The Business Dictionary defines bootstrapping as “Building a business out of very little or virtually nothing.”
Bootstrappers, by definition, can’t rely on outside capital. Instead, continues the Business Dictionary, they “rely usually on personal income and savings, sweat equity, lowest possible operating costs, fast inventory turnaround, and a cash-only approach to selling.”
Sound tough? It is. But thousands of ambitious founders are doing it, and many go on to succeed beyond their wildest expectations. Depending on how you define “bootstrapping,” legendary entrepreneurs like Bill Gates and Mark Zuckerberg fit the bill. (Though both came from monied families — which is fine, as we’ll see in a moment.)
- Turn to Friends and Family, Judiciously
Many bootstrappers turn to their personal networks for early stage capital. There’s nothing wrong with asking mom and dad, or aunt and uncle, or your college roommate who’s doing really well, for a growth loan.
Just know that, eventually, the bill will come due. Rather than give away equity, which is harder to get back, you’ll want to agree on reasonable interest rates with moderate maturities — and you’ll want to stick to them, lest you burn one too many bridges.
- Learn to Love Word of Mouth Marketing
Why pay for advertising when you can get it for (nearly) free?
“Compared with legacy marketing channels, word of mouth marketing is incredibly cost-effective,” says serial entrepreneur and investor Vivek Rajkumar, whose portfolio companies rely heavily on word of mouth marketing.
Word of mouth marketing is surprisingly receptive to cutting-edge targeting strategies, Rajkumar adds. It’s come a long way from the “spray and pray” days.
- Use Contract Labor
When it comes to managing your fledgling human resources department, you want to live and die by a simple mantra: be slow to hire and quick to fire. Use freelance marketplaces, temp consultants, and other sources of flexible, high-quality labor to handle non-core activities. Save traditional employees for core business processes.
- Maintain a Small Footprint
Keep your office cozy — if you even need one at all. If your team is small and disparate, consider working on an all-remote basis and doing away with office rent entirely.
- Don’t Make Decisions You’ll Come to Regret
There’s a right way and a wrong way to bootstrap. Yes, it can be tempting to conserve whatever cash you have on hand and take drastic measures like borrowing against your primary residence or seeking out high-interest business loans. But, should things go south, you might come to regret these decisions. Approach them as a last resort only.
Is the Time Right to Seek External Funding?
There’s no shame in admitting that you’re ready to seek funding from outside investors. At a certain point, you may find that you simply can’t meet your mid- or long-term goals without an infusion of capital — and that’s okay. It doesn’t mean that your business is failing, or that you’ll never reach positive cash flow.
Of course, fundraising brings its own unique sets of challenges and opportunities. You’ll want to make sure you have a strong team by your side — and an expert-rich advisory board to keep you on the straight and narrow.