When you look at the wave of start-ups and how they launched their businesses, you will notice many of them started with venture capital funding and then built a product.
According to the 2015 National Venture Capital Association Yearbook, 54% of funding rounds were seed and early stage rounds in 2014. The “money-first, product second” approach has led to great successes for many of those companies.
But what about those who built their businesses by the bootstraps? Those who did not have funding to work with and had to swim without a lifejacket from the beginning? Bootstrap businesses face a unique set of challenges since they cannot rely on major financial backing to grow their business. Similar to wild animals, they do not have the luxury of a warm place to sleep in and continuous food being poured into a dish. They must be sharp, staying a step ahead of their customer’s every move and need.
Building a business by the bootstraps requires transparency, flexibility, efficiency, responsibility and passion. Businesses must communicate closely with customers at all times. Even if they only have one customer, it is critical that business leaders focus on the problem that the customer faces and how they can help resolve it.
Just because a business offers a shiny, new product does not mean that product will solve the customer’s ultimate problem. Unlike financially-backed companies, bootstrap businesses do not have the luxury of getting distracted with trends. They need to make sure their product delivers a real business outcome in order to get paid. On that same front, if their customers confront them with a problem, business leaders need to listen and be willing to change course if their current strategy isn’t working. They cannot simply turn their heads and assume everything is fine. If they do not address problems, they will face greater losses in the long run.
Bootstrap businesses also need to keep at the forefront of their mind that customers pay for results; and they expect to see those results quickly. Since a bootstrap business needs to get paid in order to survive, compressing time to value is critical.
For example, if a security vendor deploys a data protection solution and a year later the vendor is still “working, implementing, configuring, fine-tuning, etc.” the customer will not be happy. It’s critical that bootstrap businesses deliver something valuable quickly; time to value success requires a mix of speed, substance and simplicity.
Operating on a tight budget is a part of a bootstrap business’s reality and therefore, businesses need to make sure their investments are made in the right areas. For example, while marketing is an important element of a business plan, marketing events are expensive. Bootstrap business leaders should start with one event, determine the Return on Investment and then decide if they can afford to attend more.
The same type of planning applies to expanding the business into a new region. Bootstrap businesses should not expand into several regions at once. They should start with one, determine the results and then decide if they can expand more.
Finally, bootstrap business leaders must build and support an internal culture that consists of reliable, passionate employees. They should focus on hiring the best to be the best and support those employees by treating them with integrity regardless of the circumstances. It is also key to not try to be everything to everyone. Business leaders should focus on their strength and passion—even if it means not making as much money in the beginning. For example, if they want to be a product development company, they should solely focus on developing products. If they want to be a consulting company, they should solely focus on providing those services. They should not try to straddle both.