While capital is arguably the most important resource for a budding startup, the ability to survive without it is a characteristic exclusively found in successful companies. The term “bootstrapping” is commonly associated with a businesses that weathered the financial storm of early stage entrepreneurship. And the only reason we use the word so frequently is because those startups often make it to the top of their fields. So, what is the secret to surviving the Startup Valley of Death without any money?
A recent panel at Detroit Startup Week covered this topic in-depth. Five esteemed panel members took the stage, including Carolyn Casin of Belle Michigan, James Feagin of the Detroit Economic Growth Corporation, Richmond Hawkins of New Detroit Inc, Wayne Millette of The Back Office Studio, and Ray Water of the Detroit Development Fund. They discussed at length a few of the necessities for bootstrapping startups in Detroit.
A Plan
While this may seem obvious to an aspiring business owner, the panel agreed that startup founders are shockingly unprepared when they start looking for funding. A detailed business plan will not only impress future investors, but it will also allow you and your employees to know what the mission of the company is, how you plan to execute your plan, and what kind of growth you hope to see in the future.
In addition to a business plan, entrepreneurs need to have a researched map that shows how the company should progress. Without knowledge of the path you plan to take, every twist and turn will involve extra steps and wasted resources. The key to making your bootstrapping efforts count is being ahead of the game.
“I knew that, if I’m going to get to revenue at some point, here’s where it is going to come from,” said James Feagin, about the importance of making a map when it comes to accepting revenue.
Most companies are not loan-ready. You need to have a business plan, you need to have financial projections and you even need to have leases in place before funding comes in. While funding is important, a plan can go a long way in making money show up when it needs to.
A Team
A plan is obviously important. But the people executing that plan are just as important when it comes to surviving without a lot of money. Whether you are a hi-tech startup hoping to get enough loans to produce your product or a lifestyle company that needs legal advice on the name of your clothing line, a team of skilled, well-connected individuals can help you stretch every dollar you have at your avail.
For one, you need a banker on your team. Loans are going to be a big part of surviving while bootstrapping and having a banker in your corner will be instrumental in that goal. You also need a lawyer on your team. The market is a scary place and the last thing you want to do is put in a lot of work, just to get sued for your meager supply of cash. Finally, you need an insurance representative. The world of startups is alarmingly complicated and bad things are bound to happen. Being covered for those bad things is the best way to fend off disaster when you are low on funds.
A Lot of Money
While AC/DC never ran a successful business, they did get one thing right: money talks. And while this post has boasted many options for a company running low on cash, a complete lack of funding will get you nowhere. Fortunately, the Detroit area is riddled with venture capital firms, angel groups, pre-seed funds and accelerators that are designed to provide funding for high potential startups just like you. You can also turn to crowd-funding, micro-lending or even using a credit card. But watch out; those interest rates are not messing around.
The key to avoiding issues with your investors (and crippling credit card debt) is to be sure that revenue potential is high and copious. Not everyone is Sean Parker looking to make an impact on the business world through word of mouth and free music. Investors are looking for companies that can set up in a market filled with need, produce a product that is unique and inexpensive, and turn a profit before they can polish their monocles. The key to surviving as a bootstrapped company is showing people that you won’t be bootstrapping for long.
This article is part of a Startup Week content series brought to you by CHASE for BUSINESS. Startup Week is celebration of entrepreneurs in cities around the globe.CHASE for BUSINESS is everything a business needs in one place, from expert advice to valuable products and services. Find business news, stories, insights and expert tips all in one place atChase.com/forbusiness.
Photo: Flickr / Alexandrea E Rust
