I've built several businesses, following different business models and in different markets. What I've never done throughout all this is take on any kind of debt or external funding.
I've bootstrapped all my businesses. Including ones that come with considerable startup cost, such as Thrive Themes. I recommend you do the same, no matter what business you're trying to start.
Keep reading to discover why the bootstrap mindset isn't only about saving money & how you can become your very own investor.
The Money Example
Bootstrapping your business means funding it yourself. Of course, building and running a business costs money. There's no way around that. The difference between a funded startup and a bootstrapped business is timing. It's a question of when you spend the money.
In a funded startup, you spend the money right away, before the business is up and running. Before any profit or even revenue has been generated. You get funding from investors who hope to get a future return on their investment. You spend that money on office space, employees, hardware, software, services, advertising etc.
You're basically using piles of cash to fuel the starting of a business and you hope that at some point in the future, the business will return a profit.
This is a common startup model and it's been taken to an extreme that is stupid and destructive.
For a bootstrapped business, we change up the timing: we make money first and then spend it to further grow the business.
In my case, that meant spending some early startup expenses out of pocket and keeping them at a minimum. Specifically: domain name, hosting, email marketing service.
Beyond this, you can earn the money you need to fund further developments in your business. We laid out a specific strategy for doing this in our podcast episode about the customer first approach.
So, the basic plan is: make a simple offer, get some customers, make some money. Then, spend that money on things that will help you make a better offer and reach more customers. And so on.
The Not-Money Example
The bootstrap mindset doesn't only apply to money - and this is where even frugal entrepreneurs tend to make mistakes.
You should be deliberate about how you spend your money. And equally, you should be deliberate about how you spend your time and other non-monetary resources.
A common example of this is a rebrand. This may be something you've experienced as well: you start a website and brand when you're still new to the whole entrepreneurial thing. A year or two later, you've gained experience and knowledge and you can now see that your brand isn't great. Maybe the brand name and domain name are too long and too generic. Maybe you've pivoted your business. You can clearly see that if you were to start from scratch again, you'd do things differently.
Now, a rebrand is something that can be done for very little money. You need to spend a few dollars on a new domain name. Everything else can be done for free.
So, you should do it, right? The new brand is going to be better, after all!
Rebranding comes at a high, non-monetary cost. There's the time investment needed to get the technical stuff sorted out, to move your site from one domain to another. There's all the time needed to choose the basic setup and design of your new site. Time needed to create a new "about" page. Time to create some content explaining the rebrand. Time spent going through old content, updating or removing outdated references. And so on.
It's something that could cost you weeks of your time, if not more.
If your business is up, running and profitable and you think it's strategically the best use of your resources to do the rebranding right now, then sure, go for it. But if you're still working on the basics of getting customers and generating revenue, a rebrand is like spending cash you don't have.
The Magic Question
How do you put the bootstrap mindset into practice? By making a habit of asking the magic question:
"Is there a faster, simpler way to do this?"
This question helps you avoid the problem of implementing a good solution instead of the best solution. To go back the the rebranding example: no doubt a rebrand can have some benefit, but we can't pursue everything that has some benefit.
We have to be more careful with our resources. We have to think not just about "is this good?" but also "is there something better I could be doing with this time/money?"
The magic question can help you focus on this.
To make strategic business decisions, don't just think about “is this good?”, also think about “is there something BETTER I could be doing with this time/money?”
First, identify the problem you want to solve or the outcome you want to achieve. Then, look at the idea or solution you have and ask the magic question: "is there a faster, simpler way to do this?"
In our rebranding example:
- Problem: the brand name is too long and difficult to remember.
- Solution: rebrand the entire business & website, to give people a catchier name to remember me by.
- Faster, simpler way to do the same thing: create a landing page and a product/service using the catchy name.
Your product doesn't have to have the same name as your brand, after all. My brand is called ActiveGrowth and I sell a product called focus & action. My other brand is called Thrive Themes and we sell a whole range of products under that brand, each with its own name.
This is just one example, to illustrate that the problems we perceive are sometimes not real problems and the solutions can be a lot simpler than we first think.
Now it's your turn: think of a current business problem or challenge you have, define the problem and desired outcome and ask the magic question.
Leave a comment below with your challenge. I'd love to see what you're working on and help you in finding a more bootstrappy solution.