“For me, a bootstrapper isn’t a particular demographic or even a certain financial situation. Instead, it’s a state of mind. Bootstrappers run billion-dollar companies, nonprofit organisations, and start-ups in their basements. A bootstrapper is determined to build a business that pays for itself every day. In many ways, it’s easiest to define a bootstrapper by what she isn’t: a money-raising bureaucrat who specialises in using other people’s money to take big risks in growing a business.” - Seth Godin.
This definition of what bootstrapping isn’t tells you exactly what it is. However, it’s not as simple as it sounds and bootstrapping comes with several advantages and disadvantages as well. It’s often a painstaking approach to take and it can be difficult to scale a business. But it will give you more control over your baby and will push you to be creative with expenses.
Ways to bootstrapping
There are several ways of bootstrapping. You can do it as a side project, or you can start with a small amount of capital, or you can start it with a state of ramen profitability. A clear explanation of these three types is given below.
Side project
“I spent the first eight months after university working three days a week as a web developer and spending most of my other four days working on my first real startup. This worked well to a certain extent – the startup was built and launched within two to three months, and it got a certain amount of traction throughout that period,” sated Joel, founder and chief executive officer of Buffer.
You can start it as a side project beside your day job and keep working on it until it becomes something that can give you enough cash to leave your job and work full time. The most recent of this example is Tina and Ryan Essmaker’s move to turn The Great Discontent, a triannual print publication and online magazine, into a full time project. Tina and Ryan had been working on it for almost two years beside their day job and other design engagements. This year, they started working on it as a full time project.
Many entrepreneurs of today have done this kind of bootstrapping successfully. Tattly, the temporary tattoo making company based in NYC, is another example of a side project started by Tina, popularly known as Swiss Miss.
Taking a startup as a side project is a very challenging task. It’s important to have a certain level of attention, dedication and energy to make it every single day.
Invest your own money
For many founders, taking it on as a full project after working on it on the side for a few days is the common path to follow. You work on your project on the side while doing a day job or contract job, then, after accumulating a small fund, you get into it full time to give it a push. However, this can be done in several ways and at several levels. If your startup is unlikely to generate any cash flow, then this is a risky bet. Buffer’s Joel puts it very well, “Having tried working in waves, I would not recommend it as a long term strategy.”
Ramen profitability
Paul Graham of Y Combinator coined the term first and explained it as follows
“At YC we use the phrase ‘ramen profitable’ to describe the situation where you’re making just enough to pay your living expenses. Once you cross into ramen profitable phase, everything changes. You may still need investment to make it big, but you don’t need it this month.”
This is a huge leap and if you can reach at this stage, it’s almost possible to do anything. A ramen profitable startup is capable of keeping it afloat and allows you to pay your dues as well. The best part of this situation is that you can stop worrying about tomorrow and fully focus on the work.
But achieving ramen profitability is not that easy. You need to make a product that can generate early revenue. While working on your startup, try harder to hit the ramen profitability stage. This can change everything.
Principles of bootstrapping
You can take the challenge and do the hard work it requires. You can even work on a side project or on the waves. But before all of it you have to understand whether your hard work is going to produce any results. A few of the principles of bootstrapping I think you need to understand before embarking on your journey are:
Understanding business models is crucial before starting a business. You business must be profitable, adjustable, scalable and secured to get it rolling.
Great ideas do not matter if your startup cannot make money. Don’t start with only an idea that can change the world.
Stop doing lots of things. Keep it as lean as possible and keep your eyes on hitting ramen profitability stage.
My takeaway
“If I was just starting out now with the knowledge I now have, I would completely focus on reaching ramen profitability, and I would work on the side on a “tool” with paid plans rather than a “social” idea. This is the approach I took with Buffer and it worked surprisingly well,” states Joel, founder and chief executive officer o Buffer.
This quote above tells us a lot about what you need to do after reading this article. Changing the world is a good dream but it will remain a dream if you fail to survive. For startups survival is the key.
Bootstrapping is one of the best ways of making an idea happen. It doesn’t require full time engagement, it does not require loads of money and so on. Just make sure you are working with enough focus in order to hit ramen profitability. When you are there, everything will change.