Bootstrapping refers to the process of starting a new business without any external funding and is a popular term in today’s startup obsessed world. Bootstrapping resources and being targeted with your business approach and strategy can yield great financial returns for first-time businesses. But there are pros and cons for every business model, so let’s take a look at how bootstrapping will affect your online business.
Pro: You are your own boss
When you bootstrap your own online business you have nobody to answer to but yourself. No investors advising you on your next business move, or knowing that you have to pay business loans. You have a degree of flexibility and can make important business decisions for yourself.
Caroline Beaton was working her usual full-time job alongside her freelance gig. She tailored her work schedule to maximize her chances of personal success by being her own boss. She cut her work week down to 35 hours in order to have more time to build up her own freelance portfolio and client base — and now she’s a hugely successful entrepreneur and speaker. What a bootstrapper!
Try it yourself — get mega productive and work your side hustle while holding down a job to see whether you’re really ready to take the plunge.
Con: You might not make as much money at first
Bootstrapping means you won’t spend a lot of money, but you might not make loads at first either.
Maximizing profit margins and increasing revenue is crucial for your online business to grow, and will allow you to scale and hire staff. It may take a long time for your company to get on its feet, especially if you are doing everything yourself. With less financial support, you are going to have to work hard on turning a profit to give your business the financial push it needs to succeed.
Nick Woodman from successful billion dollar company GoPro made a huge leap of faith when he designed his own product, a move that eventually launched him into entrepreneurial success. He designed the action camera by hand because he didn’t have enough electrical design experience. After a couple of years, he was able to create a billion dollar business renowned for superb action cameras — all because he had a vision that he stuck to, riding out the tough times.
Pro: Resourceful business with fewer overheads
Your company will be lean because you don’t have a business loan to worry about. Your business will operate in a spirit of resourcefulness, so little will go to waste. Once you begin to grow, your company will begin to make better profit percentages because you don’t have a business loan to pay off, making your company stronger in the long run.
Resourceful ecommerce store Craft and Mason started their business working from home and counted every single penny to get themselves on their feet. Financial accountant and founder, Jeremy Mason, counted every dollar of the business, from managing order fulfillment to setting up the website, so they could bootstrap their business to success.
Con: Slow organic development
Without a huge amount of money in the bank, your business’s growth could stagnate, making it hard to scale your company quickly. Scaling happens over an extended period of time, and bootstrapping businesses may find it hard to suddenly have to pay out for things they’re used to doing in-house, like marketing and PR.
Some growth milestones might take longer than you had originally anticipated and targets may be reached at a slower than usual rate. Bootstrapping may slow the profitability of your online business, but this is only a temporary state until you get your business fully off the ground.
Affordable furniture business Wrightwood Furniture knows how tricky it can be to get up and running when you’re starting from scratch – and how important it is to be strategic with stock in the early days. Wrightwood Furniture held off making more furniture until its customers had validated which products were most worthwhile. By focusing on the popular products, it promoted steady business growth and ensured that time and resources weren’t wasted on products that wouldn’t sell.
Pro: You’re hyper-focused
Bootstrapping your online business gives you the financial freedom to focus on what your business does best. Without investors, you can work hard to establish a brand that represents your core values. If you are focused on selling primarily through Instagram, then you can direct your attention to your Instagram storefront and product photos. If, however, you want to focus on a killer marketing strategy for your online business and don’t need to focus on product photos as much, you can move your attention here. Flexibility is key.
Bloom Designer Finds is minimal online fashion boutique that sells only through Instagram. They have made quite a name for themselves and ship to customers across the US. With a strong focus on their social media brand and boutique, this store has directed its energy towards selling through this social media platform, without spending too much effort elsewhere. Clearly it’s paying off.
Con: Lack of credibility
Let’s face it, you’re going to have to work a lot harder than companies with investors and business loans behind them because your business cannot be vouched for by trusted investors. If someone has invested in your business then you seem more credible than those without an investor – at least until you get yourself established as a professional. Operating online without a physical business space can also affect trustworthiness, so you have to find a way to establish trust for your brand online.
John Rampton has done a great job building trust through his online business. He is a successful entrepreneur and influencer and was named a blogging expert by Forbes. He builds brand trust through his website using lots of great techniques. By listing other top brands he’s worked with, he is showing his audience that he is trustworthy. He also promotes trust by posting on other big sites and using his social media channels to spark genuine engagement from his audience.
Staying focused and working hard will push your company to success in the long-term. Those that bootstrap their online businesses need to put in the required effort and can’t expect success to materialize overnight. Follow the necessary steps to save money while setting up an online business, like buying second-hand office furniture and doing lots of tasks yourself until you build up enough capital to scale. Slow and steady wins the race!