Would it surprise you to know that there are many entrepreneurs and business owners that are saying YES you can. Let’s find out how.
First we will look at Bootstrapping: An individual is said to be bootstrapping when he or she attempts to found and build a company from personal finances or from the operating revenues of the new company.
A 2014 study by The Kauffman Foundation revealed that almost every company in the Inc. 500 used bootstrapping to get where they are now.
Bootstrapping a business is a lesson in hard work and flexibility, an investment in yourself that will pay off for your company in the long run. The most successful bootstrapped companies have a business model that generates cash as quickly as possible.
As Derek Weber writes for the Young Entrepreneurs Council: “Bootstrapped companies are more effective at making constant course corrections, carefully honing the business model to be sharper and sharper, and ultimately constructing a strong foundation for consistent, sustainable growth”.
The second opportunity, the Lean Start-up, was proposed in 2008 by Eric Rise for the tech industry: A core component of the methodology is the build-measure-learn feedback loop. A practice for developing products and businesses based on ‘validated learning’, getting customer feedback quickly and often, and being ready to change course when necessary.
The first step is figuring out the problem that needs to be solved and then developing a minimum viable product (MVP) to begin the process of learning as quickly as possible. The fundamental activity of a start-up is to turn ideas into products, measure how customers respond, and then learn whether to pivot or persevere.
The Lean Start-up methodology asks the questions “Should this product be built?” and “Can we build a sustainable business around this set of products and services?” If yes, the answer is the first product and starts the campaign. By the time that product is ready to be widely distributed, it will already have established customers. It will have solved real problems and offer detailed specifications for what needs to be built. According to Eric Ries, “Lean Start-up isn’t about being cheap [but is about] being less wasteful and still doing things that are big.”
The Lean Start-up Model isn’t right for every type of business. Although more focused on the tech industry, Lean planning works by combining useful parts of the model with elements of traditional business plans. Lean plans are fluid and designed to be constantly adapted to the demands of the marketplace. The process revolves around financial indicators and typically follows a three-step approach: 1. Forecasting: 2. Monthly Reviews: 3. Quarterly Adjustments.
“Start-up success can be engineered by following the process, which means it can be learned, which means it can be taught.”- Eric Ries
The combination of ‘bootstrapping’ and the ‘Lean Start-up’ methodology have provided many companies viable options in starting a business. Many of these have become very successful; examples such as Dropbox, Mailchimp, Lynda.com, FreshBooks, Inuit, Envato Marketplaces, and Braintree, have learned how to bootstrap their way to success.
So now what? Can you do it? If you are ready to take this path, here are 5 tips that can increase your chances of success:
- The Lean Start-up movement encourages lots of networking and sharing of knowledge.
- The Lean message is “Get out of the building”. Don’t let your vision become delusionary, talk to customers and understand it from their point of view.
- Do-it-yourself. Bootstrappers don’t outsource jobs they can do themselves and they believe nothing is impossible to learn.
- Both state; Always watch your cash. Create a real forecast and budget, build a projected cash flow, and lay out the milestones you need to achieve in order to implement your strategy.
- Have patience and perseverance when it comes to ultimately reaching your vision.
Successful business owners plan their success by being flexible and adaptable, focusing on client needs, tracking and monitoring the money.
Need help? Ontario small business centres can provide invaluable guidance to the start-up entrepreneur for free. Start your road to success today by calling the Elgin/St. Thomas Small Business Enterprise Centre (SBEC) at 519.631.1680 x4503.