I am sitting in my small and ugly office with no windows, in a crappy part of town, sweating and hoping my CPU doesn’t catch fire! Why? No A/C. Why? Because I love bootstrapping and expensive offices costs lots of my hard won startup funds…
All startup Entrepreneurs should know how to bootstrap. Why? because it’s the best way to give your chances of success a boost.
Bootstrapping should really be a religion for us all – in the dot.com bubble and today’s net 2.0 world sometimes the need to think carefully about spending either your own hard earned startup "grub steak" or funds raised from others is lost and often the whole business with it later due to financial waste.
Another area lack of discipline can cause damage is on your ownership of the business – if you waste money you will need more, the more you need the less you own of the business you are building and this is exponential at the start of a business where valuation is much lower than later.
So bootstrapping is harder than just getting a ton of money and throwing it at your startup but it means you will have greater control, more ownership of your business, a longer ‘runway’ to success and you will have a discipline that could give competitive advantage in the long run.
By squeezing every last penny from your money by finding ways to do more for less you save funds for things that are key to your success. Nice offices, expensive cars, overpaid consultants, the latest whiz gadgets are not what will make you a success so save the money.
Building a business is tough, really tough, and bootstrapping also gives you the opportunity to make it through the hard times because you will have the capability to drop your overhead base if money get’s tight – once again giving you control your destiny while those around you fail.
The more funds you need the more time you will have spend away from the business trying to raise it – so if you can save some of that time you will, once again, have an advantage. You will need at least 27 hours a day, 9 days a week to give to your startup so don’t waste any time either!
Crucially, bootstrapping as much as possible will get you to the magic first profit level faster, and this will make your valuation go up and your ability to raise more funds at a better rate easier.
The two core lessons for the would-be bootstrapper for me are:
- cash is king
- it’s all about buying better
Cash is king:
In every business, everywhere, cash is the critical component of success – you will know that almost all businesses that fail do so due to poor cash management. You must learn this as early in your career as possible – Startups should be able to watch and manage their cash on a daily basis, forget profits at this stage, just make your cash last as long as possible.
For most of us getting cash for our business is a time consuming and painful process so the upside of careful cash management by reducing all your costs and maximising your flexibility will bring double benefits – twice the amount of time to succeed.
It’s all about buying better:
The key skill in bootstrapping for success is being able to get what you need for your business cheaper, more flexibly, on better payments terms or for free!
If you can learn or have the skills to negotiate positively with suppliers, staff, customers – everyone – you will find that your cash lasts longer.
My favourite resource on the topic of negotiation is sadly hard to come by now, it’s a CD Psychology of Negotiating by Neil Rackham but you can buy it on Amazon
In part 2 we will go through the core areas of my bootstrap manual.
A few interesting articles I spotted on the web are: