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If Morpheus from the Matrix opened one hand with a red pill for more money and the other with a blue pill for more time - which would you take to build a better business?
A giant pot of money might feel like it would make all the difference, but we talked to CEOs from a range of start-ups large and small who would advise you to take the blue pill for time, put in the hours and bootstrap ‘til it hurts — and then bootstrap some more.
These four CEOs have all successfully bootstrapped their businesses and agree this isn’t just a cheaper way to start a company. There are major advantages to bootstrapping, too.
They share their advice with us below.
The Bootstrapper’s Advantage
When launching your business, ask yourself why you need to raise capital, and the answer can’t be because everyone else is. For Janelle Allen, CEO and Founder of Learnwise.co, a company focused on helping businesses create amazing online courses, taking outside investment hasn’t even been an option since founding her company in 2012. “Being small allows me to be agile,” she says. “There’s freedom in that.”
Jill Salzman is the founder of FoundingMoms, a company that helps mom entrepreneurs get down to business. The advice she shares with her community might seem obvious, but the benefits are life changing for many. She explains, “you make all the money. Between calling the shots and paying yourself in full, nothing feels better.”
Do more with less
Bootstrapping means giving up less equity in your company to outside parties, but the culture that bootstrapping infuses can make all the difference when your company scales.
ContextMedia, a company that provides medical information to patients via tablet immediately prior to, during and after doctor interaction was listed by Forbes as one of America’s most promising companies earlier this year. According to Shradha Agarwal, Co-Founder and President, bootstrapping has infused what she calls the ‘DNA of hustle’ into the company; having ambitious goals with limited resources taught them to ‘stretch every dollar and do more with less.”
Andrew Geant, Co-Founder and CEO of WyzAnt education software couldn’t agree more. “Don't underestimate the opportunity cost of sweat equity.”
Find out what works, first
Geant explained that bootstrapping gives you the time it takes to test and prove your product. “It took us a several years to understand the user needs, business model, unit economics, supply/demand dynamics, feature set, customer acquisition channels,” Geant explained. “Had we had investors, there surely would have been pressure to scale more quickly, so the product and platform wouldn't have been as well-tested and proven.”
Know that there are no rules
Salzman points out as newbie bootstrappers, there are no rules — but that shouldn’t intimidate you. “You’re learning as you go and there’s no instruction manual as to how you build your specific business.”
Get involved in a community of entrepreneurs and ask questions, she suggests. Learn what other people are doing and what works for you.
Hire good help
Knowing where to put your limited funds can be a difficult decision. Of course you should make investments wisely, but you should definitely make them, especially in your team. Build your team carefully and cash preservation should not come at the cost of a quality team.
Agarwal warns that It can seem like a good option to use equity as a “cheaper form of cash, ” however the Context Media founder advises “take time to think through your offer because in the long run, the equity will be a lot more valuable than cash.”
Talk to your customers — a lot
WyzAnt’s founder was the company’s one-man customer service department for three years, which he explains was “crucial for understanding where we needed to invest our time and resources. You need to make those early customers feel special and valued, because frankly they are going to be in for a roller coaster ride as you change your pricing, your site crashes, you change your policies...”
Learn to say no
Allen says one of her biggest lessons has been learning when to say no. “It might sound counterintuitive, but in order to be successful, you have to turn people away. You have to decide who your customer is and what your brand is, then work like hell to protect those ideals.”
Put systems in place early
As Salzman advises her FoundingMoms community, build systems as you build your business. “Even if you don’t know how to properly do any accounting for your business, make sure it’s all in one pretty Excel spreadsheet. Even if you’re not sure how to work your Twitter account or your Facebook fan page, make sure you have a system for posting. The more organized you are, the easier it is to accomplish everything that bootstrappers need to get done in a work day.”
Be realistic - and then some
According to Geant, “It's going to take twice as long and cost twice as much as you think it will. So take your projections, double all your expenses and cut all your growth forecasts in half.”
Finally — Just Execute
Agarwal sums it all up by pointing out that a successful business isn’t built on a good idea. “It's built on the strength of the execution of the idea,” she says. “You don't have the luxury of perfecting the product — the market is your best judge. So go to market and sell. It’s about finding a balance between consider market feedback and following your own gut instincts.”
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