Many aspiring entrepreneurs think the key to growing a successful company is linked to the ability to secure investor funding. For some businesses this may be true, but many successful companies have been built from the ground up with no outside investment or support, aka bootstrapping. It takes great dedication, strong work ethic, sweat equity and an immense amount of drive to bootstrap a business to success.
Today, the majority of entrepreneurs are bootstrapping their companies. One recent report found that of the 202 million working-age adults in the United States, 27 percent are either running a business they own and manage or starting such a business. Of these, 33.1 million are in the entrepreneurial phase (starting or running a business for less than three and a half years). Now consider that venture capital is used by only 0.5 percent of those 33.1 million entrepreneurs for startup capital.
Growing a business using a self-sustaining approach requires a strong vision for the company, supported by a focus on several key areas. These include developing a sustainable business model, prioritizing customer acquisition and retention, building transparency into the company’s DNA, and strategically expanding the company’s footprint and offerings.
1. Acquiring and retaining customers
Instead of chasing after funding to drive growth, bootstrapped companies devote their time and attention to customer acquisition and retention. With no outside investment, it is critical for bootstrapped businesses to build a customer base quickly to generate positive cash flow.
Attracting new customers and boosting loyalty in existing customers can come from listening to what they need and paying attention to their feedback about the company’s product or service and using this input to develop offerings that deliver the most value.
GitHub, a web-based hosting service for software development projects, is a prime example of this. The company, which functions as a social network, portfolio space and co-working space, started as a weekend project funded entirely by its three founders. As the project began to take off, programmers began requesting additional features to project their data, and the founders knew it was time to make the project a full-time job. The team began releasing new products tailored to accommodate customer requests and the business skyrocketed to success, currently serving 50 million developers worldwide.
2. Developing a sustainable business model
Finding a problem and then developing a solution are foundational to successfully growing a bootstrapped company. Developing a business model that solves core problems serves a gap in the market and provides real value to customers, allowing businesses to quickly start selling services or products to establish and sustain cash flow.
Building a bootstrapped business allows for flexibility that a company backed by outside investors may not have, namely slowly and quietly growing to develop paying customers that offset the business costs rather than facing the expectation to prove high growth from the get-go to boost investor trust.
Different markets have different challenges, of course, but common among bootstrapped businesses is the desire to fill a market need and solve for its pain points.
3. Practicing transparency
Customers are the only metric that counts for bootstrapped companies. In order to attract and retain customers, a company must make transparency part of its DNA. In a digital world where consumers have easy access to company information and reviews, customers expect and demand transparency from businesses. Business buyers want openness and honesty along their entire buying journey. A 2019 report by Marketo and Adobe on Creating Epic Customer Experiences found that 78 percent of business buyer survey respondents cited brand transparency as a top purchasing driver.
Business transparency is a game changer that can fuel business growth. Companies that practice transparency build strong, positive relationships that increase long-term customer loyalty, which in turn generates ROI in the form of profits and long-term sustainability.
4. Growing through acquisition
Bootstrapped companies can also set themselves up to grow through impactful and strategic acquisitions. One of these growth strategies is horizontal acquisition, which involves buying a competing company to increase market share and/or scalability and accelerate company growth. When a company acquires a competing company, it gives them the ability to tap into existing elements such as key executives, proprietary technology and customer databases.
Building for the long term
The willingness and patience to grow at a smaller scale initially allows you to have the freedom to build up a company culture without outside pressure, while simultaneously retaining 100 percent ownership of your company and future vision. With the bootstrapping approach, founders call the shots on operating and growing the company.
While growing a bootstrapped company involves a lot of moving parts, a focus on prioritizing customer acquisition and retention, developing a sustainable business model, building transparency into the company’s DNA and strategically expanding the company’s footprint and offerings can drive company growth and long-term sustainability.
The post 4 Ways to Successfully Build a Bootstrapped Business appeared first on Entrepreneur and is written by Austin Mac Nab
Original source: Entrepreneur