7 Things I learned Bootstrapping Two 6 Figure Companies In 18 Months
The last two Januaries have been significant to me. In January 2014, we serviced our first Companion Maids client, and that company has grown into a multiple six-figure business. In January 2015, we serviced our first Vicky Virtual client, and not only have we surpassed the 10k/month threshold—we’re growing significantly faster than Companion Maids did.
As you can tell from the title of this post, both companies were bootstrapped.
I certainly could have grown these companies a little (or a lot) faster if we took investor money, but I would never do it. Bootstrapping is definitely not the best route in all situations, but if you can help it, you shouldn’t take funding either. I would never give back the things I’ve learned over the past 18 months, as these business lessons will serve me for the rest of my life.
Here are 7 of the most important things I’ve learned.
1. Being broke at some point in your life can make starting a business easier
Everyone loves a good rags to riches story. John Paul Dejoria went from brief homelessness to 4 billion dollars, and Guy Laliberté turned a one man street circus in Quebec to Cirque du Soleil in Las Vegas.
However, there is very little that is glamorous about being broke, even in hindsight.
But you learn things.
Perhaps the most important thing you learn when you don’t have enough money is how to do more with less. This trait is literally the essence of entrepreneurship. In fact, the word ‘entrepreneur’ itself was originally coined by Jean-Baptiste Say, a french economist, as ‘moving lower yield resources into an area of higher yield.’
I believe 2pac put it more eloquently when he said, “I’m tryna make a dolla out of fifteen cents.”
Anyway, when you’re broke but you need to make things happen, you become resourceful out of necessity. You start to ask for things you wouldn’t dare consider asking for previously.
When I originally started Companion Maids, I searched around for a good wordpress theme to build my site on quickly and efficiently. I wanted to try out a few different themes, but they were $50+ dollars each. I ended up going halfsies with another guy that was interested in the same theme, and we were able to work with the themes we wanted for half the cost.
Working out a deal with him was a simple decision that legitimately made a difference for me.
2. You don’t need everything right away
A lot of business owners are anxious. Indeed, there is a lot of anxiety surrounding the launch of a product or service. Even if you are pretty flush with cash, it’s better to consider the cost/benefit scenario for every decision you make. If you can launch quickly with an MVP (minimum viable product) you could utilize pre-sales or early client revenue to fund a more comprehensive offering. In this scenario, you learn what matters, what doesn’t, and you can use that information to move forward in a more efficient, effective way.
With each of my ventures, I was often wrong about how I visualized the business would progress. By launching with only what was necessary, I was able to avoid committing unnecessary time, resources or money to ideas or features that wouldn’t have worked out.
3. You won’t grow as fast, but that can be a good thing
Unless you hit the entrepreneurial jackpot by seeing your business go ‘viral,’ a minimum viable product with a limited marketing budget and small staff isn’t going to grow as fast as a well-funded operation. Again, this can be a good thing. I firmly believe that it takes a certain amount of time to assess a situation and determine a course of action, rather than riding a wave and seeing where you end up.
I think Homejoy is a great example of how not do things. Homejoy launched in 2012 and expanded to close to 10,000 contractors in 35 cities on 40 million dollars in funding in the space of 3 years. There were two big issues with Homejoy.
- They didn’t charge enough money to make a profit, and to keep costs low, they used contractors instead of employees.
- They burned so much money that they became far too dependent on the next round of funding, and after not securing it, they were forced to shutdown.
Thousands of people lost their jobs overnight. I have people that previously worked for HomeJoy that are currently applying to Companion Maids, UrbaHome (another maid company I run) and any other maid company they can find. It’s a mess.
Zirtual, a virtual receptionist company launched in 2011 (go figure that these two examples are the main two industries i’m in,) was an even more colossal failure. Maren Kate Donovan, the founder, literally fired her entire 400+ workforce with an abrupt email at 1:30 in the morning. It seems as though she found an acquirer a few days later, but with a class action lawsuit on the horizon, Zirtual is dealing with a PR nightmare, very disgruntled staff that doesn’t want to come back, and a less than confident clientele.
Again, this company grew extremely quickly and depended on additional funding to keep things going. A funding deal that she was counting on fell through, and with a $400,000/month budget deficit, Maren didn’t have a choice.
Neither Zirtual or HomeJoy would have grown nearly as fast, if at all, without funding. But these companies needed just a few too many things to go right without having a proper game plan.
Revenue does not equal success, and no one is entitled to funding.
Be careful with your growth, or you might find your businesses going bankrupt more times than Donald Trump.
4. You’re forced to keep the weight off
At this point, it may seem that most bootstrapping decisions are purely financial. This is not the case.
I’ll say this again, with every important decision in your business, you need to take the proper time to look at the cost/benefit scenario. Anyone can make financial decisions with some quick, accurate number crunching. However, managing metrics such as employee morale, client and employee retention and quality of product concerns are more complex problems that deserve more thought.
Some decisions, even obvious ones, will be incredibly tough pills to swallow in the short term, but the long term prospects of the company will depend on it. From the start, Vicky Virtual has forced my partner Micah and to make many difficult decisions, and our ability to continue to grow quickly will depend on our willingness to pull the trigger.
5. You learn how to do EVERYTHING
When you bootstrap a company, you don’t have the money to hire specialists for the stuff you don’t know how to do. As a consequence, being a founder in the early stages of a company is about wearing every hat necessary, even foreign ones, to get the job done. You may notice a lot of founder bios that say “Chief coder, event planner and janitor” at ABC company. There is a lot of truth to this.
You will most likely do many things you have never done before, while appearing to know what you’re doing.
Setting up the booking form for Companion Maids was my first time ever trying to figure out a way to take credit cards, and I had no idea what I was doing. I didn’t know how I was going to follow up with customers after they booked. I didn’t have a team hired before I got my first client.
But we did it anyway, and it worked. The fact that I took action mattered more than finding ‘experts’ to come in and save the day.
6. You will most likely have a more loyal core
Behind every successful company is an awesome staff. It’s beneficial to have seasoned pros, but the ‘established’ pros aren’t loyal, and you don’t need them to launch a company. You are not likely to win the salary war without funding, so your early staff will be intrigued by perks such as advancement opportunity and the vision of the company. People like to be a part of something, and the people that will grow with you are the ones that see that vision.
This may seem a little corny, but it’s true. People like to be a part of something because it allows them to make a difference. ANYONE can be loyal if you pay above a certain amount of money. True loyalty comes from people that are able to grow in ways that are not purely financial, and it’s incredibly important to acknowledge and reward your top talent as often and as richly as you can.
7. You don’t have to exit
This is perhaps the most beautiful realization I had after spending time in the VC world. Practically every company in that space is built with an eventual exit in mind, with many founders sprinting to an exit, much to the detriment of the company. If any of us are being honest, who wouldn’t want to go from launch to 8-9 figure exit within 5 years?
If you’re funded by outside investors, ESPECIALLY a venture capital firm, you HAVE to have an exit in mind. Of course, there are exceptions, but if you do well enough, investors are going to want to see their investments pay out around the 7-10 year mark.
Now, Markus’s frustration aside, he is a newly minted billionaire. Therefore, he can do whatever the heck he wants now, but this is the proverbial JACKPOT of starting a business. It is extremely rare to be in this situation, and I certainly wouldn’t base my business career on trying to hit 1 billion dollars.
When you bootstrap, you can make enough to set yourself up for a pretty damn good life, with a significantly smaller company.
The beauty of bootstrapping is that once you’re established (and you’ve fully delegated your job duties profitably,) you can do whatever the hell you want.
In one short year, Companion Maids has become a straight up passive income for me while I build Vicky Virtual. I now spend literally one hour a week discussing a few pertinent things with my dad, and that’s it.
Vicky Virtual has yet to take in a dollar of funding, which gives us full control over the direction of the company. When you’re new and still figuring things out, this can be a good tool to have. We can either build and exit, like our competition Ruby Receptionists, which recently sold a majority stake for 38 million dollars, or we can do what I want to do: build a 10 million dollar company where myself and my partner profit 7 figures each.
Certainly enough to live on, right?
I hope you have learned something from this post, and thanks for reading!