Don’t Feel Trapped When You’re Bootstrapped – Here’s What You Can Learn & Do!
Bootstrapped. The term, its implications, pros and cons…are something I’ve come to understand quite well in the months following my foray into the start up world. Entrepreneurship has taught me lots of things like how to present a product, operate a company, hire and train people, network, work long nights, and most importantly, manage on a budget!
As we all know, working on a budget not only teaches one how to get the best price and manage with less, but also makes one quite creative and innovative! Although, having abundant funds for running a business sounds great, I believe bootstrapping experience is important as one learns things that can help create a base for a well-run and financially responsible organization – this is also what investors want when they decide to fund your growth and/or future projects.
5 things that I’ve learnt while operating a bootstrapped start up
Budget, Budget, Budget
Yes, I know that this doesn’t sound sexy. But, I personally feel when it comes to business, money is always short. So naturally creating a budget is important. When you are a bootstrapped start up then a well-made budget works as a life-line, especially when funds are scarce.
So, when you’re working with limited funds, you need to create a budget – monthly, quarterly, half-yearly, and annual. Revisit it every month and check your spending against your income. If required, revise it for the coming months. As much as possible try to keep in line with the funds you have earmarked for spending and try not to spend over that, unless there’s a good justification for it.
Hire Carefully and Treat Employees with Respect
Most of the time you will not get that superstar candidate – the one you think is the solution to all your problems and most of times the reason will be money, and like in our case – the industry! So the question arises, now what? The answer is simple – try to hire people who can become superstars – hire for attitude. Of course you will need to invest your time in them, show them the path and support them initially.
But, if you have trust in them, and give them time and opportunity, they can perform. Also, trusting your employees creates a feeling of goodwill in the organization, which helps develop similar attitude in the employee towards you and your business. This makes them more ownership driven and they become accountable for their actions and decisions.
Learn the Basics
The basics are important! It’s important for entrepreneurs to know the basics of all the functions in an organization whether it is accounts, finance, marketing, sales, operations, customer service, and HR. If you know the basics – you’re not dependent on anyone to do the job, especially if you can’t hire a dedicated person for it and no one can fool you – your employees, vendors, or customers. It’s quite embarrassing if someone pulls a fast one on you in your own company, don’t you think? Also, knowledge always helps find cost effective solutions to everyday problems. We all know how important money is for start ups.
Yes, you read that right. I am talking about savings for a bootstrapped start up. I know that what I am suggesting here, sounds bizarre. Entrepreneurs, especially in the early phase, barely manage to breakeven; if they do, then they generally reinvest what they earn back into the business. Thinking of savings when we have to deal with and pay off those bills which always seem to get higher and higher and when you spend sleepless nights thinking of how you’ll make the next bill payments…seems impossible, doesn’t it? But it’s necessary and it’s helpful in times of need.
If you feel it’s not something that you can do, or not necessary…then think of your salaried days when you had that Rs. 5000 deposit /month (auto-debit) and then suddenly at the end of the year you would get Rs. 60k credit in your account. At times, that small amount you forgot about would end up being a saviour. It’s the same with business – small regular savings work as life savers during rainy days. We all know that every business has rainy days…low sales, no investors, and dwindling market share. To counter these situations we need funds.
To ensure that we have sufficient funds when needed, saving is important. Try to split your revenue into these specific buckets – funds for operating costs, funds for reinvesting in the business, and funds for saving. This will definitely help you keep an eye on finances and ensure that you always have CASH – the lifeboat of a bootstrapped – actually any venture.
Leverage the Work from Home & Freelance/Outsourcing Model
Both these practices are becoming very popular nowadays and they’re quite cost effective.
Though we do have an office, we have kept the flexibility to work from anywhere. This has helped us cut costs on renting a large space and saved on certain overheads as well, which would have been required had we had a traditional work-model.
Another option that I find quite cost effective is the freelance model. Though at times freelancers might be hard to deal with and you may have to spend more time in following up with them; but if you hire right, then you can depend on them for a lot of work. Just ensure that you communicate your requirements clearly. Of course, not all work can be given on a freelance basis or be outsourced, but if you have certain projects that do not require direct supervision and are periodic, it would make sense to outsource them to freelancers – hired specifically for the duration of the project or work.
All these things that one learns in the initial phases of setting up an organization help set the course for the future and the foundation of the company. I feel that at times, the responsibilities of funding your own venture are overwhelming and the lessons difficult; but in the long run they’re worth it.
About the Author: Divya Chauhan is a Co-Founder ItsPleazure an eCommerce store for Adult products.