By Kristopher Jones, founder and CEO of LSEO.com.
"Do I really need funding?" Many entrepreneurs -- both young and experienced -- ask themselves this question when starting any business. Though many push to secure funding from angel investors, venture capitalists or partners, funding yourself (bootstrapping) is more often than not the best solution. This is especially true today: It may take additional time to save funds and get running, but this provides more time to produce and polish your business agenda.
Self-funding may lengthen the time to grow organically, but the advantages are numerous, from both a financial and growth perspective. Here are four things to consider as you're bootstrapping:
Don't Waste Time Pursuing Funding
Chasing down VCs and angel investors takes much energy and effort, and this energy and effort is often better focused on the business itself. I've observed many friends in the funding chase; I've also been part of the rat race in raising millions for my various startups.
However, too often days turn to months; months turn to years, and suddenly the scope of the business is lost, along with that initial enthusiasm of starting a new company. Though I personally invest in other businesses, I raised $0 in outside funding in the process of building a digital marketing and affiliate network, which eventually I sold to eBay in 2009.
I've also completely bootstrapped my newest business without using outside capital. Both ran operations based on small personal loans, and eventually produced positive cash flow and strong profit.
Focus on Revenue
Bootstrapping forces you to focus on revenue: something many startups fail to do when they have major backing from investors. For a startup to survive and actually pay employees and marketing initiatives, revenue must be present.
This isn't always the case when funding is secured, as many startups lose sight of actually generating revenue. The earlier revenue exists, the faster a company can turn a profit. Through the latest growth spurt at my company, we ran purely on positive cash flow.
This put additional pressure on us, but as a byproduct, it forced me and my team leaders to focus on existing customers and marketing initiatives to garner new customers. By focusing on building revenue, the customer becomes the true beneficiary.
Connect to the Roots of the Business
Just as bootstrapping forces a focus on revenue, it also sheds light on the roots of the business, such as the product/services, customers and the internal team. Without investors tracking your every movement, you have more time to focus on what truly matters for success. We were forced to constantly revisit our digital marketing product suite, something that wouldn't have garnered as much attention if we had funding.
If the big budget is not there, you are forced to polish your current offerings. This, in turn, benefits your customers, who should always be No. 1. When you don't have to worry about pleasing investors, you open additional bandwidth, allowing you to work closer with your internal team.
Constantly reminding team members that the company is self-funded can help produce a sense of overwhelming achievement as the business garners traction. This helps smooth the flow of ideas and promotes work productivity. It also opens up more respect for you as a leader and what you are achieving.
Answer to Only Yourself
When bootstrapping, you only have to answer to yourself. Investors are always looking to maximize their return on investment, and some go as far as demanding weekly business reports. This can cause unneeded amounts of stress and, again, take the focus off the business.
Bootstrapping allows you to prioritize the core principles of your business, whether that's a marketing push through social media, reducing costs or analyzing the true fitness of operations.
When people ask me about good investments, I always say the best one a person can make is investing in themselves. If you're passionate and driven for success, bootstrapping a business is the ultimate way to do this.
Startups without funding can achieve smoother transitions to growth, which not only increases business morale, but also the bottom line: the true sign of a successful business.
Kristopher B. Jones is a prominent internet entrepreneur and the founder and CEO of LSEO.com and APPEK Mobile Apps.