Funding

What Is Bootstrapping in Business? A Guide For Frugal Entrepreneurs

The Startup Whisperer, Kellie O'Hara, breaks bootstrapping down to its core principles, offering invaluable insights and practical wisdom for entrepreneurs.

By:

Kellie O'Hara

A picture of a clean, brown, boot, closeup, from the side

At We Are Founders, we've explored the concept of bootstrapping within our Foundations section. Bootstrapping encapsulates the essence of self-reliance, echoing the age-old notion of pulling oneself up by their own bootstraps. It's about starting and growing a business with minimal external funding, relying on your own resources and ingenuity to make it work.

This approach is akin to a determined individual hoisting themselves to success using their own effort and creativity, a testament to the entrepreneurial spirit. But what does Kellie O'Hara, Startup Whisperer and all round clever clogs, think about Bootstrapping? Let's find out.

Going It Alone

Bootstrapping a startup means starting your business with little or no outside funding. It's like pulling yourself up by your bootstraps, but in this case, your bootstraps are made of sweat equity, customer pre-orders, and creative ways to save money.

Imagine you're trying to build a sandcastle. If you have a lot of money, you can buy all the sand and water you need. You can also hire people to help you build your sandcastle. But if you're bootstrapping, you have to be more resourceful. You have to gather your own sand and water, and you have to build your sandcastle yourself.

At first, it may seem like bootstrapping is the harder way to build a sandcastle. But in the long run, it's actually the better way. When you bootstrap your sandcastle, you learn how to build it stronger and taller. You also learn how to be more creative and resourceful.

I bootstrapped my startups and would probably not have learned half of what I did nor developed my own unique rhythm had I not bootstrapped.

Why bootstrap your startup?

  • You build a stronger foundation. When you have to hustle for every dollar, you're more likely to focus on developing a product or service that people actually want.
  • You retain full control of your business. When you take outside investment, you're giving up a piece of your company and your decision-making power. By bootstrapping, you can stay in charge and make the calls that are best for your business, even if they're not the most popular choices.
  • It will make you a better entrepreneur. When you have to bootstrap your business, you learn how to be resourceful and creative. You also learn how to make every dollar count. This will make you a better entrepreneur in the long run, regardless of whether or not you raise venture capital.
  • You become more passionately focused on your customers. Your customers are your FIRST and most IMPORTANT investors and matter more than anything. You do not have a business without them. Period.
  • It will make your business more attractive to investors. Investors are more likely to invest in a company that has a proven track record of profitability. If you can show that you've been able to grow your business without outside funding, it will make you more attractive to potential investors.
  • You become more resourceful and resilient. Bootstrapping forces you to be creative and find ways to get things done on a shoestring budget. This can help you develop important skills like problem-solving, negotiation, and resourcefulness.
  • You have a stronger foundation for future growth. When you bootstrap your startup, you're building your business on a foundation of profitability and sustainability. This means that if/when you do eventually decide to raise outside funding, you'll be in a better position to negotiate favourable terms.
Even if you do decide to raise venture capital down the road, it's still a good idea to start with a bootstrapping mentality. This will help you avoid becoming too reliant on outside investment and give you a better understanding of your business's financial dynamics.

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Tips on bootstrapping your startup:

  • Validate your problem-solution fit: Talk to potential customers early and often to understand their needs and wants. This will help you ensure that you are building a product or service that people actually want. EXAMPLE - Conduct customer interviews, surveys, and usability testing.
  • Develop a lean business model: Focus on the essential features and functionality of your product or service. This will help you keep costs down and get to market quickly. EXAMPLE - Use a minimum viable product (MVP) approach to launch your product or service with the essential features and functionality.
  • Be frugal with your spending: Every dollar counts when you are bootstrapping. Be mindful of your expenses and only spend money on the essentials. EXAMPLE - Use free and open-source software whenever possible. Negotiate with vendors and suppliers to get the best possible deals.
  • Get creative with your marketing: There are many low-cost marketing strategies that you can use to promote your startup. You can use social media, content marketing, and email marketing.EXAMPLE - Write guest blog posts, create informative infographics, and produce engaging videos.
  • Build a strong team: Surround yourself with talented and passionate people who believe in your vision. Having a strong team will make it easier to overcome challenges and achieve your goals, support wins and share burdens collectively.EXAMPLE - Offer competitive salaries, shares and benefits. Create a positive, supportive & inclusive work environment where EVERYONE'S ideas are listened to. If each team member specialises in one area, but can also hold the fort in multiple other areas, it's a GREAT thing. I call these people #multihats.
  • Start small. Don't try to build a giant company from the ground up. EXAMPLE - Start by focusing on a small niche market and solving a specific problem.
  • Be resourceful. There are a lot of resources available to help entrepreneurs bootstrap their businesses. EXAMPLE - Take advantage of free and low-cost resources, such as online courses, templates, and tools. Be frugal with your spending and finding ways to save money wherever possible. For example, you can work from home, outsource tasks to freelancers, and use free or low-cost tools and resources.
  • Clear vision and plan. What problem are you solving? Who is your target customer? How will you make money? EXAMPLE - Build a one-pager that outlines your goals, target market, and how you plan to make money. I solve (problem) for the benefit of (target) by doing (solution) which produces (benefit). I will monetise this by doing XYZ. Having a clear vision and plan will help you stay focused and make smart decisions about how to allocate your resources.
  • Validate your idea before you spend too much money. EXAMPLE - Talk to potential customers, conduct market research, and build a prototype to test your idea before you invest heavily in development and marketing.
  • Focus on generating revenue early on. This will help you offset your costs and start building a sustainable business. EXAMPLE - You can generate revenue by selling products or services, offering consulting or coaching services, or running advertising on your website.
  • Be resourceful and creative. Don't be afraid to think outside the box and come up with new ways to get things done. EXAMPLE - you could partner with other businesses, offer barter services, or crowdfunding.

Examples of Successful Bootstrapped Startups:

  • Mailchimp - An email marketing platform that started in a chicken coop and is now worth over $10 billion.
  • GitHub - A software development platform that started with $400 and is now worth over $7 billion.
  • WordPress - A content management system that powers over 40% of all websites on the internet.
  • Bootstrap - A front-end web development framework that is used by millions of developers around the world.
  • Fiverr - A freelance marketplace where people can offer their services for as little as $5.

These are just a few examples of the many successful bootstrapped startups that are out there. If you have a great idea and are willing to put in the hard work, it is possible to build a successful business without outside funding especially in the early stages.

Be disciplined in surrounding yourself with the right people that you can learn from.

Only financially invest in a service if it is led by those that have walked successfully in your shoes, and can actually move your needle forward faster.

Bootstrapping a startup is not easy, but it can be incredibly rewarding. It's a great way to retain control of your business, develop important skills, and build a sustainable foundation for future growth. Don't be afraid to fail. Bootstrapping is all about trial and error. You're going to make mistakes, but that's okay. Learn from your mistakes and keep moving forward.

Don't be afraid to ask for help. There are many resources available to help bootstrapped startups. There are online communities, accelerators, and incubators that can provide you with the support you need to succeed. (note that our team are one of these resources so reach out to my LinkedIn inbox if you want to chat)

Most importantly... Have fun! Bootstrapping a startup can be a challenging but rewarding experience. Enjoy the journey and celebrate your successes along the way.

Now go out there and bootstrap your way to success!

About The Author

A picture of a clean, brown, boot, closeup, from the side
Kellie O'Hara
https://linktr.ee/thestartupwhisperer

Startup Whisperer, Where AI Ideas Grow Their Wings To Scale and support Investor/Corporate Innovation

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