Bootstrapping: Guide to Zero Investment Business Model

What do you think are the basics for starting a billion-dollar business? An investment, a workshop, machines, workers, etc?

No, no, no, and no!

As a matter of fact, you primarily need one thing and that’s an IDEA. Yes, You heard it right. Companies like Microsoft, eBay, Apple, Coca-Cola, Van Huesen, and GitHub have all been bootstrapped from the scratch.

The Story of Microsoft

Microsoft was founded in 1975 by Bill Gates and his business partner Paul Allen without a large software rollout.

The two began with a simple goal in mind: to develop a rudimentary interpreter program for the Altair 8800 Microcomputer. Executives at MITS, the firm that made the computer, were impressed, even though the application they designed only functioned on a simulator of the Altair.

They sold the program which brought some cash flow and they continued to code in their spare time.

Only five years later did Microsoft feel the need to raise money from outsiders. It then enabled the company to expand rapidly into multiple buildings and hundreds of more employees.

What is Bootstrapping?

Bootstrapping in business is used to describe the process of starting and growing a firm utilizing only existing resources such as personal savings, personal computing equipment, and garage space.

In contrast to bringing in investors or taking on debt to fund a company’s expansion, this technique is less risky. It’s all about making the most of what you’ve got—whatever that may be.

The term “bootstrapping” comes from the phrase “to pull oneself up by one’s bootstraps,” which was popular in the 18th and 19th centuries.

It referred to an impossible task back then. It now alludes to the problem of creating something from nothing.

Bootstrapping vs Venture Capital

Venture Capital means taking money from outside sources in exchange for the ownership of the company to accelerate growth.

There are two ways of going into venture capital:

The first is to bootstrap the company into the viability and then take investments to scale the business for long-term profitability. And,
The second way is to make investments to grow the company in order to get to the scale required to become profitable.

The choice between these two alternatives depends on which type of company are you running.

Raising money for a startup is easy but building a profitable and sustainable business model is challenging.

Your options as a budding company get limited when you’ve secured funding. The focus might shift from developing, evolving, and growing to pleasing and appeasing the funders which create pressure and even early exit.

What Type of Companies Can be Bootstrapped

Due to the financial realities of starting a firm, bootstrapping is undoubtedly not an option for every entrepreneur. Firms that don’t fit in the venture capital scenarios and are difficult to scale up through increased spending are suitable for bootstrapping like:

B2B markets involving complex sales cycles are suitable to be bootstrapped
SaaS companies are ideal for bootstrapping as they don’t require a large capital influx for tangible assets
Serial entrepreneur businesses, in which the founder has money to invest from the sale of a previous business
Self-made small businesses with a unique product that sells well and give a good profit margin to be used in scaling up

Bootstrapping Entrepreneurship

The mindset of a zero-investment entrepreneur:

1. Be the One Man Show

Most bootstrapped companies have only 2-10 employees which means they have to be highly skilled and dedicated in order to look after the wide variety of tasks involved in running a business.

The entrepreneur must have or be keen on developing the skills required to save the outflow from outsourcing such tasks.

2. Build Connections

If you can’t buy it, barter it.”

Networking will help you find resourceful people who can help in the growth of the business. By collaborating with people in the same niche, you’ll not only reduce competition but also find better solutions by combining ideas and markets.

3. Step-by-Step Goals

Set small goals in the beginning and fragment your big idea into achievable steps. This will keep you as well as the team motivated to continue hustling.

For example:

Over the next three months, increase product pricing by 3%
Over the following five months, hire three new marketing employees
Increase the number of visitors to your company’s blog
Organize monthly giveaways for customers on Social Media

4. Experiment and Adapt

Companies become successful not by committing to a single goal or outcome but by adapting to the changing environment.

If you can cater to the changing needs and tap on the trends faster than other players, you will be able to unlock the first-mover advantage in a flourishing market.

New firms have a flexible structure and are not tied to specific work norms and methods so it’s easier for them to adjust to shifts in consumer preferences by realigning their business goals.

5. The strategy of Quality over Quantity

While Bootstrapping a company, financial management is a crucial part. Every penny that you spend has to be first earned by you. This makes quality products, a prerequisite, as they’ll help build a loyal customer base and ensure liquidity.

The Bottom Line

We are living in a world where everything is becoming accessible to everyone.

There are millions of products and services available at your doorstep with a single click. Bootstrapping in this world is not an impossible task anymore. In fact, it is going to be a part of the history of many successful companies.