You will rarely be as cautious with other people’s money as you are with your own. Bootstrapping will almost certainly make you a better manager and incentivize you to intelligently grow your business. Learning how to do more with less is one of the most important skills an entrepreneur can possess — and a key principle of 21st-century business.
Better Profit Margins
Bootstrapping a business is one of the best ways to stay lean, which will do wonders for your profitability and valuation. Plus, companies running with low overhead, often enjoy a much larger profit margin. If they succeed and begin to consider exit opportunities, a low-cost margin can have a dramatic impact on earnings, which is a common basis for valuation. One of the most compelling ways to increase your exit multiple is to cut costs — a skill that bootstrapping entrepreneurs understand well.
Bootstrapping usually keeps a company’s runway short — with less cash, there is less time to get a company off the ground. This is one of the greatest motivators to quickly build a product and get it to market. Rapidly testing and iterating on your offering is an efficient and cost-effective way to develop a product. It will also dramatically increase your chances of success. Outside investment often reduces that pressure, creating a cushion that can add months or even years to your timeline.
Less Outside Influence
Raising outside capital often attracts a great deal of attention, particularly when the investors are high profile or the deal is widely publicized. While glamorous and exciting, it also raises your profile significantly. In contrast, entrepreneurs who bootstrap have a major advantage: They can operate in relative secrecy for a period of time, staying off the radar as they fund their own operations. This can make all the difference in maneuvering around competitors and building a great product.
Every entrepreneurial venture is different, of course. The one constant, however, is that success depends on an entrepreneur’s ability to execute effectively. And my years of experience as an entrepreneur have taught me that bootstrapping is a powerful, fulfilling, intelligent way to execute.
Jay Wu leads Innovation at Best Drug Rehabilitation. In his startup experience, he has built a digital marketing agency, a content network, and an e-commerce store. Jay speaks in the Bay area about social media marketing, SEO, and current trends in the internet-startup industry.
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