Pull yourself up by your own bootstraps.
You’ve likely heard that phrase before. It means to take charge of and improve your situation – through your own efforts. Roll up them sleeves and sort yourself out, so to speak.
When it comes to the world of startups and business, bootstrapping has a similar definition.
gerund or present participle: bootstrapping
to self-fund your business while also stretching your financial resources as far as they can go.
“the company is bootstrapping itself with very little capital”
Bootstrapping is beneficial for a number of reasons.
It’s really the most effective way to make sure your business has positive cash flow. That just means that it should have more money coming in than it does going out. When you bootstrap, you avoid borrowing money and therefore incurring huge amounts of debt. You’re forced to think about how to create revenue – and revenue comes from focusing on the product.
That leads us to the first tip on bootstrapping…
Do your homework
Fully research your market and your competition. Is your product or service already available on the market? If so, how are you going to differentiate yourself or add more value so that consumers will find you?
This will be your UVP. Your Unique Value Proposition is a clear mission statement that describes the benefit of your product: how it solves the customer’s needs and why they should buy from you.
Here are a few examples:
Evernote is a note-taking and productivity app and their UVP is three fold and can be found on their main landing page. “Capture anything. Access anywhere. Find things fast”. They further elucidate on their page that Evernote allows consumers to take notes, pictures, and recordings that are easily organized and accessible from the cloud. Clear and simple.
Zen Payroll tells anyone who lands on their website that their mission is to provide payroll services that are dead simple to use.
Skillshare is for people who need skill-building courses to help them do their job better than anyone else out there.
Square, an extremely innovative company, does a great job with their UVP. This one’s a personal favorite. Their physical product is called the Square Reader and allows users to accept credit card payments through their smartphone. Smart, right? They mail this to you for FREE. Square is fast too, it deposits the money into your bank account in one to two business days. I don’t think I need to tell you what that means for small business owners.
Get your MVP out ASAP
The MVP, or minimum viable product, is the first version of your company’s product. It can be a bare-bones affair, and only needs the minimum amount of features that will allow it to go to market, rather than all the bells and whistles.
When you ship an MVP, you can quickly and inexpensively get your product into the hands of customers – at least some of whom will enjoy and appreciate it, pay you money, and give you real feedback. Because time and money are at a premium, you want to get as much information as you can so that you can learn from your product launch, iterate and get even better.
Facebook had a minimum viable product. The earliest version of the social network had limited functions (no messages, no status updates, or photos beyond a single profile picture), and an extremely niche target audience (Harvard students). Once Mark Zuckerberg was able to validate his idea, he was able to keep building and expanding.
The first Apple product, the Apple I computer was sold as an assembled circuit board. It didn’t have a keyboard, it didn’t have a monitor or a mouse. I know I said bare-bones but that’s positively skeletal!
The Apple I was just a motherboard. Now the company is worth billions of dollars and has enough money in the bank to buy a small country.
When you’re working with very little money, you’re forced to be more creative to reach your goals – given the constraints. This also forces you to be sustainable as soon as possible.
When Steve Jobs approached a local computer store about purchasing his computers, the owner asked for 50 units with payment on delivery. Jobs then went to get the parts (parts for which he had no money) from a national electronic parts distributor. He was able to negotiate an agreement where he would pay for the parts AFTER he had delivered his computers and received payment from the computer store.
Steve Jobs and Wozniak built their prototype in their basement, landed their first order and got the parts they needed on credit. Apple computer was born.
When Bryan Johnson was looking to leave his 9-5 and start up a new business, he calculated that he needed at least $2,100 a month to live. He was working as a credit-card services salesman and noticed that the industry was super dishonest. Business owners were tired of the deception and trickery that was going on. Bryan had established himself as a reputable guy with many customers and so when he approached a few of them to jump ship to his new company, Braintree, they did so pretty eagerly. Johnson was able to generate $6,200 a month from these initial contracts and he was up and running. For Bryan Johnson, Braintree was sustainable from the beginning. Today, the credit-card processing company has grown from its humble beginnings in 2007 to processing over $12 billion in payments by 2013.
What these stories have in common is that in each case the company was focusing on making money and making a profit from the start.
Good things happen when a company is profitable early on, huh?
To learn more about bootstrapping and entrepreneurship, check this course out.