Jan 23, 2019
DOs and DON’Ts of startup idea testing
If you’re anything like our podcast guest Jutta Jetrum, independent, determined and prefer to do it all yourself, bootstrapping may be the best way for you to build your business. That said and confidence aside, know that bootstrapping isn’t for everyone!
For one, your growth and potential for scaling will be slower and more difficult because you simply don’t have cash flow to put into things like marketing and development. It’ll also take longer before you start earning a salary because all the money coming into the company should be reinvested into the company. On the other hand you can better avoid spending money you don’t have and falling into the words of Nancy Sinatra where you keep losing when you ought to not bet. To help you decide which strategy is the right fit for you we divided up bootstrapping and seeking outside investments into these two identities:
The Cowboy Boot
The Combat Boot
To enjoy the full episode with Jutta, click here.
We’re calling the successful bootstrapper an outlaw because they’re a bit of a wild child and prefer the freedom of the open road to the constraints investors might bring. Most importantly however, they are not afraid of the risks it brings. To successfully don the cowboy boot, the bootstrapping entrepreneur is typically able to keep a paying job while reducing the workload to make 2 or 3 days a week dedicated to the startup until there is enough money from the startup to earn a salary full-time. As mentioned above this can take a painfully long time and requires that the entrepreneur be really conscientious of cash flow needs. In the Wild West where cash is king, bootstrappers aren’t afraid to cut living expenses and sustain on a can of beans for the first few months. Cutting costs can also be done on the following ways:
Consider that even though the bootstrapping entrepreneur hasn’t acquired investors, there is a constant presence of supporters. Whether that be family members cooking up a few extra meals a month, partners bearing the financial burden or an understanding employer from the other job… wearing cowboy boots doesn’t necessarily turn you into the lone rider one is expected to be. The first thing a buckaroo does when they come to town is feed and take care of their horse and the same approach should be taken towards the supporters of the bootstrapping entrepreneur whose value should not be underestimated.
Bootstrapping is often most successful in B2B businesses where it’s more common to pay for a product upfront resulting in liquidity when it’s needed. This can also be done with consumer level drop-shipping (where you don’t own inventory and only fill orders as they come). Being financed by your orders means not spending money you don’t have and gives you a longer runway. However, this is best achieved if you don’t have to invest heavily in development.
The soldier is in the heart of a big team effort because the nature of the startup endeavour simply requires it. You may find yourself seeking VC’s or angel investors if your business includes heavily regulated products such as in fintech, med or biotech which inherently need a lot of funding and will benefit from a diverse team for their development. This also includes a lot of B2C businesses where it’s becoming increasingly important to build a brand. Although this can be done with free PR like our podcast guest Alan from Amorana or through landing a marketing stunt, it’s very difficult to do it without cash and a larger team. At the end of the day the soldier, who depends on investors, is able to sacrifice freedom and personal preference for the sake of the product.
Regardless of the boots you are wearing, they’re both great options as you tread towards your dreams, it’s just a matter of choosing the right ones and committing to the identities that come with them.
Are you ready boots? Start walking.
To have this song stuck in your head all day, click here.
A few of our favourite bootstrapping sidekicks:
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