Accelerate your transition to business growth and create a strong foundation for ongoing success.
Rewarding, challenging, empowering, painful, delightful and, at times, surreal. All of the above apply to my experience bootstrapping a debt-free and profitable business in Silicon Valley without VC funding. Bootstrapping has allowed me to call the shots and focus on customer needs and long-term success rather than chasing short-term growth at all costs while worrying about the next quarter.
Here are four specific strategies that can help you bootstrap and scale your own successful business while maintaining control and not ceding ownership to VCs.
1. Getting Started: Begin with a service as you refine your product
With the requisite hard work, a small team or even an individual can be successful in services. In the long run, you probably want to transition to a product business, as that is where fortunes are made.
But before you do this, you must accumulate the capital and expertise to produce the best product in your category, because product sales are all-or-nothing, the company that comes in second in the sales process gets zero.
Spending five years providing custom software development services for Fortune 500 companies before launching our first product helped to build the foundation for our long-term success.
2. Inspiration: Don’t doubt your vision, but be decisive and act fast
My experience as a CIO was that companies were really fed up with spending months to implement enterprise systems or make changes to them. The only way to fix this problem was to eliminate the need for custom coding. While other companies had tried and failed to do so, I started my company with that vision because I realized advances in underlying technology had made it achievable.
The fact that no one else thinks it can be done doesn’t mean you are crazy, it just means that you are first.
3. Growth: Find people smarter than yourself through objective testing
The secret to being a great manager is having great employees. Unfortunately, you cannot find them through the interview process. As Malcolm Gladwell and others have documented, interviews are hardly better than random selection in separating out the good prospects.
The solution is objective online testing. It is not only a lot more effective, it also saves time to provide tests that single out the strong candidates before they come in for an interview; and it eliminates bias.
Our company has a highly diverse group of employees and senior management, not as the result of an affirmative action program, but as a side effect of objective testing and a fanatical determination to find the best individual for each job.
4. Long Term Success: Align the interests of the company, employees and customers
While this strategy may seem self-evident, it is actually the exception, rather than the rule. For example, it is common that bad news is not passed up the management chain, because upper managers may blame the messenger, rather than rewarding their courage. The result is bad decision making and angry customers.
Here are some of the things we do to ensure company interests are aligned with those of our employees and customers:
Maintain open lines of communication between upper management and staff and encourage them to share bad news – the worse the better.
Encourage people who come to you with a problem to recommend a solution. Then go about fixing the issue and thank your lucky stars that you have such employees. It takes courage to raise difficult issues and you cannot fix a problem you do not know about.
Do not expect staff to work long hours, except very occasionally. In the long term, your people will be more productive and a lot happier working 40 or 45 hours a week than working 60 or 70.
We also provide all employees the opportunity to take an expenses-paid meditation retreat for up to 10 days without taking any PTO. We’ve found these types of meaningful perks have a direct positive impact on employee health and productivity.
To closely align our interests with those of our customers, we provide an unconditional satisfaction guarantee that covers our software and consulting services. This guarantee enhances customer loyalty and ensures that it is not in the self-interest of our sales team to exaggerate product capabilities. In the short term, this may constrain sales, but in the long term, it leads to positive reviews and sustainable growth. With every successful implementation, our whole company receives a bonus – not just the sales team. This makes every employee personally invested in the success of the company, our product and our customers’ experience.
Bootstrapping Startup Growth and Success
Starting a business in today’s economy is cutthroat, which is why eight in 10 businesses fail in the first 18 months. However difficult it might be to resist VC funding, bootstrapping your business can build a solid foundation to scale the company with intention. Starting out with a strong vision and service, hiring the best employees through objective testing, and aligning your interests with employees and customers are powerful bootstrapping strategies that have worked for me and can help you to bypass VC funding and build a profitable, debt-free business on your own terms.
Colin Earl is the founder and CEO of Agiloft, Inc.
Bootstrapping business stock photo by airdone/Shutterstock