Starting a business can be expensive, but it doesn’t have to put you into massive debt or require you to take on investors (which is really just another word for debt!). Yes, there may be venture capital available, but I’m a firm believer in bootstrapping if at all possible.
Why? For one thing, I know it’s possible because I’ve bootstrapped all of my entrepreneurial endeavors. Second, I’ve watched quite a few people jump through hoops to secure VC investment, and I’ve learned from their experiences that taking VC funding can shift your focus away from your product. Suddenly, you’re beholden to your investors and distracted by their expectations, which may be different than yours. Plus, you may ultimately be forced to give control of your big idea to someone else.
If you’re in the beginning stages of starting a business or could use some tips on scaling back your spending, here are a few rules to follow when you’re just getting started.
1. Don’t Quit Your Day Job Until the Scales Tip
Many people advise not quitting your day job right away when starting a business—to keep working until the time is right. But how do you tell when that time is?
When I founded my first company, a web design agency, I was working at a local print shop. I began doing freelance work at night and on the weekends until I had enough business to justify spending more of my time doing design work than working at the print shop. Basically, I built up my clientele before I quit my day job, only making the move once the scales tipped in favor of my new business.
I went through the same process when I started my current company, ShortStack. I was still running the agency, so I worked on ShortStack in my spare time. In the beginning, the platform accounted for about 1% of my total income, then 20%, and then half. Finally, after about 18 months, ShortStack was bringing in more revenue than the agency was. That was when I knew the company was sustainable, so I restructured my agency and transitioned my clients over to a similar firm.
Sure, I was raring to start ShortStack at full force from day one, and I would have loved a chunk of change to do so. But bootstrapping helped me refine my product and ultimately made it more viable.
Whether you already have one business and want to start another, or you have a day job, try not to quit until your new endeavor is beating your day job in some metric, be it that you’re earning more of your income from your venture or are so busy with business that it’s demanding more of your time. If you want to start a restaurant, which could cost $250K before you even hang up the “open” sign, see if you can think of ways to “workshop” it in your free time: Maybe start with a smaller investment, like a food truck, that you can run on the weekends, or run a catering service for your friends out of your apartment in the evenings. Refine your recipes and grow your fan base until it makes sense to open a restaurant. Or, if you have an idea for a line of jewelry or clothing, open a shop on Etsy to allow you to get a sense of demand before you sign a lease, hire employees, and manufacture on a grand scale.
2. Don’t Be Afraid of the Kitchen Table
Office space is great, but make sure it’s really necessary to your business. If you’re leasing space because you think it will make you look more legitimate, reconsider. When I was first starting my agency, I asked my dad if I could borrow enough money to pay three months rent on a space and he said, “no.” I was disappointed at first, but I set up shop on my kitchen table and got to work. I soon realized that my clients didn’t care where I was doing business from, only that I was offering a quality product and great customer service.
The kitchen-table scenario won’t work for everyone, but there are other alternatives. You could look into becoming a member of a co-working space or renting an office from an existing business. For years, I rented out a section of the ShortStack offices to a local graphic designer. Often times we would trade rent for design work I needed done. It was a win-win for both of us.
If you absolutely have to have your own office space, you can still control costs by buying used office furniture, renting it, or shopping at stores like IKEA. Even now, our office is 80% IKEA furniture, with the rest from Craigslist. For us, there’s no need to have a $100K in cubicles when some used desks work just fine.
3. Scale Your Staff on an As-Needed Basis
When you’re first starting a business, you may think you need a marketing and PR team, a development team, human resources, an administrative staff, the works. So many young startups make this mistake, scaling much too fast for their needs. But the truth is that in the beginning you really only need one or two other people who can implement your idea.
When I started the agency, I only needed myself, a computer, and a printer. While it would have been nice to have some extra hands, I didn’t have the clientele to support additional staff. As I started getting more projects, I started adding people to my team. The same thing happened when I started ShortStack. To bring my initial idea to life, I needed a software developer. Once we had a functioning version of the software, we needed a graphic designer to help with branding. Then we needed someone to do PR. I’ve hired very slowly, and it has taken us about four years to get to our current team of 20. However, due to the slow hire rate, I’ve never had to let someone go due to lack of business or not being able to make payroll.
A great way to get some extra helping hands who don’t (always) demand high salaries is to seek local college students for internships. A lot of students are willing to contribute their skills and time toward a new idea or business to grow their own portfolio or get experience in an industry. Several of my current employees are previous interns to whom I offered full-time jobs as soon as their internship commitments were done.
You can also try out potential employees on a project or contract basis. It’s a great way to test the waters with an employee before making a long-term commitment. After all, you don’t need to hire a graphic designer the first time you need one logo made. Do things with lighter-touch help (or yourself) until you reach a point where the workload or the expertise needed requires another body.
Starting a business is exciting and scary at the same time. In the midst of all the excitement, it can be easy to be distracted by what you think you need. The key is to focus on your idea and put all of your energy and time into perfecting that idea—whether it’s a product or a service—that people will want to use.
If you focus on the idea, the rest will fall into place.