By: LA New Product Development Team based in Shreveport, Louisiana.
During the first qualifier of the 2017 Louisiana Start-Up Prize, founder of LA NPDT, Konstantin Dolgan has shared his knowledge and experience on very important topic for almost any entrepreneur, product developer or inventor, “Bootstrapping.” For those who missed it or wasn’t a part of this great event, we made this article we think you may find very valuable.
What is bootstrapping? It is a term known to represent “to pull oneself over a fence by one’s bootstraps.” In the modern day world, this term is used to represent starting a business with no external capital.
Why would one even want to bootstrap?
While starting a business with sufficient capital sounds ideal, it usually comes with several drawbacks. In some cases when someone invested in your product, it is possible that you will be pressured to steer away from your primary goal of creating a great product to pleasing your investors or bank. This can not only become heart-wrenching but can hinder your company’s competitiveness. Without outside investors or bankers in the early company or product development stages, you can make quicker and better decisions that align with your vision for the company. On top of that, bootstrapping allows you to start working on your idea instantly since you don’t need to develop and create a full-blown business plan. Such tools as a business model canvas will be sufficient to make your initial goals and direction clear. When does bootstrapping seems to be most effective? – When it is your almost only option. In this situation, there will be no need for motivational videos; you will be forced to be creative and work hard. In this situation, you will not grow complacent and will always be on the look-out for new ways to grow and be efficient. Another important aspect of bootstrapping is that you keep the equity and control of your business. You can reinvest into business to ensure continued growth of your company. Even if you needed further investment, you would have a better leverage negotiating with the investors because you will have a proven track record and a validation of your business model.
Examples of businesses that bootstrapped successfully include TechCrunch, Dell, Facebook, Behance, Envato, Coca-Cola, Microsoft, and other.
What are free tools available for successful bootstrapping?
As a product developer or inventor you may have many challenges on your way to success and one of them may relate to prototype development. Luckily there are several tools that can help you with a range of business needs, from keeping the books in order to creating a product prototype. There are many helpful options when it comes to prototyping. You may want to access co-working spaces (such as Cohab), maker spaces, and universities for your prototyping needs. If you need an engineering work done, a good idea may be to approach universities representatives to make your project as a Senior Design project topic for students. One of our clients had a great success during the Senior Design Project Initiative. Choose a technically savvy partner or advisor that can be heavily involved in the product development process who can share their knowledge and experience with you. There are several free CAD programs available such as Fusion 360 or TinkerCAD and inexpensive 3D printers which will allow cutting the cost of your prototyping projects.
An alternative to prototyping is creating a visual animation or a virtual prototype (3D models or virtual reality renderings). Virtual reality renderings are a great way to demonstrate your product to potential customers and investors.
Set your goals and have a team by your side who are motivated and responsible. If you don’t have a team or unsatisfied with the work they perform, it might be better to outsource product development and focus all of your energies towards other aspects of the business. Whether your product development team is scattered around the country or all bunched up in your office, it will always be a complete group effort to get the desired results.
Marketing your business is an overwhelming task for most. The importance of market research, competition analysis, and customer profile identification cannot be ignored. You can find more information about this topic in our other articles. When that is done, a good idea may be to conduct a survey. Survey Monkey is widely used to get customer’s feedback to improve your product during the prototyping phase. Google Trends is a helpful marketing tool that allows you to track consumer behaviors and get the insights you need. Hubspot is the marketing toolkit for any startup. This software will help you with sales and customer relations management (CRM), along with providing you some free educational material on topics ranging from “How to Make an iPhone Video” to “Basics of B2B Inbound Marketing”. Need to engage and nurture your audience? You may find Mailchimp handy for creating beautiful newsletters and emails to ensure your outreach efforts are effective. Consider QuickBooks and Mint.com for managing your company’s finances.
Even with a low budget, there are several ways to present your idea to others in a professional manner. The most inexpensive route would be creating photo-realistic renderings or mockups of your product idea. These graphic materials can be placed on a professional sell sheet to display the product as well as highlight its many benefits. Using CAD software, you will be able to convey your product ideas to others. The 3D models used for making renderings can also be converted into animations or even placed in a short promotional video. CAD models and renderings can give you a wide range of options to move forward with marketing and presenting your ideas.
You can also apply for a provisional patent application to show others that you are taking the proper steps to protect your new technology and design. Patent-pending status may increase the value of your inventions and will provide you with a piece of mind. Willing to go the extra mile? Take the time to prepare a professional presentation of your product for investors or other interested stakeholders. This includes a short sixty-second elevator pitch as well as a much longer and detailed slide deck about your business. Taking these extra steps will ensure that you are prepared for any opportunity that comes your way.
Crowdfunding (CF) still reigns supreme when it comes to fundraising for products and getting a feeling of the market. The existing CF platforms are easy to use and can help you verify your idea quickly. If your campaign raises enough money – you move forward; if it doesn’t – you either go back to the drawing board or drop the project altogether.
With all of these tools, one can rest assured knowing they have what it takes to bootstrap their business.
Where can I get some support?
There are several organizations and individuals in Louisiana. The first that come to mind are universities and colleges, such as LA Tech, LSU, and Grambling. They’ve been historically helping local entrepreneurs and product developers. Some great groups that can help fund your project include the Louisiana Economic Development (LED), the U.S. Small Business Administration (SBA), and the National Science Foundation (NSF). There are also several groups that can consult and guide your new business in the best direction. Such organizations in our area include the SCORE Association and the Louisiana Small Business Development Center. We are grateful that we have such a strong network that is more than willing to help local businesses be successful. If you are in other states, please stop by your chamber of commerce to learn about options available in your area.
Some Additional Tips and Things to Consider
- Some suppliers can provide credit/financing if needed.
- Your new business can sell its receivables to commercial financial companies such as Fundbox, BLueVine, and HSBC to get some working capital.
- Carefully consider the responsibility of financing a building, equipment, and vehicles you may be for your bootstrapping initiative.
- Web apps might serve as a low-cost temporary replacement to mobile apps
- Offer to barter goods and services with your suppliers.
- Educate yourself on how to use crowdfunding properly
- Don’t forget to ask for discounts and negotiate the quotes.
- Utilize co-working spaces such as Cohab(or other local options) to collaborate with others and be entrenched in the local entrepreneurial community.
- Learn valuable skills such as website development and graphic design. They are easy to learn and will be helpful for any business you enter.
- Consider outsourcing tasks that can be performed
- Only leave your full-time job when your business generates enough profit.
- Leverage personal connections to get better deals on necessary items for your business.
- Partner with a co-founder that has a different skill set than you.
- Read books on how to set up a successful business.
- Lean Startup
- 7 Habits of Highly Effective People
- The Tech Entrepreneur’s Survival Guide
- One Simple Idea
- Built to Sell
- Disciplined Entrepreneurship
And don’t forget about our complimentary services! Call us today for some additional information.
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