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What Is This Bootstrapping Term All About?

April 25, 2014 By Darren Leave a Comment

BootStrappingYou’ll probably notice that I use the term ‘Bootstrapping’ here and there but what exactly does it refer to?

I’ll start with my first real introduction to the concept and explain it from there…

It must have been back in 2006 or 2007, a time when I really started to get into online marketing more seriously, that I discovered Seth’s Blog.

Seth’s writing resonated with me a lot and when I had free time I would often dig back through his archives, it was on one of these sessions where I stumbled across a link to the Bootstrapper’s Manifesto.

I strongly encourage anybody interested in business to read it through, it basically describes the key principles of a bootstrapper and compares and contrasts between a bootstrapped business and a traditional ‘big business’.

Not having really started a ‘proper’ business at the time, but always having a desire to, I found it inspiring and knew that whatever I did would be founded along very similar principles.

The Main Features of Bootstrapping

A bootstrapped business is essentially one that is started small, is profitable quickly, can self-fund its own growth and has the ability to react to external factors more rapidly than its larger competitors.

Essentially it’s the opposite business model to attracting external investment and attempting to ‘start big’ with a lot of funding behind you.

Now, I’m not criticising people or companies that choose the investment model, it clearly works in many cases, however it is not something that I personally would feel at ease with.

The attitude of a bootstrapper to start small does not mean that the ambition to grow larger is not there, it often is, for me the main driver is to find a workable business model and self-fund the growth, where it stops is anybody’s guess.

Key Bootsrapped Business Principles

There are a few sets of principles outlined in the manifesto, many with great ‘real-world’ examples.

One of my favourite lists the 7 key advantages small businesses have over the big fish:

1. Nothing To Lose

A new small business has no established brand name to ‘protect’, it doesn’t spend resources protecting the ‘status-quo’ of its industry, it essentially has the freedom to pursue whatever avenues it wants with nothing holding it back.

2. Happy With Small Fish

Question: What would 1000 annually recurring advertisers look like to me in my new business within 1 year? Answer: A resounding success! Ask the same of some of our bigger competitors and the answer is obviously failure.

Moving on from this doubling our advertisers would be difficult but doable, I’m not sure what HomeAway’s plan to double their ~700,000 would be but I’d like to see it…

3. Presidential Input

My vision, my goal, my input. Anything that happens in this business has at the very least my input on it, yes, it might not be that scalable, however at this crucial stage I can be assured that everything is focused in the right direction.

4 .Rapid R&D

If some new technology springs up then the time to implement for a small business can be almost instant. Larger businesses tend to have layers of management and bureaucracy to battle through to implement changes.

5. The Underdog

Let’s face it, everybody loves an underdog, especially when the underdog actually does a really good job. I believe there’s a lot more value in something that is built from scratch rather than acquired.

6. Low Overheads

Having low overheads allows you to be ‘flexible’ when it comes to pricing, and gives you the freedom to take risks which may not necessarily pay off in terms of revenue.

I think that growing a business from initial setup into something a bit bigger and keeping the overheads low is going to be a difficult skill to pull off, hopefully I’ll get the opportunity to attempt it.

7. Time

Time is a valuable resource, perhaps the most important one of all in some respects. Being small, with low overheads and perhaps a smaller reliance on income can afford you time to develop, analyse and plan for a better future.

The flip side is that small can mean instant changes when required giving you the advantage of a shorter time to implementation.

Hopefully you will now have a clearer picture of bootstrapping, what it is and why I favour it. I’ll probably revisit the subject from time to time so stay tuned!

Photo Credit: R A N D O M Esque

Filed Under: Random Posts

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