Although bootstrapping can be unglamourous but it is good path to build real business, with positive bottom line and profits coming in steadily. In this era of easy access to capital, bootstrapping will perhaps be the last resort for founders as it is laden with risks and growth will be much more measured.

But having bootstrapped an online business successfully, I must say that this is perhaps the best route to build a business. One becomes laser focussed on solving real problems through innovative solutions. When there is not enough money in the bank balance, your mind works over time and stretches you to think of “out of the box” solutions to problems. And this helps in the long term!

Online business bootstrapping

So here are the 5 lessons that I learnt after bootstrapping an online business.

1. Invest Heavily with First few People

So our first few hires were 4 college pass-outs with no prior work experience at all. We hired them for their potential and believed that if they are groomed well, their lack of experience will be taken care by their enthusiasm to learn and perform. And Boy! Weren’t we proven right? These rookies are still with us and are heading individual verticals now.

Quite a lot of times, we wonder –

“What worked with them (so well)?”

And the only possible answer we can come up is that we invested a lot of time with them. We gave them the room to experiment, make mistakes, fall on their face and then rise up again. We invested a lot of our personal time with them by sharing our vision of the company, developing data driven culture and not afraid to make mistakes. And it is because of this, the same culture has rubbed on to other people.

Another thing that we learnt during this process was that money is not the biggest motivator for young people. For them, the recognition and the sense of achievement is. So empower them to do more and they will surprise you.

So the biggest learning has been that your people is your business and if you take care of them, they will take care of the actual business.

2. MVP Really Helps

Though MVP is not a new concept and all of the entrepreneurs would have read about it in Eric Ries book The Lean Start-Up but to put it into the action and see it perform is totally different thing.

All of us are product and tech guys so it was very natural of us to get carried away by building the entire product and then start the business but then common sense prevailed.

We realized that the only customer flow required to start the business was this –

Order Form For the Customer → Payment Mechanism

Rest everything could be managed manually offline. If we were able to test this flow and run it profitably, then we would be good. And so we did! We built our entire product around customer first and then added on all those frills that helped us to carry out backend operations smoothly with lower cost.

Accounting

3. Always Account for Administrative Costs

Another thing that we learnt (the hard way) was the concept of administrative cost. So here is what we learnt –

True Cost of An Employee = Actual Salary * 1.25

Yep! That’s correct. In most situations, the cost of a person to the company would be 125% of the salary of that guy. And the worst part is that this 25% more will not be visible to anyone but only the founder. And it would pain if the entire business plan has not factored in this 25%. You might be wondering what constitutes this 25%. So here is the list of top expense items –

  • Daily Refreshments – This was the biggest chunk of administrative costs. Now we could have reduced it but that would hampered the motivation so we decided to factor it in.
  • Capital Assets like machines, UPS, etc.
  • Salary of Office Guy
  • Cost of Services like call answering service, bookkeeping service, etc.

There are other items as well but these constitute the biggest chunk. And these are actual cash outflow items. I am not even factoring the productivity loss due to chit chat.

Therefore after first few months, we decided to factor in these expenses in the financial plan only and make peace with it.

4. Avoid Raising Capital

Yes! You’ve read it right! Avoid raising capital as long as possible. And I could say that now after running the business profitably for more than a year.

Raising the capital early in the journey results in 2 things –

  1. Dilution of equity stake at much lower valuation thereby not leaving much with you along the way.
  2. Capital replacing your ‘efforts to come up with innovation solutions’

Now both these things will result in suboptimal outcome for the startup. Therefore until and unless the capital is required to keep your startup alive, don’t raise the capital.

Trusted inner circle

5. Create an Inner Circle

Last but not the least, create a group of circle with whom you can share your joys, apprehensions and problems. Entrepreneurship is a lonely affair fraught with risks and huge mood swings therefore you would need a mentor, a friend, relative, spouse or parents to talk to.

Whenever we had a good day in business (sales wise), I would be on cloud 9 and would talk about rapid expansion as if everything is just right there. But on the other hand if we had a terrible day then I would be so depressed as if there is no tomorrow and our business would wound up next day.

And when we are bootstrapping it with our hard earned savings, variance of these emotions are even higher. Therefore it is almost a necessity to have an inner circle with whom you can speak your mind freely without being judged. It will take a lot of burden off your shoulder.

Do you have more things to add to the list? If yes, please do let me know in the comments below.