Bootstrapping your startup means growing your business with little or no venture capital…or outside investment. It means relying on your own savings and revenue to operate and expand. It’s not easy to do, but it’s incredibly rewarding. Bootstrapping is a choice you can make and I think it requires a special “entrepreneurial” character. You have your own mind, you have many solutions at hand for various challenges, you are a “jack of all trades” and you know how to stay frugal in your spending. You are probably also confident in your ability to “hustle”, that is sell your ideas or early product to stay afloat. So the question is, why and when do you need external funding?
When is bootstrapping an option?
You might be running a consulting business that you want to turn into a product business. Thus you have some cash flow for the turnaround and to fund the redirection. Or you have a “cash cow business” and you foresee a new opportunity/direction that may scale and you have some ability to fund the redirection of your business. Or you might have some space financially…
Why is the choice hard?
When you are used to running your own business you love the freedom of deciding yourself. You know you can fix many pressing issues with little resources. However, at one point this may risk your venture. Competition tends to appear from all directions and is global. As you turn around your pennies you might miss on opportunities to surf an exploding market as you need some muscles to test and expand.
How can you go about it?
To weigh the opportunities, the first thing you should do is document your choices of expansion/scaling and the funding required for the different directions. By having a clear roadmap of expansion with team buy-in it is much easier to know when to seek external funding and when to stay “bootstrapped”. Constantly returning to your roadmap and assessing the opportunities and way forward is the best guidance of when to go all-in with other people’s money or when not to.
“Bringing clarity to the scale-up plan and coining various expansion options is a way to ignite energy in the team.” – Maria Horelli-Rosenlew.
These 6 steps are a great start in order to to create a scale-up roadmap:
- Decide with your team and advisors (if any) to co-create a roadmap for scaling/expansion and to meet for a joint workshop.
- Define main milestones going forward and the timeline to reach each milestone. Memorable language is key. (E.g. Milestone 1: Establish, Milestone 2: Go Nordics, Milestone 3: Create Movement, etc).
- Choose key KPIs and set goals/metrics for follow-up of each milestone. Both financial & operational.
- Achievements are levels of mature ways of working or goals reached, repeatable and proven best practice. Jointly plan each achievement required to reach a given milestone & sign off as these achievements are completed.
- Leaps are major steps forward, and usually require completely new resources such as money and expertise and they usually transform the company. These are ex. new market entries, large capitalization, formative business deals and partnerships, M&A, etc. Jointly discuss potential leaps to be taken for a given milestone and when the opportunity could potentially emerge.
- Tool Creation, create your own visualized one-page Roadmap for Scaling/Expansion containing each crucial milestone with timing and achievements, leaps, and goals/KPIs.
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