7 Rules for Bootstrapping a Business
Your odds for finding funding right now for an early-stage company are not looking good.
No matter. You're better off bootstrapping in the early days anyway. I'm not going to lie: It's no easy task. But if you follow a few rules, you can minimize your risk and maximize your chances for survival.
- Validate your idea. Is your business idea a good one? How do you know? Don’t just ask your friends and family what they think. You won't get a straight answer. Ask people who don't have a stake in your potential success (or failure). And then listen to what they have to say. The best way to validate an idea is to ask potential customers but if you can't do that, try someone who has been down this road before...
- Get a mentor who's not going to give you any BS. Don't look for the person who's going to affirm your ideas; look for a guy (or gal) who's going to challenge you to defend your reasoning and your decisions. If that person is in a related industry, even better. This doesn't have to be a formal arrangement; you just need an occasional sounding board. You may not like what you hear but keep listening.
- Become obsessed with your customers. Who are they? Where are they? And how will you get them? Those are the first questions you need to answer. This task should take up half your time. The other half? Spend it on making sure your product or service exceeds those customers' expectations. If you do it well, those first customers will become your reference, your case study, and best of all, they will bring you more business.
- Reinvest everything back into the business. When I started my company, I spent more money than my customers gave me to create a better product than they expected. I took nothing for myself. If you focus on profitability too early, you’ll end up with a mediocre product or service. And mediocrity won't help you get more business. Then you’ll need to spend all the profits you took anyway to find new business.
- Be cheap, but smart. Need new customers? Find a cheap way to get leads. You’ll spend a lot more of your own time qualifying the leads to find the good ones. But that’s better than trying a risky and expensive marketing approach that may get you nowhere. Craigslist is a great example. It’s known to get you "cheap" customers but you’ll find some good ones there too. This also applies to hiring. Don’t be too quick to hire full-time employees. Try offshore help and contractors whose payment terms parallel how your customers pay you. It will take you time to find the good ones, and will likely take even more time to work with them to get the product you need. But if you’re smart and productive, your cost-cutting will pay off.
- Start marketing before you think you're ready. Too many start-up founders spend all their time and whatever little money they have on building a product with a ton of features. But then there's nothing left when it's time to show it to people. Find good, cheap, effective ways to reach your potential customer in the early stages of your business. Try to automate your marketing if you can. And whatever profits you do make, put as much back into marketing as you can. I started marketing before I even had a product, and it was the best thing I ever did.
- Don't do it alone. Starting a business by yourself is hard. It's even harder when you have no money. Find a good partner who shares your passion for the product—but don't look for someone just like you.