Straight out of the minds of those that managed to do it.
Binge watching ‘The Silicon Valley’ sure doesn’t help in believing that companies really can (and some would even argue — should) be built without any external investment. Bootstrapping might not sound like a popular choice at first, and definitely not the easiest one, but the reality is that more and more startups are deciding and thriving on it.
We see new articles, popping up on a daily basis, written by those that managed to bootstrap a business from zero to millions of users, all claiming that there’s a certain set of benefits that a company can get only through bootstrapping. The list almost always starts with the fact that — it gives you the entrepreneurial autonomy to be in charge of your own destiny, builds through the notion that it teaches you the real value of money, and many points later, wraps up with the claim that it forces unconventional thinking.
But we’re not here to digest what has already been said too many times. Instead, we’d like to directly introduce you to a few of the ones that already made it, all of which have the recognition as ‘Best Bootstrapped Startup’ from the Nordic Startup Awards 2017, as a proof of their bootstrapping-success.
Now, with this year’s Nordic Startup Awards ahead of us, and the nominations still open, we talked to three of last year’s national winners. We askedCrankWheel (Iceland), Vainu.io (Finland), and Sleeknote (Denmark) to share with us their most valuable tips for the next generation of entrepreneurs that are considering starting a business with (almost) no money.
Write Every Cheque Yourself
“I know nobody writes cheques anymore, but what I mean is, whenever there is a payment made by the company, you, the founder, should be aware of it and should approve it personally. It also means you need to review credit card statements thoroughly, for any automated payments you are making, for example for subscriptions or ad purchases. This gives you a much better overview of where your company’s money is going.” — Jói Sigurdsson, CEO, and founder, CrankWheel.
Keep the Team Small and the Product Simple, for as Long as You Possibly Can
“A small, talented team can do incredible things, as long as it gets to focus its time on not too many things at once. As soon as your product gets too complicated, or your sales and marketing processes have too many moving parts, you start needing a lot more manpower and your costs will skyrocket. Try to find product/market fit with a product very specific to a particular type of customer. This should let you keep your product a lot simpler than if it were catering to many different types of customers. It also lets you focus on just the handful of sales and marketing channels that will reach that particular type of customer.” — Jói Sigurdsson, CEO, and founder, CrankWheel.
Cash Flow Is King
“Say your operating expenses are $25K per month, and you just made your first revenue from goods sold, $25K for this month. You’re breaking even, right? But if your customers pay with Net 30 terms after the end of each month rather than paying up front, you would still need an additional $50K in investment just to keep the company going until those payments arrive.
Get your customers to pay each month up front to help with your cash flow, and as much as you can, negotiate to pay your suppliers in arrear. If your customers are mostly large businesses, they are likely to prefer to pay a year at a time and you should definitely request this or even make it the only way to buy. The same goes for a product for SMBs, if you are able to give a good discount for committing to and paying a year at a time, you should do that. This way, your customers can fund your growth.” — Jói Sigurdsson, CEO, and founder, CrankWheel.
Hire Late and Carefully
“An early bootstrapped company will typically be hiring just one person at a time, as increased revenues allow it. When you’re filling just one position, you can afford to, and should, be extremely careful about who you hire. Do lots of interviews, check references thoroughly, and make sure they fit in with your existing small team.
Also, don’t be afraid to wait until the very last moment possible to hire, when there is just so much work that the existing team can possibly handle it. It’s much better to build up a small buffer of money and be super busy because you haven’t hired yet even though you can afford it than it is to hire the wrong person as soon as the money is available.
Finally, one way to increase your current team’s capacity at a much lower cost than hiring another full-time person can be to retain a remote virtual assistant or two, who can take care of many of your team’s mundane time-consuming tasks, in a low-cost location elsewhere in the world. I’ve used Upwork for this, with good results.” — Jói Sigurdsson, CEO, and founder, CrankWheel.
Minimize Your Fixed Costs
“You can pay less rent by using cheaper and/or smaller office spaces, or even by working from home or from coffee houses in the very early days. You can potentially lower salaries by offering some kind of stock incentive or profit-sharing plan. Last but not least, don’t forget the “small” costs, as they add up very quickly. Things like the 15 different SaaS subscriptions you feel that you need to run the company. Are all of them really needed? Can you choose zero-subscription options instead, or replace them with versatile tools such as Google Spreadsheets?
Did you know you can typically reduce your cloud hosting costs significantly by committing to resources 12 or 36 months into the future? I wrote a whole series on my StartupResources.io blog about zero-subscription options for running a startup.” — Jói Sigurdsson, CEO, and founder, CrankWheel.
Bootstrapping Will Get You Unfiltered Feedback from the Market
“When you decide to grow without external funding, you’ll naturally focus more on revenue-generating activities such as sales. This is a great way to get unfiltered feedback from the market and it helps for the product — market fit to hit home early on.” — Mikko Honkanen, co-founder, Vainu.io.
Teach Yourself to Say ‘No’
“When you operate with limited cash flow, you’ll teach yourself one very important skill, which is an ability to say no to things that aren’t very high on your list of priorities.“ — Mikko Honkanen, co-founder, Vainu.io.
It’s Important to Seek for External Tips
“External investors often provide valuable tips and advice. As a bootstrapped company, you don’t have seasoned investors sitting on your advisory board. However, it’s important that you seek external tips and benchmark with other companies in similar situations.” — Mikko Honkanen, co-founder, Vainu.io.
Focus on Building Your Company and Generating Revenue Growth
“You don’t have to spend weeks on tweaking your investor decks. Instead, focus on building your company and generating revenue growth. If you manage to do that, the investors will instead reach out to you sooner or later.” — Mikko Honkanen, co-founder, Vainu.io.
The Foundation of Success: Network
“In 2016 I had the chance to talk to Peep Laja, founder of ConversionXL, about the value of networks. He said: “Nepotism is not a thing of the corrupt past. It’s how the world still works”. He elaborates on this in his amazing blog post: 25 thoughts for life.
I couldn’t agree more. Whether you are looking for co-founders, new employees, remote workers, freelancers, mentors, sales partners, or others, it will be so much easier if you have a solid network. You cannot — and should not — know everything yourself. It is impossible, and it wouldn’t make any sense, as the synergy you get by having a good sparring partner, will typically result in a much better outcome!” — Mogens Møller, CEO and co-founder, Sleeknote.
Your Network Will Benefit from Entrepreneurs That Are 1–2 Years Ahead of You
“If I should give you a tip as to who you can benefit from a lot by having in your network, it would be an entrepreneur who is 1–2 years ahead of you, and who recently overcame some of the same challenges as you, made the same decisions, and thus knows some of the consequences.” — Mogens Møller, CEO and co-founder, Sleeknote.
Know Your D*** Numbers!!!
“If you are a tech entrepreneur, you obviously know how many visitors you have on your website every month. You also know how many visitors sign up for a free trial or create an account. You might also know how many of these convert into customers, and how many unsubscribe every month. Ultimately, you probably also monitor your turnover and expenses closely.
At least, these were the numbers that we focussed on in the beginning. We measured them every month, and we felt like we had a great overview of how our business was doing. The problem with only looking at these numbers — at least for us — was that they did not provide any answers. They only gave us circumstantial information on our status, and in reality, we had no idea whether our business was succeeding with the potential for massive growth, or if we were a few weeks away from closing down.” — Mogens Møller, CEO and co-founder, Sleeknote.
Dedicate a Week of Your Calendar to SaaS Metrics and Unit Economics
“My world changed significantly at a meeting with one of our trusted advisors, Thomas Kragelund, co-founder and CEO of Pixelz. When among other things, he asked me:
- What is your average turnover per customer — not just this month, but during the whole time that customer is with you? (AMRR & LTV)
- How much does it cost to acquire a new customer, and how does this vary on your different traffic channels and sales channels? (CAC)
- How many months does it take before the turnover of one customer has paid off your initial costs for acquiring that customer? (months to recover CAC)
- What is the relationship between Lifetime Value and Customer Acquisition Cost of one customer? (LTV:CAC ratio)
- How many turnovers do you lose each month from your existing customer database, and how does the upsell to the existing customers affect this number? (net churn)
These are all questions that I had no answers at the time, but realized were essential to our future growth. This is why I immediately took out a whole week in my calendar and reviewed all accessible information on SaaS metrics and Unit Economics, which led me to the discovery of a whole new world of KPI’s. A world that today is the basis of all long-term decisions made at Sleeknote. We went from making decisions based on gut feelings and good intentions, to make decisions based on data!!!” — Mogens Møller, CEO and co-founder, Sleeknote.
Content Marketing Is Bullshit, Unless You Go All In
“Content marketing is incredibly hard to master. Often, people do not know how much time and resources it takes and they have way too high expectations for the results, which is why many fail. Do not think it is a shortcut to anywhere. In fact, it is a detour. The upside is that it can open some amazing doors for your business, and long term, it can become a big driver for new leads; content marketing is VERY time-consuming. It is time consuming to produce — meaning it will demand a lot of resources, but it also takes long before you see any results.” — Mogens Møller, CEO and co-founder, Sleeknote.
Don’t Expect Fast Results with Content Marketing
“Do not expect noticeable results within the first 12–18 months after start-up; do not expect people rushing to your website just because you published a new blog post. There are already countless blogs about all sorts of topics, so think of this blog as a new product you invented that needs to be launched for the world to see. You need a target group, a niche, and a need that you can satisfy. Otherwise, it will never be a successful blog.
Our work on content marketing resulted in the blog series: Inside Ecommerce. A year after we started working on it, we began to see some results, but we are still far away from the big BOOM!” — Mogens Møller, CEO, and co-founder, Sleeknote.
Producing Content Is Only 30–40% of the Work with Content Marketing
“The major task is to create awareness about your content, promote it, get people to tweet about it, get them to share it on LinkedIn, write about it on blogs, fora, etc. This process requires an immense amount of manual labor that we are only now starting to learn and understand. Bottom line: If you are thinking about doing content marketing you need to go all-in or wait. Otherwise, you risk wasting your resources.”- Mogens Møller, CEO, and co-founder, Sleeknote.
These articles are brought to you through a collaboration between Nordic Startup Awards, Valuer.ai and Techsavvy Media, and originally published here. Do not forget to nominate your startup hero for the 2018 edition of the Nordics Startup Awards – the deadline is June 22!