How to bootstrap a start-up
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Posted: Mon 2nd Sep 2024
Bootstrapping means starting a small business from scratch with a limited budget. When you have little to no money to play with, creativity is crucial. It is possible to launch and market a business for a small investment, but only if you use the funds effectively.
In this blog, we explore some simple marketing strategies you can use to get your product out there for next to nothing, with input from entrepreneurs:
Tim Rundle-Wood (Twoodle Co)
Stefan Allesch-Taylor CBE (Department of Coffee and Social Affairs)
Simon Ong
What is bootstrapping in business?
Bootstrapping is when you start and grow a business using very little (or no) outside investment. Instead, you rely on your personal savings, reinvested profits and revenue the business has generated itself.
Entrepreneurs who bootstrap their start-ups typically prioritise a few different ideas and methods:
Managing costs and keeping costs down
Being resourceful
Operating efficiently in order to sustain and grow the business without needing finance (such as loans, angel investment or venture capital)
Keeping financial decisions tightly controlled often leads to more sustainable business practices. And while bootstrapping can mean slower growth, it does allow you to maintain greater control over your business in the long run.
Is bootstrapping a start-up hard?
It can be challenging, due to the fact you're depending entirely on your own money and any profits the business has made.
This financial constraint means you need to be frugal with your decision-making, allocating every pound carefully and prioritising critical areas such as product development, marketing and operations.
When bootstrapping, you do face immense financial pressure to generate revenue quickly, which can limit your ability to invest in long-term growth.
Also, with fewer financial resources to play with, you may start to feel more stressed and fatigued, as you juggle a number of different roles within the business.
Despite these difficulties, bootstrapping can give you much greater control and a more significant sense of ownership, as well as making you more resilient and deepening your understanding of the market.
Pros and cons of bootstrapping a start-up
Pros
Bootstrapping a start-up brings several benefits:
Financial independence: When you're not relying on funding from outside the business, you have full ownership and can make decisions that match your vision, without the external pressure of investors' expectations.
Financial discipline: Without the investment from others, you're forced to prioritise essential expenses and work innovatively to operate within your means.
Lean operations: Bootstrapped businesses are often more agile and adaptable – and more competitive as a result.
Strong company culture: As the business grows organically, you can build a solid foundation while cultivating a healthy company culture that's driven by a deep commitment to your mission.
Ultimately, bootstrapping can lead to sustainable growth and a resilient start-up that's less vulnerable to ups and downs in the market.
Cons
While appealing for its autonomy, bootstrapping a start-up does have some drawbacks that can hinder growth.
Limited access to funds: Using only personal savings and business profits can mean you're less able to invest in essential areas such as marketing, recruitment and product development.
This can slow down the business's overall progress and make it difficult to compete with more well-funded rivals.
Compromised decision-making: The pressure of managing everything on limited resources can mean you start to prioritise short-term survival over long-term strategy. Ultimately, this makes your start-up less sustainable and harms the potential for success.
Personal impact: Because you're investing savings and/or incurring personal debt to fund the business, this financial risk can lead to stress and potential burnout.
Who is bootstrapping ideal for?
Bootstrapping is ideal for entrepreneurs who have a strong sense of financial discipline and a clear vision for their business, as it emphasises building and growing a company with little to no external funding.
This approach suits people who are resourceful and can make the most of limited upfront investment while maintaining control over their business's direction and equity.
Bootstrapping is often favoured by start-ups in industries where there's little need for initial capital or where revenue can be generated quickly, allowing the founder to gradually reinvest the profits back into the business.
It also resonates with anyone who's motivated by independence and wants to prove their concept before seeking outside investment. This makes it an attractive option for many first-time founders and small business owners.
What are the stages of bootstrapping?
Validate your idea
To validate a business idea with only a shoestring budget to work with, you need to be creative and resourceful. One effective way to do it is to take advantage of free online tools and marketing platforms to conduct market research and gather customer feedback.
Start by engaging with potential customers through social media, online forums or surveys. Assess their interest and gather insights about their needs and pain points.
Building a simple landing page using free website builders can help gauge interest by tracking sign-ups or inquiries.
Consider interviewing industry experts or potential users to validate your assumptions and refine your idea.
Through these low-cost methods, you can gain valuable insight and make informed decisions about your business concept without the need for substantial financial investment.
Identify your audience and find niche markets
According to Twoodle Co founder Tim, having a niche really helps small businesses start and scale online. He explains:
"One of the best pieces of advice about starting, is to have a niche. General products that appeal to everyone seem like a good idea but those markets are so flooded."
Tim recommends creating a really specific ideal customer persona that includes a name, job titles and habits when you start trying to promote your business. He uses aspirational personas that reflect a small part of his customer base, but that the rest of his target customers aspire to.
Entrepreneur Stefan started Department of Coffee and Social Affairs on a bootstrap budget and claims it was the fastest-growing coffee business in the UK. He believes it's important for small businesses to be disruptive to stand out from their bigger competitors.
"If you don't believe you're doing something better, you're diminishing your chance of success. Brands are powerful things and you'll be up against some of the most powerful brands in the world."
It helps to remember that big isn't always better from a consumer standpoint. If there were 500 Department of Coffee shops in the UK, for example, it would be regarded as a chain and viewed differently. Stefan explains:
"As an overall business plan, growing for the sake of growing isn't always the best way. You have to listen to your consumer.
"Our customers recognise that speciality coffee has to be speciality coffee, so commoditising what we do would be a terrible mistake."
Work out how much money you need to get started
The amount of money needed to bootstrap a business can vary widely depending on your industry, your business model and what you're trying to achieve.
Generally, the bootstrapping method is all about using personal savings and revenue generated from the business itself.
For some small businesses, a few thousand pounds may be enough to cover initial costs, while others – particularly those needing significant stock or technology – might need tens of thousands or more to get off the ground.
Ultimately, the key to bootstrapping is being financially disciplined, focusing on essential expenses and strategically reinvesting profits to make sure the business can grow.
Play to people's emotions
People buy based on emotion and then justify it logically afterwards, according to successful entrepreneur and motivational speaker Simon Ong. He advises bootstrapping founders to be creative and find a connection with customers through their content.
London-based EL&N Café has done this by creating a space that gets people talking online. Its café is covered from floor to ceiling in faux flowers and has become an Instagram hotspot, with people queuing to have their selfies taken.
This human connection has helped to build a 740,000-strong following on Instagram. Most importantly, it's cost this successful company next to nothing.
Make seven points of contact
Marketing experts believe it takes around seven points of contact with a customer before they decide to buy. But don't confuse this with seven follow-ups – it's seven different media.
These media could include:
Don't underestimate offline communications either. Consider how you can reach your customers in the real world through events, so that you build trust over time.
It's possible for bootstrapped businesses to use lots of these channels for free. Think about where your customers will interact with your business and pick what you're going to focus on.
Tim at Twoodle Co started off with organic promotion, then played around with Facebook adverts. He targeted ideal customers with a very simple strapline about the problem he was addressing, aiming to get them to like his Facebook page.
He then retargeted them with an offer, testing whether giving money off, offering two-for-one deals or another strategy worked best.
Get customers to generate your content for you
User-generated content is not only budget-friendly, but it also shows a real and human side to your product or service.
Simon Ong puts it this way:
"For someone to buy your product or use your service, it comes down to three things. They have to know you, like you and trust you."
Customer reviews are a form of user-generated content that build trust. They're also free and help improve your ranking on Google. Reviews have become an important factor in customers' buying decisions, so build relationships with your customers and ask them to leave reviews on your social media pages, website or Google business profile.
Remember your partnerships and networks are powerful
Partnerships can help you scale your business. They're a particularly powerful tool if you're just starting out, and can be a cost-saving way to market your business.
For example, Simon Ong set up an online career summit with other recognised business speakers, reaching a significantly wider target market than running it alone.
Tim Rundle-Wood advises you to think about who in your personal network may be able to help too.
"Use everybody that you know, and take money from friends, family, friends of friends. There's always someone or somebody that can do the thing you can't do. Pull in every favour. Say 'yes' to everything even if you don't know you can do it."
Invest back into the business
Tim at Twoodle Co used what he calls the "pinwheel" approach to scale his business, buying the most products he could afford, selling them and then reinvesting the money to buy more.
"Let's say I want to start a business making candles. I buy 10 and sell them and that allows me to buy 30. I sell those 30 and get 90. Ninety becomes 180... it's about reinvesting every penny back into the business.
"You have to be really clever with your investments. You're buying more of what's selling and dropping what isn't. You create a business based on best sellers."
Tim launched Twoodle Co with "just a few hundred quid" by buying small quantities of products and selling them on Etsy. Your costs fall as the business grows because ordering in bulk tends to save money and some costs, such as your website hosting, won't change as sales increase.
Tim adds:
"To begin with, product costs tend to be quite high, so the profit isn't as much. As you get bigger and buy in bigger amounts, your profit gets bigger and the pinwheel gets quicker."
Tim worked on the business as a side hustle before going full-time. He explains:
"It took about three years to get things to a stage where I could walk away from my full-time job. I could no longer manage both. I got to the stage where I had to have a conversation with my husband and say 'I physically can't do both'. It's good to get to that stage but you have to know yourself well enough."
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