Bootstrap Your Business

Bootstrapped businesses can be beneficial because they allow the founder to maintain tight control over operations and freedom to make business decisions. There is a misconception that it places undue risks on the businesses as the perceived "lack of financing" places unnecessary risks and pressures and reduces the companies ability to grow. 

Entrepreneurs that decide self-fund are rare, as we are told from an early age that it "takes money to make money". Entrepreneurs that manage to successfully bootstrap their businesses often showcase a mix of confidence, risk tolerance, self-discipline, determination and competitiveness. 

Bootstrappers take the business idea or concept and use internal- or key resources from strategic partners to launch and operate the business. This is done without capital investment or investor backing. Success is achievable through pure dedication, single-mindedness and strong work ethic. 

Minimizing external debt and equity financing needed can be desirable for most entrepreneurs wanting more creative freedom and decision making capabilities in their planned startup. By using a collection of methods to minimize the amount of outside debt and equity financing needed from banks and investors, companies that are bootstrapping will look at:

There are usually three identifiable phases of bootstrapping a business. This includes:

A BIG idea or multiple income streams

A strong focus on execution sets bootstrapped business apart from other startups. A strong focus on profits also means that the entrepreneur will ruthlessly trim any activities, resources or costs that do not contribute to the execution of the idea. Bootstrap founders expect to be around for a long time and focus on steady growth and creating impeccable value for their identified customer segments. They focus on in-depth research and analysis of their markets and continue to refine their value propositions. They focus on profitability without the additional pressures and expectations of payback often created by external funders, where high growth is expected to ensure the payback period is implemented and managed effectively. 

Bootstrap founders also focus on continuously up-skilling themselves. This includes a focus on integrated management skills that require them to have knowledge of:

Now this seems like a mouthful and not even remotely possible unless you consider the context in which the bootstrap founder operates. The entrepreneur understands that they do no need to DO it all, and that they can either manage the process with in-house resources, by outsourcing to a freelancer or by appointing a strategic partner to manage the Key Activity or provide the Key Resource required to deliver the value proposition to the intended Customer Segment.

The bootstrap founder does however realize that even though they need to UNDERSTAND the function being outsourced or managed by Strategic Partners. This is a prudent strategy that allows the entrepreneur to gauge whether the channel or process is operating optimally or whether adjustments need to be made in terms of business processes or the available oversight. It is a wise plan considering how you can manage something that you do not understand. In bootstrapped businesses, this does not call for specialization across multiple functions. It does however require the entrepreneur to have an in-depth understanding of the business model and the resources required to operate it. 

Essentially any business can be bootstrapped, although the following types of companies are particularly well suited to a bootstrapped business model:

These businesses can be managed using technology, require low levels of financial investment, and rely on the founders' know how to combine and deploy the Key Resources in delivering the value proposition.

Popular companies that have followed this approach include:

There are entrepreneurs behind the scenes of successfully bootstrapped companies, such as Bill Gates, Steve Jobs, Michael Dell, and Richard Branson.