- 3 Resources Bootstrappers Need to Overcome Common Challenges - March 15, 2022
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There are many ways to grow a successful business, and bootstrapping, while not necessarily en vogue, is what most entrepreneurs are faced with—funding a business straight from your own wallet or customer revenue, not from investors.
There are unique challenges to bootstrapping, but you can do it and still become a high-growth company. We’ve done it at Text Request, earning distinctions on the Inc. 5000 and Deloitte Technology Fast 500 lists as one of the fastest-growing companies in the U.S. If you’re bootstrapping your own company, you need to be prepared for these unique challenges. Below are three impasses you’re likely to arrive at, and how to successfully maneuver each.
Every startup has three potential resources
Think of a Venn diagram with Time, Money and Skill Set as your three outer circles. The middle where they all overlap is Success. Venture capital (VC)-backed companies are typically taking on massive markets where speed is paramount. They use money to hire top skill sets to make up for that time. Bootstrappers typically have time, hopefully have the right skill sets, and they have to use these two to make enough money to find success.
That’s why this first challenge is arguably the most important to solve.
Getting the right founding team in place
The best founding teams have at least one person to lead business development, and one person to lead product development. Someone has to be able to build a product worth using, and someone else has to be able to sell it.
Other skill sets can be helpful—marketing, legal, finance—but you can outsource these relatively inexpensively. Some things you think are important may not be necessary early on, and ignoring them for a while may save you a lot of money.
In our case, I had 25 years of business development experience. My wife and cofounder, Jamey, had a similar tenure in customer service and operations. Our third cofounder Rob Reagan had 20 years of software development experience. We made a great team to build, sell and support in the early days. The challenge most face, that we did as well, is that you only have one of those skill sets. So how do you vet the others to know they’re good enough?
Unless you’ve worked with the person before, there’s no perfect answer. Check referrals and references. Look at past work if you can. But make sure you can enjoy working with this person, because you’re going to spend a lot of stressful and also exciting times with them. Then you have to trust them.
Keeping the lights on
Money will probably feel like your biggest challenge. The short answer is to get paying customers as quickly as you can while making sure they can depend on your product or service to solve their problem. (See why having a technical and a business development cofounder is so important?)
You have to provide a needed product that solves a real problem for your customers in order for this to work. Nice-to-haves won’t cut it, especially if you’re providing something new or aren’t serving a massive market.
This pressure to make money to keep the lights on also has a tendency to bleed into every decision you make. Some, like whether to pay for office space or sponsorships, are easier. You can work from home or just email people to get their attention. Others, like whether to build a different product or pivot to a new market, are much more tempting. You need money, and there are seemingly good ways to get it if only you’d just… do something different.
Don’t fall into this trap. You created your business to solve one problem for one type of customer. Stick to it. There are times when you may need to pivot to save your company, but those pivots still need to match your mission and company values.
You created your business to solve one problem for one type of customer. Stick to it.
Text Request, for example, was started to let customers contact businesses by text. We went after the hospitality industry (hotels and restaurants) first. There was some interest, not as much as we needed, and it turned out the home services industry (think movers and maintenance) really needed our service to be able to text leads to get a response so they could book services.
We pivoted from customers-texting-first-for-customer-service to businesses-texting-first-to-book-services, and switched industries. For hospitality, it was a nice-to-have, but for home services it was a needed solution that led straight to more revenue for them (and us). The change still fell within our purpose to connect customers to businesses through text, we just found a different and more profitable way to do it.
Building trust and credibility
There are innovators and early adopters who will want to try the next “new thing” whether it’s proven or not. In fact, they prefer being one of the first to do something. But most customers aren’t that way. They want to see signs of stability and reliability. They want to know they can depend on you.
Venture-backed startups have social proof in the venture capitalists who backed them. If that company can be trusted to be given however many millions, surely you can trust them as a customer. Not to mention all the press and media attention companies get when they raise a round. But as a bootstrapped startup with little history, minimum press and few customer success stories, how do you build that trust and credibility?
One customer at a time. It’s that simple. Do good work for one customer ongoing, then another, then another. As timing’s right, ask for online reviews or testimonials. As you layer on your successes in customer count or notable logos, product improvements and other milestones, you build your reputation. Be intentional to talk about your progress publicly. Build relationships with relevant media personnel, and you’ll have a story they may just want to tell their audiences.
Repeat the process. It will become self-sustaining, and before long you’ll have ample proof that you’re credible and worth working with. This is just as important for hiring great talent as it is for earning and keeping customers. It’s worked for us, and it will work for you, too.
Don’t downplay resilience
On paper, building a business is as straightforward as understanding a customer problem, building a solution to it, and taking that solution to market. In practice, as we all know, it’s much tougher. You’ll wake up many days facing challenges you didn’t expect, and questioning whether you should keep going.
The difference between many success stories and those that simply become “lessons learned” is how many times you choose to get up to face those challenges. Grit, resilience and tenacity are key. Keep going.