Bootstrapping means starting a business on a low budget; you can do it with no upfront costs or by investing the money you earn and later reinvesting the profits you make with your new business. Lets say you are working in a marketing agency, but you find your job to be too stressful and you are thinking about a career change. A few years back you have started practising yoga and you liked it so much that you devoted all your free time to learn as much about it as you could. You took care of your body and came to know a lot more about it then most people you know. Although you know you can’t completely substitute your income from the start as a yoga teacher, you are willing to try. What’s the plan?
You are not going to get a loan to buy yourself a studio, you are going to bootstrap. Since you first have to do some research and test your idea, and you think you are not much of an entrepreneur and you don’t know whether this will work, you take some time to organize yourself, make classes, think of multiple ways to monetize your ideas in the future, figure out a way on how to let the world know you are here.
First you search for a space to rent, in a gym you like or some ex dance studio. Whatever comes to mind can be a good idea to explore. If you find a space at a gym, you ask them to put a poster up for your yoga classes and give the receptionist small cards with your information to give to every new and existing member and ask her to introduce you in a sentence or two. Make it attractive from their point of view, which shouldn’t be hard because you are just starting out; use that to your advantage. The most important thing about this is to give your website address. And in this case I actually mean blog because a blog allows everyone to interact which that will make you much more approachable. Tell your story, explain how you started, try to connect with your future students, and then say what you will all try to achieve. Don’t talk about benefits of doing yoga, they know what they are and it’s what is least important when somebody is choosing where to go. To make yourself and your class even more approachable and attractive, use your personality and make a short video on your blog. People who watch it will feel like they know you a little already and their first meeting with you will be a lot more relaxed and easier to make.
So, you got the low startup cost with renting a space, add posters and business-like cards to it, your blog is free, you invested time in creating classes and content, first marketing strategy is impelmented and you are gathering a group. Once that is done, you start paying off the rent with money from classes, you calculate how many students and classes you need to teach to supplement your current income. You reinvest the money in rent for a better space, maybe you get some necessary equipment, you start seeing some other ways of monetizing your ideas. That could be doing private classes, making an online course or boot-camp type of thing.
Your students will come to you with ideas and suggestions as they get to know you and as the classes progress; maybe someone will ask you about dieting and that is something you love organizing or experimenting with, but you have never done it for anyone else but yourself. That would be the right time to start building personal programs. And for the future, maybe start expanding your business, mixing yoga and your own method, creating a team of talented people you like working with, invest in your own studio; you get the picture. It’s always easier to learn from example and, most of the time, you’ll pick it up and know what to do better then if you were following a list.
But, since this was a short invented “case study”, here are some important things you need to know if you are planning to bootstrap your micro business:
- time is of the essence; it will take you longer to build a business by bootstrapping then if get a loan and invest a larger sum of money, but money doesn’t guarantee you a better results or quality prospects
- plan ahead to know how much time you have to get this micro business on its feet. How long can you keep investing your money before you start breaking even or making a profit without risking your existance?
- overhead expenses + know where to invest; there are some expenses in every business that are necessary for you to continue working, so have in mind that that is where some of your money will go on a regular basis. Invest in what helps you bring in the most money and in things that are absolutely necessary. Don’t spend money on better equipment you don’t need, on an office if you don’t need it, etc. You sacrifice comodities in the start to be debt free later.
- reinvest; reinvest the profits you make with your micro business, only take out the money you really need (living expeneses, health check-ups…)
- a smart thing to do is to make a list of things you will be spending money on in your micro business and write down the lowest and the highest possible cost per month. Then do the same for your expected income and compare. That way you will know if your micro business venture is possible and where you need to cut or delay.
- build a strong foundation; if you put a lot of quality work and effort into building a strong small company from the begining, it will not only ensure that it will survive, but it will make its place in the market and a big opportunity for a steady growing cash flow in the future.
- personal economics; always take into consideration personal finances. What are you regularly spending your money on? Family, credits, rent, car leasing…
- keep your job until your business can replace your salary; in the begining it will seem like a slow process, but only because you are building the foundations, searcing for customers or clients, and because you are investing your own money. When your business takes off, it will happen very quickly.
- first money; don’t spend the first money you earn carelessly. It took you a lot of work and, of course that rewarding yourself will cross your mind more then once, but reinvesting is the only right option right now. Otherwise, you are back at the begining.
- knowledge; bootstrapping will teach you almost everything about entrepreneurship and all aspects of business, especially if you are launching a business alone. The faster you learn, the faster you’ll move forward.
When you succeed, when you get your micro business off the ground, it will not only be about knowing that you did it yourself, but the fact that you are now making pure profit, you don’t have any loans to worry about, no longterm stress, and you can go on with growing your business.
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photo courtesy aclintonb
Feel free to share your bootstrapping tips or stories you know about micro business bootstrapping; alone or as a group. We would love to learn from you and discuss below.
I think the best type of business structure for bootstrapping would be a virtual company, one that is web-based, and which hires remote workers. This type of business keeps overhead costs low. This is how we started Gnosis Arts. And we did not have to take loans to start it.
Virtual companies definitely demand less funds to start because there are usually no rent obligations and, sometimes, there aren’t even big product costs. The best thing about them is that they are not limited in revenue and whoever has a computer and an internet connection can start one. But, not everyone has the an idea that would fit an online business or wants to have it. Rent doesn’t have to be a big deal and when you start small, it’s a lot easier.
Though the obvious shows how virtual companies are easier to start, we need to think about what heppens after that moment. The only way you can actually say which is easier is to compare two existing businesses, because a brick and mortar business can cost a little more to open, but has a better idea then an online one, so it makes faster and better profits. Maybe it’s the marketing that puts it on the map right from the start, like word of mouth because it’s integrated into a community opposed to an online one that can be lost within millions of websites.
Both types of companies take effort; some will find it harder to bootstrap a shop, some will find it harder to booststrap an online consultancy. It comes down to us; what we know and what we can do.
Since I run an online business, I can totally relate to you Eric. But, I have also seen many people who have bootstrapped great brick and mortar micro companies and who would probably have a lot harder time doing it online.
Thanks for joining the discussion, always a pleasure!
Good points, Stella. I’d love to hear how other members of the “we are micro” community did bootstrapping with a brick and mortar business. Anyone care to share?