Bootstrapping – A Necessity and a Virtue for Founders
Acuity Law Alliance Partner Lucy Bulley talks us through the concept of bootstrapping.
What is bootstrapping?
Launching a start-up business is difficult at the best of times. In the current economic climate, with investors more cautious than five years ago, it can be hard to attract investment, especially during that first round, when your traction and revenue have not yet caught up with your vision.
This is where bootstrapping comes in.
Bootstrapping is when a founder gets a company up and running without outside investment, using minimal capital and employing personal finances and/or initial operating revenue.
A strategic choice
This might sound like a survival tactic, but as well as a necessity, bootstrapping can also be a strategic approach, says Fractional COO (and Acuity Law Alliance Partner) Lucy Bulley.
“Bootstrapping can position your start-up as a lean, innovative, and resilient contender in the market,” she explains.
“When you bootstrap effectively, you demonstrate to potential investors that you can achieve growth with limited resources. This not only proves your business acumen but also instils confidence in your ability to manage their investment wisely.”
Staying lean
As your money is quite literally your own, you need to be extra savvy when choosing how and what to invest it in. Lean operations are the cornerstone of successful bootstrapping – which sounds obvious, but there will be temptations along the way in the form of opportunities, equipment and talent that, on the face of it, appear essential.
“Lean operations are about making strategic decisions that maximise value and drive growth while minimising waste,” says Lucy.
“In my own businesses, I have adopted the ‘wife sign-off’ technique. This means that when I am considering an opportunity, such as: attending a conference, a capital expenditure like a piece of equipment or a new talent acquisition, I imagine having to make the business case to my wife.”
For Lucy, this means considering:
1. Is this an opportunity with REAL return on investment potential OR is it an ego exercise?
2. Is this piece of equipment going to have a true impact on performance, delivery or operational efficiency OR is it just “cool” e.g. the Apple Vision Pro?
3. Do I have the time and capacity to lead this talent and draw out their true potential in a way that aligns with the growth strategy for the business OR is this a super talented individual that I want to “make a role” for because they solve a short-term problem or would be a great asset?
If the answer isn’t yes, then it’s a “nice-to-have” that can be kept in the back pocket and explored further down the line.
Talent acquisition
One of the most significant challenges for start-ups is attracting and retaining top talent. High-performing teams are the lifeblood of your business, driving innovation and execution. Hiring someone who is talented and would be a great fit is not a strategic move if their role does not fill a clear skills gap that will drive your business forward. Instead, think clearly about what roles and skills you need.
Lucy’s top tip for finding the right people is to communicate well and manage expectations – not only of the candidates themselves, but your own as well.
“Throughout the recruitment process, make candidates aware of what to expect in a fast-growth environment, ensuring that they possess the ability to be agile and flexible to constant change”
She adds: “New hires will likely need to hit the ground running, but remember – they are not likely to be doing the full scope of the job for upwards of six months and will require a huge amount of knowledge transfer and support before being able to perform at their best.”
Investment
When investors are impressed by your initiative, prudence and growth potential and the longed-for investment comes along, if it is in fact still the right option for the organisation, the strategic skills you have developed while bootstrapping will be the core skill required to then scale effectively. Crucially important is the ability to build a clear understanding of what investment will (and won’t) bring to your business, and whether it is still fit for purpose.
“Investment can accelerate growth, provide access to valuable networks, and offer strategic guidance. However, it also comes with expectations and accountability,” says Lucy.
“Define what the investment will be used for and articulate the expected return on investment. Whether it’s for product development, market expansion, or operational scaling, ensure that every pound invested has a clear purpose and measurable outcome.”
Working from the end backwards
A fundamental principle when launching a business is to visualise what success looks like for you and your business in five to seven years, says Lucy. That way, you can:
- Define the high-level steps needed to get there
- Identify the people and resources required
- Break down those steps into short-term goals that will add up to key milestones.
For more about how Lucy Bulley can support your business, visit here.
When watching the pennies, it can be tempting to skimp on the cost of documentation by using documents borrowed from other companies. However, your business is unique, particularly if it is founded on innovative technology. Be careful to make sure your documentation fits your business and doesn’t leave you exposed. Document Assist is a cost-effective tool that empowers My Digital Lawyer subscribers to build and personalise your own documents.
Plus, our Acuity Law Start-ups team can provide full legal support on the challenges facing entrepreneurs and growing businesses – including understanding, structuring and negotiating funding rounds, share schemes and executive incentives.
