Bootstrapping your business – A Strategy for young entrepreneurs to succeed
December 8, 2022
You have a dream, a clear business plan and strategy, and want to start your entrepreneurial journey. But you do not know how to choose a suitable sector, do not have enough capital to pay office lease and utility bills, etc. You try to save your money and wait for funding opportunities?Instead of depending completely on outside funding, there are many ways for bootstrapping your business. Therefore, even if you have little money or are empty-handed with no money, starting a new business is still within your reach!
Bootstrapping your business does not mean there will be no successful opportunities
Many young people have big ideas but are afraid of starting up. Because they fear that with the limited amount of capital they have, they can only start in small scope with a limited number of staff. Or worse, they can only work on their ideas on their own. However, you have the opportunity to succeed only if you dare to dream and dare to act upon it. Over 69% of startups started from home. Many giant companies started as bootstrapped startups with no or little money from founders’ savings. They had to start their ideas or operate their businesses in the early stage right from their living room or garage.
Bootstrapping your business, starting from your home
It does not mean that if you start from home, you will be successful. However, we have to admit that many big companies today started their businesses right from their living room or garage.Amazon started as an online bookstore developed by Jeff Bezos himself within a year in his garage between 1994 and 1995 after he quit his full-time job to follow his entrepreneurial dream. Today, he has become one of the richest in the world, and Amazon was valued at US$1.7 trillion in 2021.Atlassian was founded in 2002 from a limited capital of US$7,000 withdrawn from the credit cards of two co-founders Mike Cannon-Brookes and Scott Farquhar, 2 graduates at that time. They decided to build the first version of their product from their garage to start their entrepreneurial journey. The Australian tech giant is currently valued at US$100 billion.Many other giant companies also started from the garage or living room of their founders. Google, Dell, Apple, Microsoft, and Canva are some examples to name a few.The reason why most companies decided to start their business from home is to save money, especially in the early stage of their business. This is the stage when founders must focus on developing the product with the limited cash they have from their personal savings. Therefore, renting an office space before having a completed product and a stable customer base is unnecessarily risky and wasteful.
Bootstrapping your business, having desired products is vital
Bootstrapping your business means that you have to rely on your personal savings or money from your family and friends only, sweat equity, and reinvested revenue, instead of outside funding and investment. Therefore, the importance for bootstrapped startups is that you must have a product that can solve a customer’s problem. Once your product can solve customers’ problems, customers will automatically come to you, pay you to use your product, and help you earn the necessary revenue for maintaining your business.
A bootstrapped startup with the desired product – A story from GitHub
A product came from a weekend project
GitHub – The biggest Git storing and hosting platform nowadays, founded by Tom Preston-Werner, Chris Wanstrath, and PJ Hyett, started as a small project of its founders. They loved Git and wanted to share the code with each other but could not find a suitable platform. Therefore, GitHub was developed from their real needs, and it was also the needs of many other developers. In the first stage of its development, it was Github’s founders who became loyal customers of the platform. The platform was used by them on their daily job and was tested and fixed many times until it met their demands.After they shared Github with their friends for a trial, Github was loved by them and many used Github for their daily job. The founders also started receiving requests from Github users to pay for the private account. From that moment, a business opportunity came to Github’s founders.
A bootstrapped startup
The expenses to establish Github were very modest, from the limited money of its founders. They were expenses to buy a domain, hosting server, and legal costs for company establishment. The remaining is sweat equity from the efforts of all the founders to develop the platform.During its early time, Github’s founders had to do extra jobs to earn their living. The expenses for growing the platform and maintaining the business were from the revenue they gained from paying users. Notably, gradually, the founders could not only pay themselves but also attracted and hired other talents without using outside funding. Up until 2016, 8 years after its establishment, Github had 11 million users, was valued at US$2 billion, and received funding of US$350 million for the first time. In 2018, GitHub was acquired by Microsoft at a price of US$7.5 billion.
The founder’s Age or a large amount of capital is not the determinant for the success of a startup
The founder of Jack’s Stands & Marketplaces– a 9-year-old boy starting with lemons and a stand earned over US$25,000 within a year. And he has now become a kid entrepreneur who is inspiring many kids all over the world.
From a lemonade stand to a chain-of-stands business idea
In his first trial of selling lemonade at a stand in the farmer’s market, Jack earned US$2,000 of which US$900 was his profit. With his parents’ encouragement and his ability to plan for his scale-up, Jack owned 3 lemonade stands in the three biggest farmers’ markets in his State within half a year.Next, he borrowed a kid loan at Young Americans Bank, and hired staff who were other kids from 7 to 11 years old. He trained them with what he acquired from his own experience so that other kids could run the stands by themselves and receive a salary between US$30 and US$50. This expansion helped Jack earn US$25,000 after a year.The hands-on experience in business taught Jack about business and finance. He continued to raise funds from the crowdfunding platform Indiegogo and next from Shark Tank to expand his business. In 2016, in Shark Tank Season 8, Jack successfully raised US$5,000.
From a boy who learned to start up to a young entrepreneur with a big dream
In 2019, Jack continued to open TeenHustl, a DoorDash-like service for delivering packages to customers’ homes by teens on their bikes, skateboards, or cars. Even though this service was not successful and expanded as his expectation, Jack’s lemonade stands kept their stable operation and gave him a good profit. He also received the Dream Big Young Entrepreneur Achievement Award from the US Chamber of Commerce.
Bootstrapping your business – What do you need to succeed?
The desired product
As mentioned above, when bootstrapping your business, you need to sell your product as soon as possible to have the revenue to reinvest in your business. But a product is sellable only if it can solve a certain problem of customers. This is to ensure that customers are willing to pay for the product. Therefore, the first thing a bootstrapped startup needs is to recognize a problem of customers and develop a product to solve it. Here are the methods you can use to develop such products.
Become your own customer
From Github’s story, we found that to have desired products, their creators need to be their first customers. We need to have the demand, and the problem, and then experience the product ourselves to understand what we need, and how the product should be developed or adjusted during the product development process. Only by doing so, we can develop empathy with customers, a broad understanding of their problems, and create the product to solve their problems and meet their needs.
Automate processes if possible
On innovating and developing products, if there are any repeated activities, automate them to save time and operating expenses for your business. At the same time, you can develop a product with proven demand. Because if the product is useful for you, it will be for others too.
Capital is not only cash but also the resources that you have. Try to make use of them
The capital of a startup, besides the cash that you can use in your business, consists of other resources that you have, such as experience, knowledge, sweat equity, relations, etc. Especially, office space, machinery, and sweat equity are expensive resources if you have to rent or hire them. Hence, making use of these available resources will bring good benefits to your business.With stories about Amazon, Atlassian, Google, or Apple that started from home, we see that starting a business does not always need a big, modern, and professional office. If you have a passion, a clear plan, and suitable expertise to implement your idea, any place can become your office to start your business. If your business is online, bootstrapping your business will be much easier for you.
Prepare yourself for: little money, small success
Although many successful entrepreneurs started with cramped spaces, turning a bootstrapped startup into a successful one depends on many factors. Therefore, don’t see above the surface of the iceberg to convince yourself that you need to have a big dream. Even if you have a big dream, when bootstrapping your business, you should accept to divide your big dream into small parts. You should implement your dream gradually, based on what you have. And you should learn to accept that your small business will need a lot of time to grow steadily.
Seek companions when you need them
Many young people fear sharing their ideas with others. They only want to keep their ideas for themselves, and thus become afraid of seeking companions. Instead, they give themselves trouble in seeking solutions to solve problems of their project. Therefore, if you are young and lack experience, do not hesitate to seek companions. You can make a balance between seeking companions and keeping your ideas for yourself by giving your companions a share in your company. By doing so, you will have companions to share and support you in implementing your ideas.
Don’t become dependent on fundraising, let your bravery lead you to success
There will be no investors who dare to invest in your business only after hearing you share your idea. What they need is data and figures – the ones that give them an overview of your development in the past and a prediction of your success opportunity in the future. If you can prove your idea with proven and convincing figures, over time, investors will surely invest in your business.Not to mention, when receiving investment, you will lose some part of your control over the company and your ideas, especially if you receive investment from a very early stage. And as we see in the stories about GitHub or Atlassian, bootstrapping your business does not mean you cannot succeed. Therefore, if you have good business ideas with proven demand, a suitable sector to start with, a clear strategy and plan, and bravery, try to develop the early stage of your startup right from your home, with your personal savings and efforts. No one knows, but once you reach a certain development, you will write your name in the list of successful startups.
Summary
Starting up is not about how much capital you can raise and how big your startup is valued by investors. Despite starting with little money from your own savings, your bootstrapped startup still has the chance to succeed if you have a clear strategy, suitable experience, passion, bravery, and resilience.
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