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The year 2021 was a record year for venture financing, with a record $288 billion in global investment within the first half. These investments have generated headlines for brands, and a general assumption that these businesses are well-positioned to win.
There is an alternative to bootstrapping that deserves the attention. Bootstrappers are speaking out on Twitter and elsewhere, fighting to have their stories heard.
Bootstrapping is a route that some founders choose because they want to retain equity and control. Some founders don't know much about fundraising, or have had their applications rejected by VCs many times. These founders, regardless of their motivations for building their businesses without investors money, wear bootstrapping proudly and are eager to prove their worth.
Bootstrapping is a difficult and sometimes scary venture that requires a lot of sacrifice, hard work and a lot of risk. It is possible to create a profitable business without raising investment money. My story is just one example.
Schmidts Naturals was founded in 2010 and I managed to bootstrap the brand for seven years, bringing it to $25 million in revenues and a nine-figure acquisition from Unilever. As a former bootstrapper and investor, it is not unusual for me to convince founders to stop raising money. Instead, I will share my secret recipe for success in bootstrapping.
1. 1.
It is important to invest time in seed money to help you grow your business.
Begin by taking it slow at first. Then, focus your efforts on side jobs that will teach you something you can use later. Perhaps you are looking for a place where your products can be sold or where you can gain insight into retail operations and make meaningful connections.
Keep your eyes open, learn from others, and be eager to learn.
Related: How Venture Capital Can Solve the Diversity Problem
2. Get rid of the hustle mentality
You've seen all the stories and tweets from business owners boasting about their fast growth and financial success. They also talk about how they get only four hours sleep each night to keep their success. It is important to consider the future and how your actions today will affect your outcomes. However, you must grow at a pace that suits you and your circumstances.
You should be focusing on building the foundation for your business, not on competing businesses that are focused on big investments.
You are creating the foundation for sustainable growth.
3. Find out who and when you should hire them
If you are a new parent, it is difficult to manage a business on your own. It can also be very tempting to hire someone to help with the work load and take over the responsibility. It is a great way to save money and help you refine your business vision.
Hire one employee at a given time when it's time to make a hire. As they prove their worth, you can start them part-time. Work with a strong, lean team and make each employee count. You don't need to be a C-suite executive. Instead, look at contracting out some services that are cheaper.
Related: Funding: What is Entrepreneur Capital and Venture Capital?
4. Make smart money decisions
It is important to be both frugal as well as willing to spend. The trick is knowing how. Prioritize expenses that directly impact sales. This will help you to maximize your return on investment. Pay attention to what's working and what's not. No matter how big or small your business grows, money is extremely valuable. It's important to reduce what isn't delivering and to focus on what is.
All things should be negotiated. Negotiate everything. Shorter terms with retailers mean faster money in your bank account. While suppliers have longer terms that allow you to sell inventory prior to paying for raw material, they will require you to pay more. These relationships can be nurtured to ensure favorable order minimums, better pricing, and more profitable business relationships.
You should make space for a modest salary. Don't forget taxes.
5. Have a backup plan and be realistic
Bootstrapping means that you have to recycle all profits back into your business. If you are in dire need of more cash, have a plan. Consider other loan options and lines of credit. Even if you're not raising money right now, it is a good idea to start building relationships with investors. Be realistic about the sacrifices and risk you will have to make for your family. You can live with uncertainty and have a plan B.
Sometimes outside investment is a good idea. An investor myself, I understand the benefits of capital in helping to scale up a business. However, the benefits of building your business according to your terms will outweigh the costs.
Related: Alternative Venture Capital is on the Rise
