Entrepreneurs and business owners are being more creative with their budgets. Now more than in more recent years entrepreneurs have had to stretch their dollars to ensure they get the most return on their investments. A few entrepreneurs and business owners shared their best tips for bootstrapping ventures.
Be Passionate, The Cloud & Ask Questions
(1) “Make sure you are doing what you love and that you are passionate about your work. This will encourage you to dig deep and really work towards success no matter what obstacles or lack of resources come your way. You can make it work! (2) Meet the cloud and take advantage of it. This refers to the network of resources that are available and creates a converged infrastructure and shared services to make things easier for you. (3)There are so many services and tools being created daily. Technology is a great thing, and make sure you are constantly asking questions to your network. There is always someone who has a resources that will aid you in some way.”
Thanks to Kelly Fallis, Remote Stylist!
Plan, Be Frugal & Be Realistic About Cash Flow
(1) Plan: If you fail to plan, plan to fail. There will be aspects of your life that will “suffer” so plan ahead what you are willing to give up and the time you’re not willing to give up. If you have kids and hobbies such as reading, running, watching movies and traveling, you will have to re-evaluate you time. For Ross, family came first and he was not willing to sacrifice family time so he gave up other things. (2) Be frugal: People are either too frugal or not frugal enough. Spend money to make sure your side business can run but don’t spend on unnecessary items. Where possible trade skills with others but never barter for equity for your side business. (3) Be realistic about cash flow. If you have savings to spend on your side business, be realistic because if you do transition to spending all of your time on your side business, the cash flow will change and you need to adjust accordingly.
Thanks to Ross Kimbarovsky, crowdSPRING!
Cheap Online Service, Fancy Equipment & Customer Development
(1) Don't use a cheapo online service to incorporate your company. It will cost you more money in the long run to re-do your paperwork. You're much better off going with a specialized start-up attorney in your area – if you don't know one, check with other entrepreneurs. I made this mistake and thought I was saving money – but wound up spending almost $2,000 to fix my bad legal setup. (2) Don't buy the fanciest new equipment. When you're bootstrapping you need to focus on what's most important to your business, and not on vanity purchases. For example, is a brand new Apple Macbook Air really going to make you that much more productive or will your old laptop do just fine? That's a great way to save $1,500. (3) Spend less time fundraising and more time on customer development. Getting customers excited about your product is way more important for the long-term health of your business and customers are a much cheaper source of funds than external investors.
Thanks to Alex Raymond, Kapta!
Exclusive Agreement, Network & Royalty Agreements
(1) Do not agree to any type of exclusive agreement (2) Look to your network for expertise in helping you get to market (3) Using royalty agreements will allow you to bring your product to market debt-free.
Thanks to Linda Pond!
Learn As Much As You Can
My number 1 tip for boot strapping is to learn as much as you can. When it comes to starting a business you will have to pick and choose your cash flow battles and there will be many of them. If you cannot acquire funding for your start up you will have to learn some things to keep costs down from always hiring outside help.
Thanks to Maciej Fita, Brandignity!
Think Like You Have No Money to Spend
Think like you have no money to spend–most of the time you won't, plus it's a good habit as a business owner. I started an ecommerce business about 9 months ago. Since then I've spent $300 approximately on shipping materials. I reuse boxes that suppliers send us products in. The boxes in good condition get reused to ship products to our online customers. And the shrink-wrap our suppliers use to wrap pallets? That makes a great packing alternative to peanuts. Of the $300 I spent on packing materials, about $70 of that has been packing tape!
Thanks to Nate Lipton, Growers House!
Don't Hire Without Cash & Retain 3-6 Months of Operating Expenses
(1) Don't hire unless you have the *cash *to support it. Billings/revenues are not cash, cash in the bank is what matters, and cash in the bank is what's needed to bootstrap the business. I've had the most difficulty with bootstrapping due to the fact that I often have to complete work before cash arrives, and you can't hire people until the cash arrives. This means that you must expect to work incredibly hard to fulfill initial orders in the beginning until you have the cash in hand (often 30 – 90 days after you landed the big customer). Hiring prematurely, on the assumption that the cash will arrive in a certain time, will kill your business. (2) Your main goal is to retain 3-6 months of operating expenses in your bank account. There will inevitably be large variations early on in cash flow, but your overhead doesn't swing up and down with the cash flow. The only way to be able to sleep at night with such wildly changing cash
flows is to retain a chunk of cash in the business to even out the ups and downs. Then you can expand much quicker because you always have the cash cushion to make decisions without being constrained by your cash flow.
Thanks to Nick Herinckx, Obility Online Marketing Agency!
(1) Cheap desks, expensive chairs. (We got Ikea desks that cost $50 and measured every other expense as how many desks it would cost). (2) Keep marketing costs low. So easy to just ‘throw money' at marketing. Instead, limit your budget severely and throw ‘creativity' at it. (3) Keep your staff size smaller than you think you'll need. (4) Use a good law firm for your major paperwork (option pool, etc…) but use individual lawyers (or remote firms) for day-to-day work. (5) Get air conditioning. It will increase your productivity by 50% on hot days and is worth the cost. (6) Most importantly, pick a product/company to build that is amenable to bootstrapping. If you need $1M in inventory to get going it will be really hard to bootstrap.
Thanks to Charlie Graham, Shop It To Me!
Don't Staff Up Right Away
There are two types of hires for any business: there are people who pay for themselves and there are people who improve quality of life. The biggest thing early stage entrepreneurs waste money on is hiring the latter type too soon. It may be tempting to staff up right away, but it's often unnecessary and may leave you in the red.
Thanks to Ian Siegel, Zip Recruiter!
Wait A Week, Don't Ask Investors for Money (Initially) & Create A Detailed Budget
(1) Wait a week before spending money on anything. It is too easy to get emotional over an advertising spend or product that is going to make your company successful now. I have found waiting a week really forces me to understand why I am spending money and what the ROI should be. (2) When first talking to investors do not ask for money. I would just ask for feedback on my idea and ask if I could keep them updated with a monthly newsletter. By month 8 or 9, when we were making serious progress, these investors reached to me. (3) Create a very detailed budgeting plan and make sure to track actual versus budget. It can be tempting to spend an extra $100 here or $300 there, but if you do not pay attention, you will lost a few months of worth of runway for your business.
Thanks to Aron Susman, TheSquareFoot!
Use Your Skills, Get Money to Flow & Get Close
(1) You need some skills. If you can’t actually do any of the things that your company will need to do, it’s much harder. Being able to code, or design, or sell or run marketing campaigns or do one of the critical things for your concept, all by yourself makes a big difference. You illiterate way faster. You’ll understand things better. You’ll save massive amounts of money when you need it most, which is when the company has no revenue. (2) If you want to bootstrap a company, it’s really helpful to get some money flowing in almost as soon as the costs start piling up. It’s not just because you’ll go broke; it’s also because you’ll learn more from a day ofactual customer interactions than you will from months of ‘research’ on your market. (3) Get close to the information and see what works and then feed the winners and starve the losers. And then work like crazy. Be persistent, be stubborn, be driven. Learn the biz better than anyone.
Thanks to Jim McCarthy, Goldstar!
Steer Clear of Sexiness, Get in the Door Early & Secure A Team
(1) Steer clear from the sexiness of the venture capital model. It sure does sound nice to have a few million bucks to blow over 6 months in hopes that you can acquire market share but you don't. Be smart about every dollar you spend. Taking risks is important, but make sure they are researched and well calculated. (2) Get in the door early. With bootstrapping it is unlikely you will be able to recruit top talent away from existing companies. Tap into local universities and look for students with the ‘it' factor. Hiring senior interns is a great way to bring on youthful talent without breaking the bank. You'll have an opportunity to hire the exceptional performers once they graduate. (3) Identify and secure a team of advisors and/or a mentor. The value of an experienced team of advisors and a mentor can't be measured. The best part: it won't cost you much. If they believe in you and your idea, then recruiting them for advice will be easier than you think. They've been there and done that. The scars on their back along with the successes they've experienced will help you guide your company to the top.
Thanks to Josh Neblett, GreenCupboards Inc.!
Aim for Cash Flow, Launch Fast & Know What Your Setting Aside
(1) Aim for cash flow over profit. Most bootstrapped businesses fail because they don't have the cash they need to keep the doors open, not because they don't have enough sales coming in. (2) Launch fast even if the product is not perfect. This is uncomfortable to most entrepreneurs who are worried that a less-than-perfect product will tarnish their reputation. The truth is that obscurity is going to be your enemy far longer and getting something into market and getting real customer feedback is much more valuable. Also, it starts the cash flow. (3) Know up front what you're setting aside for the business and what your'e setting aside for living while you start the business. Deciding where to spend your precious resources early on is hard enough without weighing it vs. another month of mortgage payment.
Thanks to Hart Shafer, TheraSpecs!
Fiverr, Ask for Good Deals & Collaboration
(1) I use fiverr.com regularly – for $5, I can have market research responses (anonymous), generate SEO traction, have unbias articles written that I can promote to generate more SEO and get users to show interest in my start up to then sign up and use as general customers. (2) For every tech monthly fee, whether it’s github, elementool, olark, IM – I ask the company to give us a good deal for say 6 months or a year since we’re a start up. From this, we’ve had a few months free service, ½ price or further discounts. Every penny helps and start ups helping start ups really is great. (3) Which leads me to – collaborating with other start ups to keep costs down. We’re partnering with PunchTab.com to create a travel loyalty program. From this, we’ve not only saved a chunk of change by not needing to create our own loyalty program (coding, design etc) but the back end is also controlled by Punchtab so partnering with an expert in their field saved us a ton of cash – vs creating a program ourselves.
Thanks to Heddi Cundle, my Tab!