Although it can often be an exciting process, launching a startup business can also be stressful, especially when working with limited resources. Many small businesses quickly look for eager investors to help provide the financial buffer they’re looking for to get a new venture off the ground. But is this really the most practical approach?
Bootstrapping is another practical approach young businesses can take to help them get the traction they need in the early years of development without breaking the bank. Although it can require a certain amount of resourcefulness, it allows entrepreneurs to continue to control all areas of their business without giving up significant amounts of equity.
What Exactly Is Bootstrapping, and How Can It Help Startup Businesses?
New businesses often come to a crossroads of deciding to fund early development on their own or reach out to potential investors. Although receiving a quick injection of capital is hard to pass up, embracing a bootstrapping philosophy can actually help the business become more resilient over time and better manage its available resources.
Bootstrapping the business essentially means that as a business owner, you may need to wear multiple hats while trying to use every available resource. It’s a long-term discipline that, when mastered, can give your business much more volatility as it grows while significantly improving its profitability potential.
There are a number of different benefits that bootstrapping effectively can bring to the business. This includes:
- Preserving the Founder’s Vision – Bootstrapping helps entrepreneurs bring their specific visions to life without justifying their decisions to a large board of investors. This allows for unlimited creative expression often displayed by some of today’s most successful organizations.
- Creating Financial Discipline – When you cannot depend on a large financial buffer, this usually leads to a much more organic level of economic discipline. This helps business owners think more strategically about their company investments and reduce the tendency to waste valuable resources.
- Improved Expertise – Bootstrap also helps improve business owners’ education and experience. Since entrepreneurs looking to save resources will often take on multiple responsibilities for the business in the early days, it leads to learning valuable business lessons and improving competencies in the industry they serve.
Strategies for Applying Bootstrapping Effectively in Business Settings
If you’re looking to apply bootstrapping techniques to your business model, there are some helpful strategies you can follow:
Establish a Financially Disciplined Business Foundation
The first step you should take when trying to conserve resources for your business is to establish a more financially disciplined attitude, which will help to develop the right foundation for your company.
Make Sure You Have The Right Business Idea
Before embarking on a certain business path, it’s important to first understand your target market’s needs. This involves researching their preferences or pain points and introducing solutions you know they’ll value and use.
Part of this process is also identifying your unique value proposition in the market. You should be able to clearly articulate how your product or service stands out from competitors while ensuring you get the response you need from customers to continue to grow the business.
Keep Your Business Plan Lean
Creating a blueprint for your business’s success is critical. This should include all of the core elements of your business necessary to continuously grow while also identifying critical goals and objectives to go after.
The goals you establish for your business – whether they’re revenue-driven or various financial targets – help you achieve a clear target over the years. Monitoring your progress in hitting these targets helps you to make better decisions that are in the best interest of the company’s long-term success.
Utilizing Minimum Viable Products (MVPs) Before Entering New Markets
An MVP (Minimum Viable Product) is a tangible extension of a product or service idea currently developing. Business owners can use MVPs as a cost-effective method for showcasing essential features of the product to a select audience while safely gauging market reception and validating their ideas.
Creating an MVP before the official launch of a product can allow you to gather invaluable feedback that can help you refine the product.
Look for More Organic Growth Opportunities
A fundamental principle of bootstrapping is successfully growing your business organically without relying on expensive advertising methods. This requires leveraging established relationships and utilizing more cost-effective marketing strategies.
Content marketing, for example, is a great way to bring valuable and link-worthy content to an audience, allowing a business to establish itself as a thought leader in the industry. When businesses take the time to provide insightful and helpful information to their current and potential customers, it significantly improves the likelihood of the company website ranking higher in search engines and attracting backlinks from high authority domains applicable to the products and services being offered.
Apply Best Practices When Looking for New Investors
The idea of bootstrapping for the business doesn’t necessarily mean it will avoid the potential of bringing in new investors altogether. Instead, it means taking the necessary steps to ensure you’re maximizing the value you can receive from new investment relationships while minimizing the amount of equity you need to give up. Some of the strategies to support this effort include:
- Come Prepared to Investor Meetings – Make sure your financial records are meticulously organized, and your business plan is refined before sharing it. You should also carefully craft a business pitch that is easy to understand and clearly articulates the high-value points of your business.
- Align Investment Opportunities With Your Core Objectives – It’s important to remember that not all investors are the right fit for your business. Take the time to explore your investment opportunities by attending networking events or conferences to find individuals whose values and objectives align with your company’s vision.
- Learn How to Negotiate Better Terms – Be sure to familiarize yourself with all of your business funding options while carefully evaluating the balance of control over shared equity. You’ll also want to be comfortable negotiating terms that are in your best interest while still providing an enticing offer for potential investors.
Start Leveraging Bootstrapping For Your Startup Business
By adopting a bootstrapping approach for your business, you’ll be able to better shape your company’s trajectory while still maintaining the level of control you need to make your vision a success.
