitely consider outsourcing to cut the project cost. For example, if you need to hire remote software developers for your company, Starkflow can help you expand your search to countries like India and Ukraine, where the talent pool consists of excellent developers at reasonably inexpensive rates.
3. Don’t borrow money if you can avoid it
The more you borrow, the later you will start actually earning on your business. Therefore, the ultimate piece of advice is to self-fund your company as much as you can. Use your savings, cut expenses, and choose more affordable alternatives when possible.
For example, do not hire top local professionals hoping that they will do the job for you; instead, source affordable yet experienced employees through remote talent augmentation. Again, your goal is “to be customer funded, not investor funded,” which is what the CEO of MadPipe, a 100% self-funded business campaign director start-up, pursued when starting their business.
To prove you that self-funding is the way to success and increased ROI, here are some examples of now huge businesses that started off as bootstrapped, according to Hackernoon:
So, the bottom line is as follows: unless it is a real crisis, stick to what you have, postpone things if you have to, and adjust the budget accordingly.
4. Ask for advance on royalties and vendor deferred payments
Offer the value of your business to solve other businesses’ issues. Putting it differently, try to provide your service in exchange for getting what you need if you cannot afford it.
To illustrate, you need to create an attractive website for your aspiring marketing agency. But even the average cost of website design is way above your budget. So what do you do: have a plain, not eye-catching website or skip on developing one altogether? Neither!
Find a small web design studio whose style matches your taste and offer them a free marketing consultation or marketing strategy development for a free or, at least, discount price for a nice website according to your vision. In this case, both companies benefit, and most importantly, you get what you need and stay within your budget.
For some time after starting your self-funded business, you will not be able to afford talent staffing, so you will have to make deals to set up your business. So do not be afraid to ask for royalties and barter offers.
5. Negotiate inventory management with suppliers and distributors
As a beginner entrepreneur, you need to know how to communicate things to close smaller, mutually beneficial deals to keep your company growing while reducing expenses. Of course, you are going to need supplies to build your product or provide a service, but you may not always be able to afford that.
Therefore, start communication. Be honest about your situation and try to find common ground regarding what you need and what you can get. In addition, do not neglect the aspect of the relationship with whom you work, since the time you spend building a mutually trusting and reliable relationship is another long-term intangible investment in your business. Coming to an agreement is easier when trust is a part of your business relationships.
In business, everything is negotiable. But you will know that if you do not bother to ask!
6. Choose a business model to optimize your revenue flow and timing
Aim for efficiency. At the initial stages of business, you want to get a lot of things done over a short period of time. Also, you better do things quickly as opposed to correctly. This provokes growth quicker than if you spend time crafting and implementing what seems to be the perfect solution, but that ends up not working out. So you are left with time and money wasted, still being at that Step 1.
To set up a model that would lead you to faster results, work on your approach to decision-making. In particular, prefer quick solutions over fancier but more time-consuming ones. Also, choose more affordable alternatives when possible.
As an example of acting quickly versus correctly, cut the app development cost through outsourcing specialists with a recruiting agency, such as Starkflow, to gather a team fast, launch an MVP as soon as possible, and save time and resources on long-lasting development, because time is money. At the same time, an illustration of choosing a more inexpensive business solution is not to hire remote marketing specialists but to use social media for free marketing solutions.
By looking for more affordable and effective options to get what you need, you get things going at a faster pace, which brings about revenue growth over a shorter period of time.
7. Hit the phones and knock on doors
Use your connections and the connections of your friends to tell others about the service you offer.
Do not tie this to a negative stigma of feeling like you will have to beg people or look silly. Instead, consider this as sharing a cool, effective solution that someone else may find helpful. Drop a few details about what you are working on among your network and ask if the most influential members of it mind sharing information with their friends and acquaintances.
Also, do not be afraid of being turned down and actually prepare to hear rejection. There are going to be no’s, but there are going to be a few yes’s.
But going out there and letting others know about the product or service being available is definitely more effective than not doing so. You never know whom you come across and where you meet your next client or customer!
8. Negotiate everything and never take things at face value
The difference in what you save with every deal adds up eventually. You may think that several hundreds of dollars on top of the price do not make a difference in one deal, but you will definitely notice how these extra hundreds harm your budget in the long run.
When starting a business, every dollar and effort counts, so be sure to save it when you can. You do not need to hire top specialists when you can source for employees at more affordable rates without sacrificing the quality of performance. You can get real experts by expanding your search to the foreign market without having to overpay for the equal qualification level locally.
Let alone performing tasks on your own instead of hiring a team, such as to implement basic marketing solutions on your own — this is also a way to go at the beginning.
Both ways, you can end up saving up to several thousand per month, which means getting a long-term benefit and multiplying growth opportunities for your company.
Therefore, wise and careful financing is crucial for successful bootstrapping: clever decisions and less expensive purchases now will give you more opportunities later.
Today, you do not need to craft a perfect business plan to spend months looking for investors to start your business, just to end up postponing the moment when you can make a living off your company. Bootstrapping a business, or funding it out of your own pocket, is not only a less stressful way of running a company but is also a quicker one to turn your expenses into profits.
Summarizing the recommendations I have listed based on the example of Starkflow, make sure to prioritize efficiency, productivity, and speed, as opposed to dedicating yourself to what seems to be that one perfect direction, and use your communication skills to get better deals with vendors and raise awareness of what you offer among your network. In addition, always seek for more affordable alternatives and make sure to make the most use of outsourcing.
If you are looking for a remote talent augmentation agency to cut the project cost, contact us, and Starkflow will help you gather your perfect team at the most affordable rate.
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