Bootstrapping is hard.
Transforming an idea into a profitable venture with the benefit of venture capital support is certainly one path to go down, although a much different one than bootstrapping. Venture capital (VC) dollars offer a bevy of benefits, from access to networks to strategic insights that can fast-track the growth of your company. When there is synergy between investors and the founding team, there is usually a bit of breathing room to scale ahead of revenue and profits.
But these dollars don’t come without a huge weight that investors will have to give up: control. VCs can step in and replace founders or change the go-to-market model until they feel like their money is working in their best interest. I’ve witnessed a number of founders in the early stages of a path toward exit, only to be exited themselves. Nothing personal, it was strictly business.
Bootstrapping puts the onus on the founder to make the numbers work, because if they don’t, it's game over. You are 100% in control of your own destiny. It took me three years to build Treble into a recurring million-dollar agency. It was a daily grind that required every ounce of my willpower and brainpower. Even today, five years after starting the agency, I recognize success is not guaranteed and think about the responsibilities of supporting employees and their families.
While my experience is geared heavily toward service-based companies, the advice is universal and can be applied to product-centric companies as well. With that perspective in mind, I’ve assembled three key points every entrepreneur can implement to get closer to the elusive million-dollar run rate:
Make Your Dollars Make Sense
Cash flow is the singular priority when you are bootstrapping. No cash, no business. While money flows in, it’s imperative to protect what goes out. In the first year of Treble, I was able to save thousands each month in rent, insurance and commuting costs by working from a home office. While that may not be viable for every entrepreneur, co-working facilities of every genre can empower entrepreneurs and early-stage companies as they scale.
Labor costs are typically one of the highest outflows of cash. My advice is to really focus on the initial hires as they are critical to your brand. As a CEO and founder, your time will undoubtedly be pulled into a number of directions. One way to continue to produce while you are multitasking is to utilize interns for important behind-the-scenes work. Independent contractors can also bridge the gap to hiring full-time employees. Keep in mind the immediate spike of W2 employees in terms of salary, benefits and federal taxes are a huge challenge as those costs are steady while revenue will fluctuate significantly in the early months and years.
Flexibility Leads To Scalability
This may be a rudimentary approach, but profit margins don’t mean anything if no money is coming in. I launched a $75 million fund pro bono. Why? Ironically, while this venture fund raised capital from its limited partners to deploy across its portfolio, the quantitative event of a capital raise was something I was willing to take on for free because I could see how the startup ecosystem was expanding. Plus, this relationship would drive significant revenue beyond a project in the years ahead.
I also recognized that $75 million would be deployed to around 25 startups in Austin. Guess who was on the shortlist when those startups needed funding? I started off with $1,000- and $2,000-per-month retainers to get the brand equity built and dollars flowing.
The reality for many startups that need to achieve scale is that venture capital is a necessary bridge to cross. Bootstrapping requires fiscal discipline, immediate profitability and incremental scalability. The reward of complete ownership, in my opinion, is priceless. Now, five years after that pro bono launch, I’m more inclined to pay attention to choosing the right clients because not all money is worth it if it impacts your culture, bandwidth or mindset.
There is a distinct process to get to that point. I’m still open to creative deal structures to make the numbers work over the long-term. Be willing to drop your ego for the greater long-term viability of the business in the early days. Once you hit that tipping point, you can command market value or even a premium because people inherently want to work with you and your brand.
Invest For The Future
Owning 100% of your own business grants amazing freedom -- and responsibility. The goal here isn’t to be a unicorn startup. Incremental growth is beautiful in its own right. When you do have a positive month or quarter, it becomes imperative to save a significant percentage in your business accounts. Of course, part of the reason you are grinding is to enjoy the fruits of your labor. Do it. But do it responsibly. Your business and its longevity are the real goal. This requires savvy saving, tax planning and investing back into the business.
Have you done any marketing for your brand and taken advantage of targeted sponsorships? Protected your brand’s intellectual property with the necessary trademarks or patents? Is your website driving new business prospects? Investing in all of these areas fractionally as you are scaling affords you the same privileges enjoyed by your venture-backed counterparts. Thinking big when it comes to your branding while you’re small sets you up to cross the $1 million revenue threshold and well beyond.
Bootstrapping is a long game that needs to be played with precision every single day. Enjoy the ride and the luxury of complete control of your business. It’s priceless.
