The conflicting (frequently unsolicited) advice startup entrepreneurs too often hear is enough to make you tune it all out. Either you’re told that you need to go big and grab all the angel or VC money you can get your hands on, or that you should start small, do it on your own, and retain control of your company.
But bootstrapping a startup is not easy, requiring discipline and fortitude, as well as ingenuity. But entrepreneurs who have done it have discovered some best practices to increase the odds of success.
Comparz, the largest independent user review site for businesses seeking Web-based software. Blankstein admits bootstrapping also involves “a lot of ingenuity, trial and error - and an immense amount of hard work.“ But she insists there are benefits to bootstrapping. It enables you to “build something incredible with next to no cash, and to retain significant ownership of your company.” Blankstein offers five ways to operate your startup with minimal cash burn.Serial entrepreneur Rachel Blankstein is bootstrapping her latest startup,
Bootstrap 1. Offer Equity Compensation to Team Members: Generate interest in joining your team by giving equity to others with complementary skill sets to yours. With a four-year vesting schedule and a six-month “cliff” or trial period, you can get others to join in on the fun of startup, and make progress without expending cash. This type of equity structure safeguards you, so you won’t have to give away a lot of your company if the person does not produce results. In fact, with the six-month cliff, if they do not work out within that timeframe, you have not given away any equity.
Bootstrap 2. Leverage the Skilled Unemployed: Encourage talented workers who are between jobs to work for you, which benefits them by keeping their resumes fresh, and allows them to build new skills. This is a win-win for the younger segment of the workforce who value building skills and enhancing their resumes. They will be grateful for the opportunity, and you will be grateful for their hard work with no cash expenditure. Just make sure you don’t violate any employment laws.
Bootstrap 3. Barter, barter, barter: You can barter more than you think. It can be as simple as saving money on marketing by promoting someone in a blog post who then promotes your company to their audience. There are a thousand ways to do it, but by providing more favors to others, they will be happy to do favors for you - whether you need expert advice, exposure or someone to test your product, etc. You can also barter for services. Exchange your coding skills with someone who will offer the equivalent value of marketing. Just remember, it’s all accountable to the IRS.
Bootstrap 4. Build Relationships with Key Influencers: A successful entrepreneur often has strong relationships with key influencers in their industries. If you don’t have these relationships at the outset of your venture, build them. This gives your brand more exposure to the “right people,” offers you priceless insights into your industry and snowballs as these contacts introduce you to more “important people” if you prove to be good at what you are doing.
Bootstrap 5. Outsource: Don’t hire people, use independent consultants who come highly recommended from your peers when you need to bring in expertise. That way you can learn from them, and use your low-to-no-cost team to implement their ideas. Blankstein adds, “While these may not be ideal [solutions], this is how you limit cash burn, which is important for a startup or business of any size.“ (See also: 4 Ways to Avoid Hiring Your First Employee.)
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