- What is bootstrapping and how can it help me start my business?
- What is an MVP?
- How do I begin bootstrapping?
Imagine your friend Tito loves tennis. He knows all the major players and their stats, watches all the games, and has decorated his house in a tennis theme.
Tito tells you that he’s started taking tennis lessons and his coach thinks he has the potential to be a professional player one day. He decides to enter into some competitions.
Knowing that Tito just started tennis lessons 6 months ago and has never been in a tennis tournament before, what type of competition do you think he should enter?
If you have a new business idea, the thought of it becoming a hugely successful company can seem like winning a Grand Slam tennis tournament.
But, just like Tito’s tennis career, you’ll probably need time to nurture your idea before launching it on a large and very public stage. So, it’s a smart strategy to start small and develop your idea bit by bit.
Along the way, you’ll learn the skills you need to be successful, get the time you need to turn your business into something great, and risk a whole lot less than if you went big right away.
You may be thinking, “But even if I start small, I need money to rent a storefront or hire people or build my product or create my app or not starve to death.”
That’s where bootstrapping comes in.
What is bootstrapping and how can it help me start my business?
Bootstrapping is a way of starting and funding your business without taking out loans or relying on investors.
The name comes from the phrase “pulling yourself up by your bootstraps,”which means you’re building your business using your own resources instead of getting outside financial support.
In bootstrapping, you concentrate on making early sales to fund your business. This means you may have to start small by using your current resources to create a leaner, more simplified version of your product or service.
You can sell this initial version of your idea, which can help give you the funding you need to grow your business. Potential customers can also give you feedback on what’s great and not-so-great about your product or service.
By avoiding early investors (who will partially own your business) and lenders (who you’ll need to repay whether your business succeeds or not), you’ll only have to answer to yourself and won’t rack up a lot of debt.
You’ll also have the chance to build up a good track record of sales. This can help you show that your product or service is viable and profitable when you’re talking to potential investors, lenders, and funders in the future.
What is an MVP?
To start small and bootstrap, you need to dream big and think small with an MVP, or Minimum Viable Product. Think of it as version 1.0 of your product or service.
Your MVP is the most efficient and least costly way to bring your product or service to life. It’s okay that it’s not the full version of your idea – you can improve or enhance it later, or even change its design or purpose completely.
For example, let’s say you want to open a restaurant. That’s expensive and risky to do right away. So your MVP might be a food truck or a catering service. Both can cost less and let you learn about food costs, portion size, waste, and so on.
Steps for creating MVP
The first step to creating your MVP is to write down your big, overarching vision, or what your ideal version of your business idea is.
Make sure to consider what the key offering of your business is and how you’ll be different from your competitors.
Let’s check out 3 different examples:
- A chef with a restaurant idea
Key offering: ready-to-eat food. Differentiator: food is Cajun and locally-sourced.
- A bike repair shop
Key offering: repairs high-end, competition-level bikes. Differentiator: competitor-free location.
- An app developer
Key offering: an app for managing expenses. Differentiator: superior user experience.
Creating a financial plan
Once you have your vision nailed down, create a financial plan that shows what it would cost to launch your business in its most ideal form.
That includes facility costs like rent and improvements, equipment, employees, marketing and advertising, inventory and raw materials, and other costs like insurance, professional fees, and licenses.
Next, take a moment to gasp at the total amount. Then, think about how you can keep the key offerings, differentiators, and value of your business while cutting out costlier parts of it.
Ask yourself, what needs to be removed before I can start small? For example, the app developer might consider releasing a simple web app version of her financial management tool first instead of launching a mobile app right now.
Do you have to wait until your MVP is created before you can start selling?
New businesses sometimes need initial funds to even create an MVP. This can be especially true if your business idea revolves around a product versus a service. So, it may be a good idea to do pre-sales.
This involves pitching and selling the idea of your MVP product to see if you can get pre-orders. Then you can use the money from these early sales to build your product.
If you happen to have a great, consumer-friendly product, you can try crowdfunding to raise manufacturing money. This also helps you raise awareness for your new business, market it, and get feedback from the public.
On that note, your MVP doesn’t need to be perfect before you release it. Consider this your testing phase, where you can build, experiment, iterate, and repeat as much as you need.