In the startup world, bootstrapping is a term for financing a company the old-fashioned way — on your own and from scratch.
A scrappy entrepreneur starts with very little money, sinks in her own savings, takes on little to no debt or any major investment and pours in sweat equity (and some tears) to build a business. Money is important, but startups also rely on friends, borrowed office space and other cost-saving resources to help move the business forward. Even in the venture capital age, startups are choosing to bootstrap their endeavors in order to more securely control their company's growth and direction.
So what can those of us who aren't (yet) entrepreneurs learn about budgeting from bootstrapping startup founders? Plenty. Here are five lessons about living within your means, adopting a DIY attitude, and learning how to turn limitations into opportunities based on bootstrapping principles that you can apply to your own life.
Starting a business with her own limited funds also meant Le was — and is — focused on running a lean operation, and keeping big-ticket expenses out of the budget when they're not essential. "I could budget for expensive social media ads, but does that mean I will?" asks Le. A marketing opportunity for Society Nine might be as simple and hands-on as taking samples of her company's boxing gloves right to the customer. "You can be as lean as popping up a table outside a gym, putting out product and shaking some hands," says Le.
Rob Farrow co-founded Aisle Planner, a business management and planning platform for wedding professionals, with his wife, Christina, who previously ran a successful wedding planning company. The couple bootstrapped Aisle Planner, based in Encinitas, CA, with the proceeds from selling Christina's business, as well as their home — truly going all-in. "Lean is scary," he says. "It's a tough place to be, to have that really frugal and lean mentality." What helped the Farrows was learning patience and that establishing the company would take longer than they ever expected — but that's OK. Running a business is a long game, says Farrow. "You don't win in the first quarter."
Set medium- and long-term financial goals and keep your focus on them. What do you want your future to look like? Your goals can be as simple as a big vacation next year or as far away as a comfortable retirement. Just the act of creating goals will make the financial choices you're making now — staying in your current home for a few more years, driving that older model truck — feel less like sacrifices, and more like an investment in your future. Living lean is about winning in the fourth quarter.
Some spending, whether to grow the business or the team, is inevitable and essential. But it's making smart spending decisions that counts, Farrow says. "Every dollar we've spent was a very thoroughly vetted decision," he explains. "We spent time with the customer, investing in the proper thing for them, as opposed to just speculating."
And yes, even so-called indulgences can be worth the spend, says Farrow, who pays for a weekly company lunch and counts the team-building time as an essential investment in the company's health. "Bootstrapping doesn't mean being cheap, it means being tactical and smart," Farrow says.
For Le, essential spending includes expensive international shipping back-and-forth to her vendors overseas as they work on boxing glove prototypes. "I won't skimp on product," Le explains. "I won't skimp on talent. And I won't skimp on visual content." If she has only five seconds to impress a potential customer online, Le explains, it will be through the website's photography and videos. "That's our story. That's the brand right there."
Some spending is worth it — once again, if you're taking a long view. If adding another bathroom to your house allows you to avoid moving to a bigger home or if traveling to a conference will allow you to network and make contacts for your small business, those might be wise expenditures. A careful cost-benefit analysis will help you determine how to spend (not splurge) smartly.
Even as they find bigger and broader success, entrepreneurs say that the fundamentals of bootstrapping will still be relevant — just as for non-entrepreneurs, the lessons apply to running a life or lifestyle. As Le says, she fully intends to continue applying bootstrapping principles as Society Nine grows. Running a company while staying lean is a discipline, Le says. "At a certain point, when we have millions in revenue, it will shift, absolutely. But the fundamental principles remain."
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