All entrepreneurs must decide how they’ll fund their business when starting out. Though many works to secure funding from angel investors, venture capitalists or partners, funding yourself through bootstrapping is often the smarter solution. Self-funding may lengthen the time to grow organically when your business is ready, but most importantly, it allows time to truly listen to yourself, your business and your customer base while scaling.
In my experience as the Co-Founder and CEO of Legacybox, it was our customer base that convinced my Co-Founder, Adam Boeselager, and me to bootstrap in the end. Entrepreneurs have many options when evaluating how to fund their businesses, so we wanted to share six things to consider if you’re exploring bootstrapping:
Connect With Your Customers
While bootstrapping focuses on revenue, it also sheds light on the base of your business, such as your customers and product/services. Without the added pressure of investors, you have more time to pay attention to the piece of your business that really matters, which are critical in helping you scale. Our company was far from an overnight success and we’re always humbled when we think back at our small beginnings. Through slow growth in the early years of the company, naysayers, and countless trials and errors along the way, we persisted and eventually came out on top. We founded a company we believed in and we’re constantly fine-tuning our product so that it was always 10 times as good, which helped us stay the course even when things got tough. Our company was built on design thinking principles. We began with a blank sheet of paper and envisioned what our product could be. We designed the experience we wanted to deliver with every customer touchpoint in mind and created it so that it was unlike anything else on the market. We constantly empathize with our customers and engineer better ways to serve them. In the early days, this included personally responding to the first 10,000 customer calls, which we had set up to forward to our personal cell phones. By doing so, we were able to draw profound insights about where we needed to improve our service and how we could innovate to continue making an impact.
Bet on Yourself
Since the company was launched, we’ve experienced 1,075% growth and when we think back to our origins, we’re even more proud to have achieved that growth by bootstrapping alone. We chose to bet on ourselves time and time again, and we’ve been able to reap the benefits of doing so. We were willing to bet on ourselves. When you decide to sell your company or accept funding, you are choosing the immediate gain over long term potential. We assessed the offers given to us and thought that gain wasn’t high enough to give up the future potential we saw and continue to see in our business. The fastest (albeit most risky) way to wealth, is to have all your eggs in one basket, preferably in a basket you can have a large personal impact on.
Do What’s Best for Your Company
There are several factors that helped us decide to reject funding and turn to bootstrap instead. What it all boiled down to was that it just wasn’t what was best for our company. We found the goals of investment bankers weren’t the same as ours as entrepreneurs. Our motto has always been to do what’s in the best interest of our company. They are in it to maximize their return. So, once you have investors, the best course of action may conflict with the wishes of those investors and you have a split. It’s hard enough to pursue one unified goal as a company. It’s impossible to pursue two conflicting goals. As they say, a house divided cannot stand. We didn’t want bosses. Ultimately, when you take money, you give up control. Even if you maintain equity control, there are often complicated legal controls that are put in place that limit you as an entrepreneur. That’s pretty much a death sentence to any entrepreneur. We knew if we sold, we wouldn’t last very long.
One of the benefits of not having investors is that we don’t have the external pressure to consistently grow. We’ve had seasons where we know we’re pushing growth too hard and we need to give ourselves a little more margin to maybe take care of the organizational needs that are there. Perhaps the most important thing that week has nothing to do with growth. It might have to do with training, or management, or some sort of culture or human resources type thing, an organizational type of goal. It’s whatever the organization needs at that point. I think that’s the other benefit if you can be patient. Bootstrapping allows you to respond to the needs of the organization, whatever they are, not simply be pushing growth to the detriment of, or the neglect of, anything else that your company might need.
Place Small Bets
I’d also recommend placing small bets. As a bootstrap company, we had to adopt that mindset and have seen success from betting small. After one failed advertisement placement, we knew better than to place bets using the majority of our savings ever again. We learned to test with small portions in order to cautiously and methodically gauge ROI, which has worked for us. If the barrier to entry is so big that it would represent a large risk for us, we decided for something less risky instead. We approached opportunities looking for “signs of life.” For something to be viable, there have to be some signs of life. If you test small and there are no signs of life, then there’s little likelihood that it will get better.
Weigh the Pros and Cons
You should spend most of your time thinking about what you’ll be giving up. Money is cool, but freedom, learning, leading – those things are far more valuable. Ultimately the best business to sell is the one that doesn’t need to. Build that, and you’ll have something valuable. Plus, you’ll hold a lot of bargaining power if you do decide to look at selling down the road.
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