How to Bootstrap Bigger Visions
You got big dreams. But big dreams aren’t cheap, are they? Heck no. They cost a lot of money.
So I was digging up some articles on how to bootstrap a company for you guys, and 99% of the advice I came across said something along the lines of: sell cereal, get free stuff, etc. And that kind of stuff is great if you’re just looking to make a quick buck here and there. But bigger dreams & visions require a different approach to bootstrapping. So here I am writing my own guide.
(As a side note…if you are starting a cereal company, then yes sell cereal. Otherwise probably not)
Why You Bootstrap a Company
How about instead of asking: “Why should I bootstrap?” a much better question is: “Why do entrepreneurs that bootstrap wind up with more wealth?” Bootstrapping gives us a few key things that are very important:
- First, being that you’re going to have to bootstrap (at least for a while), regardless.
- Second, bootstrapping gives you time during the discovery phase. This time is critical, and your company probably won’t survive long term without it. It took Blackberry founders 12 years to figure out what it was doing until it was ready for growth. Do not hire employees or raise money during the discovery phase. (What’s that word…pivoting, they call it?)
- Third, it teaches you how to focus that drive & ambition you have; and learn how to use it to be successful. Because let’s face it, you only learn how to do it, when you absolutely have to.
(Software Advice interviewed a VC with Summit Partners on the why you need to bootstrap in the Virtues of Bootstrapping. It actually isn’t just advice for software companies, it’s a great article applying to all companies)
Getting the Bootstrapping Money Ready
Yes. You need money to bootstrap a company. Bootstrapping is the act of self-financing. It doesn’t mean no financing! But do you need a lot? No. Not if you can perfect the fine art of allocating resources, while gaining resources (more on that in a minute). First, let’s start from the very beginning, before you start your company:
1. Try starting with self employment.
Either snag a key role in an early stage company, or leave your job for self-employment. Then start a business. What’s the difference?[list type=”arrow”][li]Employment: Your Time = $[/li]
[li]Self-Employment: Your Time = $$[/li]
[li]Business: People + Systems = $$$[/li]
So why self-employment first? Because it’s a heck of a lot easier to turn $$ into $$$, then it is to turn $ into $$$. If you can get into something in the industry you want to start a business in, great. That will give you an opportunity to build up connections & relationships.
You also need time to adjust to the lifestyle of an entrepreneur. Mentally adjusting from employment to self-employment is a big deal. Mentally adjusting from self-employment to business owner is even harder.
2. Line up credit ahead of time.
Here, remember how entrepreneurs manage their personal finances: strong arms, light body. It means high cash flow, low expenses. Alright, because you’re getting ready to do ALOT of chin-ups. You can’t do that with a fat body. Things to do:
- Raise all your credit limits, just in case.
- Eliminate as many financial obligations as you can.
- Don’t buy a new house, don’t buy a new car.
3. Enlist the Spouse
Here is where spouses come in extremely handy. The vast majority of founders will tell you their spouse held down the household finances while their business were being started. For households with two entrepreneurial spouses, they usually take turns starting businesses so there is always one solid income in the family. Again, strong arms, light body. You should be able to live off ONE income in your household. For those of you without spouses, of course this is a lot harder, and requires more savings.
4. Enlist a Mentor or Coach
Also enlist the support of a mentor. Your mom is not a good mentor. Because one day, you’ll find yourself in a place where your only friends will be other entrepreneurs. Because they “get it”. Good mentors aren’t afraid to tell you the nasty things. They are very blunt, & have a “been there, done that” mentality. The best kind because there’s this authentic vibe to them.
Coaches are a little different. They lay out more of a framework for you, set goals, and hold you accountable to those goals. Because when you’re a business owner, it is extremely easy to abuse your own freedom (imagine that! I know, it is so ironic).
5. Pick the Right Business
Even big bold visions need to be broken down into more practical, smaller visions. That doesn’t mean you need to loose the big vision though. The ideal business is not capital intensive, because if you’re relying on funding just to start…you have less then a 1% chance at success right out of the gates. That’s not good!
6. Find the Pain (Ouch!)
The best advice I ever received on this (a very blunt mentor!): “Until you talk to 100 people, your idea SUCKS”. It is sad, but very true. So start off by not selling people anything. Instead, just talk to them. Give yourself time. You would think it doesn’t take that long to talk to 100 people, but you need time to process it and build a business model around it. Not easy. This is the discovery phase that can take years.
5. Recruit a
Management Entrepreneur Team
So you’re done with your discovery phase now. Great, time to hustle! I read alot of advice that says to hire for small jobs, task oriented folks first (assistants, etc) first. And my personal experience is it doesn’t work. Because you end up spending all your time managing those people. They need a lot of handholding. And who has time to hold hands in a startup? You lack any true committed do’ers or visionaries on your team.
But with other entrepreneurs, they’ll jump right in, and roll up their sleeves. They don’t need to be micro-managed. And they focus on the bigger picture. Which means, instead of just focusing on one customer, they find a way to get to thousands of customers. So when you work together, you see a much larger return, a lot faster.
Note here: Alot of corporate executives are not entrepreneurs, and usually do not thrive in a startup environment. Personal opinion, there. Choose wisely.
6. Practice the Art of Allocating Resources
Managing resources when you’re bootstrapping is extremely difficult, but it’s the core job of every Founder or CEO. Especially when you start off with employees, it is hard. It is very risky. It is a risk most people will never take out of fear. And rightfully so, because your stomach will turn inside out. But it is how you grow. Basically, you’re constantly bringing in new resources while allocating those resources out. Don’t stop. Everything else behind you should now be a repeatable process.