To bootstrap a start up successfully you must:
- Provide a valuable benefit;
- Communicate that benefit to those that need it; and
- Manage your cash flow.
If you do those three things well, your chances of success soar. If you miss any one of the three you have no chance of success. None. Give up. Quit now and get a real job. While these are true with any start up, what’s different about bootstrapping is that you must do them with extremely limited resources.
Provide a valuable benefit
The benefit you provide others is the heart of your business. No one cares what you do. All they care about is what you do for them. This is about turning inputs into product or service outputs that someone else values. But if they don’t solve someone’s problem better than their alternate choices, you don’t have a business.
Aytekin Tank who bootstrapped the start up of online workplace forms builder JotForm had been helping writers and editors create forms. He noticed that there were “lots of people looking for web forms” and no one had systematized it – until Aytekin. He suggests:
- Choose products over services. (You can scale products; but service delivery is constrained by the deliverers’ time.)
- Focus on your strengths. (Don’t try to get good at everything. Instead, hire others or partner with others who are good at the things you’re not good at.)
Communication. If you build it they won’t come – until you let them know about it. Just having a great benefit is not enough. You must invest to generate awareness and interest and turn that into sales. This requires clarity around your message and engaging in an ongoing series of iterative conversations.
Having decided that StubHub’s 25% fee to trade event tickets was way too high, Brett Goldberg created a more efficient market with better information on TickPick. The site grades different available seating options has no hidden fees and makes transactions simple.
Affordable marketing was hard. Since StubHub’s fees were higher they could always outbid TickPick for things like Google Ad Words. So Brett turned to Search Engine Optimization (SEO) and blogging, explaining different seating options at events. Now about 25% of the people that read his blog end up interacting with TickPick in one way or another.
Brett has had a lot of success with SEO by putting things like “cheapest Seahawks” tickets on their page headlines. But he (and Google) know that the value of SEO will decline as app interconnectivity increases. Think in-app referrals instead of in-app purchases – all bypassing search engines, thus TickPick’s shift in focus to their mobile app
Cash. Cash is the oxygen of commerce. You must get your business cash flow positive or have an alternate source of cash before you run out. It comes down to cash in, cash out and how the two sync up.
Note that some cash is more expensive than you think. Tom Foster does a nice job of explaining some of the pros and cons of bootstrapping versus getting venture funding in his Inc. article. Outside money gives you breathing room at the start and allows you to move faster. But you must deal with the loss of control.
Aytekin didn’t take outside money to avoid having to go too fast.
I prefer to keep the vision and plans to myself instead of put them in the hands of an investor who might decide on something different.
On the other side, Aytekin keeps his monthly burn rate down and won’t hire anyone until he has a full-year of their salary in the bank. Aytekin won’t spend what he hasn’t earned, has all the equity, no debt and sleeps well at night.
Bootstrappers have to embrace simplicity. Deliver a real benefit. Communicate it relentlessly. Manage your cash. These are the three keys to successfully bootstrapping a start up – and running most businesses.