So you have a great idea for a business. Brilliant, but how do you get your new app on to the market, or revolutionary new product off the drawing board and into the stores? Before you run out the door to talk to every person with deep pockets to get funding, you must prove your business model, and with no cash to do this, you need to learn how to bootstrap your business.
Bootstrapping is the process of starting your business without going to external sources for funding. Generally speaking, loan providers won’t look at entrepreneurs, so by funding we are probably solely talking about investment capital. These days you need a good proof of concept to achieve investment without giving away great chunks of your business.
It’s never been easier to bootstrap your business, the internet has reams of free resources to get you going. You’ll find all the information you need to research your market and numerous SME hubs or accelerators to support you.
Bootstrapping is not just the best way to get your business off the ground on the cheap, it’s also about honing a good survival instinct. Businesses with this strong instinct have a cutting edge when they hit the inevitable tougher periods. Entrepreneurs know how to get things for free; they are hungry for advice and have an instinct for extracting meaningful information from people who give it freely. They lap it up and use it to benefit their business.
Bootstrapping is most important when it comes to marketing. My father ran his own advertising agency until his early retirement and he always said the best advertising is free advertising. I’ve inherited that mantra and don’t pay for any publicity. If you have taken the option to pay to get exposure, then you probably haven’t thought hard enough. If you get creative in getting your message across, you’ll often find there are more effective ways of reaching people who don’t need money but provide huge exposure.
This is where you need to invest your mental dollars – not your cash. Just think about some of the brilliant viral campaigns you have seen in the past few years. All of these cost the originators nothing except their mental dollars.
You may have a marketing budget. But you will really notice your mistakes when you are spending your dollars? When it’s free you can learn the same lessons but it’s going to be a much less costly mistake to take that creative chance.
The best businesses are always prime examples of fruitful partnerships. We all need the boost delivered by other people’s skills and motivations, especially at start-up stage. But when you find someone with a complementary skill set and (more importantly) someone you can get along with, how do you encourage them to stay up for another 17-hour day? One way is to let them share equity. You could be looking at one partner or maybe you build a whole team of partners; Ted Turner set up CNN by paying the team in equity in the early years and created a team of highly motivated people.
If the thought of equity doesn’t work for you then you can bring the skills in by outsourcing infrequent jobs to freelancers. My personal trainer has helped me to shed 15 kilograms but no money has changed hands. I give her advice on business and she gives me advice on nutrition and exercise.
How do you do this for your business? You swap core services. A good friend of mine posed a great example of this. Swede Erica Werneman and her partner Yasmine Akermark, both based in the UAE, have been working on a phone app concept called Tibba that allows people to exchange services rather than money. In her own words she achieved this by being a “little bit cheeky” and asking larger companies if they would be interested in an exchange of skills. So rather than giving up a hefty chunk of equity for a relatively modest investment they have built meaningful relationships with a company that has provided a dedicated team of software developers in exchange for a long-term vested interest in the app they are building.
When you are a minnow floating in a big sea of corporate sharks, you need to use your advantages to stay competitive. Bootstrapping your business and keeping your costs low allows you to pass some of this on to your customers and compete among the sharks.
Paris Norriss is an entrepreneur and currently partner in Coba Education, which provides educators to schools and institutes