Bootstrapping is an innovative business philosophy that stresses simplicity and results over bureaucracy and tradition. In my previous post in this series, I explained what bootstrapping is and why it works for so many budding entrepreneurs.
Many successful online businesses have been bootstrapped: Buffer, ManageWP, and even my own freelance writing business (although things would have gone a lot smoother had I known, from day one, all of the steps that I'm going to show you today).
In this post I will offer a basic how-to guide to bootstrapping.
While no blog post can ever provide exhaustive and in-depth guidance on this topic, it will provide you with a comprehensive overview. Fundamentally, bootstrapping is an approach based primarily on simplicity, so once you understand the basics you are ready to move forward with your business.
1. Find Your Place
For many businesses — especially people with dreams of finding a market online — bootstrapping is essential. Of course, you know that bootstrapping works, the real question now is this: what is the most effective way to embrace the approach?
At the risk of stating the obvious, you need to start at the beginning. If you don't already have an idea, you should focus on coming up with one that could form a business.
That seems pretty simple, but there can actually be a little bit more to it. Bootstrappers are usually people who want a business because they want freedom and it's important to keep in mind the reason why you are pursuing entrepreneurship. You probably don't want to spend the rest of your life doing mundane work that doesn't excite you. So don't build your business on that kind of bedrock.
The key is to find the overlap between what you can do, what you like to do, and what other people will want to pay you for. Chris Guillebeau talks about this in The $100 Startup using the term convergence. You should try to find where what you can supply converges with what potential customers demand.
This is a great way to think about things, but I do want to note that it is not the only way. Many people find business opportunities in areas they never expected. Still, it's imperative to make sure that you're conscious of your strengths and know how to use them to your advantage.
2. Start Lean
One of the biggest mistakes that beginning entrepreneurs make is to lose focus in their product or try to do too much with their service. You are not going to be taking on the titans of industry and stealing their market share (at least not yet), so don't try to build up enough features to match them.
Instead, strip your idea down to its most basic form. Remember that simplicity is key in these early stages.
Remember ManageWP? I mentioned this web startup briefly in the first post of this series.
ManageWP is a web application that allows webmasters to manage multiple WordPress sites from a single dashboard. It has numerous other features that give value to customers, too, like analytics, automated customer reports, and more. ManageWP is currently a feature-rich product, but it didn't pop out of the box that way.
Remember, the point of bootstrapping is to avoid elaborate business plans that weigh you down.
Vladimir Prelovac, the company's founder, kept his initial focus on the core purpose of the product: creating a simple tool to manage multiple installations of WordPress. He wasn't distracted by potential additions. ManageWP launched with a basic feature set. He kept this product lean and targeted on initial launch, and this allowed ManageWP to find its core audience from the beginning. They then refined it over time.
Why does beginning with a lean product work? Think about it, you can never be completely certain about what potential customers want. You might have brilliant ideas for hundreds of extra features, but you won't know if those time-sucks will ever help your bottom line. With this in mind, you have a choice:
- Option one is to craft grand plans and waste tons of money trying to sell customers something they might not even want.
- Option two is to stick to the basics and only innovate based on customer feedback.
The latter approach has the potential to lead you to real sales.
Narrow Your Plan
At this point, you should take a look at your business plan. What is your online business going to do that people will pay you for? If your idea seems complicated, you need to analyze it further, and whittle it down.
If you're having trouble with this, that's okay. One way to help clarify your thoughts is to write them out. List every part of your product idea or draw a diagram of the business model you envision. Now cut out everything that is not absolutely essential. This leaves you with the most basic essence of your idea.
Remember, the point of bootstrapping is to avoid elaborate business plans that weigh you down. With a leaner approach, you'll be far better equipped to respond to customer feedback and handle whatever problems come up over time.
Let me make clear that you do need a basic business plan. Bootstrapping is not about flying by the seat of your pants and hoping that things work out. While you don't need a comprehensive eighty-page tome containing your business model, you should make sure that you have people who would be willing to pay money for the product you envision.
3. Build An Audience
Few things are worse in business than pouring valuable time into creating a product or service that nobody wants. This is especially true on the web, where even great ideas struggle to get noticed in the deluge of information.
You can achieve every step of your plan, but if you don't have people willing to pay for what you're offering then you don't have a successful business. Eric Ries looks at an example of this in The Lean Startup:
One company I worked with had the misfortune of forecasting significant customer adoption — in the millions — for one of its new products. Powered by a splashy launch, the company successfully executed its plan. Unfortunately, customers did not flock to the product in great numbers. Even worse, the company had invested in massive infrastructure, hiring, and support to handle the influx of customers it expected. When the customers failed to materialize , the company had committed itself so completely that they could not adapt in time. They had “achieved failure” — successfully, faithfully, and rigorously executing a plan that turned out to have been utterly flawed.
Here's the takeaway: know your business model, know how you will make money off of this idea, but don't plan so far ahead that it locks you in.
You need a vision, you need a plan, but don't dig yourself into a hole that you can't climb out of if needed.
Demographics and Psychographics
Do consider who will buy your product or service. Look closely at demographics. It's an important consideration. But you don't need to go straight to the groupings printed on a census form. Instead of gender or income groups, think about your target audience based on personality. Chris Guillebeau elaborates in The $100 Startup:
[A]s you explore different possibilities on the road to freedom and value, it helps to think clearly about the people you plan to serve. There are now at least two ways to group them together:
- Traditional Demographics: Age, Location, Sex/Gender, Skills, Race/Ethnicity, Income
- New Demographics: Interests, Passions, Beliefs, Values
In the Internet age, these traditional demographics are just a starting point in defining your audience. You need to go a step further. Target people based on their interests, and serve a product that aligns with their passions. When bootstrapping your business key into the psychological triggers of your audience early on. Bake these triggers into your offering.
4. Pivot or Persevere
Self-financing can be scary, but this scrappy approach to building a business is doable. Bootstrappers pave their own path to success. With a narrow business plan in place, and your audience well targeted, work on getting your initial product out there as quickly as possible.
Focus on doing what is needed to get people to spend their hard-earned dollars on your product or service. You're operating within a tight budget, which gives you freedom from nosy venture capitalists and banks. But it places you in a precarious position. To succeed, you need to be smart. Bootstrapping is all about taking only actions that will directly generate profit.
Do not spend a long time creating a product before releasing it to the public. Instead, start lean, release early, and change based on feedback.
Eric Ries put this clearly in The Lean Startup:
Every entrepreneur eventually faces an overriding challenge in developing a successful product: deciding when to pivot and when to persevere. Everything that has been discussed so far is a prelude to a seemingly simple question: are we making sufficient progress to believe that our original strategic hypothesis is correct, or do we need to make a major change?
Ultimately, everything links back to the idea of responding effectively to customer feedback. Build a (paying) audience early on and collect feedback from this target group. This way, you can craft a rapid response in your business.
Know Your Customers
What do I mean by feedback? Nobody knows what customers want better than customers themselves. That's true enough, but it misses a key point. As people, we often don't know how to express what we want.
Oftentimes, we have a hard time knowing what we really want. Too many business owners hear demands for a particular product, service or feature, only to be greeted with the sound of crickets and an empty wallet when they release that feature.
Businesses stay afloat by raising money, so your decisions should be based on what customers actually do. If they say that they want feature x, but they never use the features you put out that brings your product closer to x, there's reason to pause. Always think about what your customers have been shown to pay for in the real world — action begets action.
Surveys and qualitative feedback should be a part of your plan, but those things need to be just one part of your overall strategy to make sure the business is working.
You need to make changes based on customer feedback. That feedback has two parts: what customers do and what customers say. Do what you can to collect this information and use it to make good business decisions.
Cater To Your Audience — The Bootstrapper's Way
What should you do with all of this feedback, then? Simple: pivot or persevere.
If customers are happy with your product, if revenue is coming in, things are going according to plan. In that case, persevere: keep doing what is successful, and look for ways to expand that successful idea to drive more growth.
A pivot means that you're keeping one foot firmly planted, while swinging the other around in a new direction.
If things aren't going so well, as is often the case with internet startups, pivot: make changes that will put you down the right road to success. A pivot means that you're keeping one foot firmly planted, while swinging the other around in a new direction. You want to stay true to your core idea, but you can't be afraid to make radical changes as needed.
What kinds of changes can you make? There are lots of different variables that you can manipulate. For example, you can change how you make money. Instead of relying solely on ads to fund your website, you could implement a subscriber-only section or write an eBook, and have customers pay you directly.
You can change who you make money from. Early on in my web-based endeavors, I wanted to make money from AdSense. I tried to develop niche sites with written content, rank them highly, and rake in the earnings. That didn't work, so I decided to continue writing (I kept one foot planted) while also finding people other than advertisers to pay me (a radical change). I started freelancing, working directly for clients, rather than hoping to see passive income from ads.
You could even change what you make money from. You might find that you have an interesting idea that doesn't play out as well in the real world as you had thought it would.
Identify what aspects of that idea are working. Ask if people like the concept? What specific issues do they have with it? Why won't people embrace your revenue model and pay you? Answering questions like these lead you to a slightly different idea that might actually make money.
Pivoting based on customer feedback will give you the best shot of turning your ideas into money-making reality.
Get Out There and Do It
Bootstrapping is a simple concept, which is ultimately the key to its power. Starting with a great idea, you can build a lean product or service that will set the stage for innovative success. Bootstrappers should never forget the importance of assembling an audience that's willing to pay. With audience feedback you can make an informed choice to pivot or persevere.
By applying these simple steps, you will have the freedom to create value and find success on your own terms. Your only limit is your own performance.
All of the steps that I have laid out in this post ultimately play into a key benefit of the approach: instead of boxing yourself into uninformed plans or preconceived notions, you can shift your business to take advantage of the knowledge you gain from putting ideas into the market.