8 Ways to Bootstrap Your Business (And Your Life)
When Shari Hughson graduated from Queen’s University with a degree in nursing, she knew her career would not follow the typical trajectory – and it didn’t. Moving to Calgary with $200 in the bank, she got a waitressing job and then managed to buy a house with a credit card, renting out every room in order to make her mortgage payments. That frugality and willingness to take risks soon enabled her to launch her first business in home healthcare. In the years that followed, Hughson launched three more businesses, all in the healthcare space – with varying degrees of success. Now the Director of the Master of Management Innovation and Entrepreneurship at Smith School of Business, Hughson recently shared her tips for bootstrapping a business with students participating in the Queen’s Innovation Centre Summer Initiative.
1. Know what you need
Have a clear sense of what your survival basics are before you launch your business. “Prepare your life,” says Hughson. “What are your shelter, food, transportation, clothing, and technology needs?” Know what you need to survive and then figure out how you are going to make ends meet before making the leap into entrepreneurship.
2. Avoid giving away equity
While savings, credit cards, and loans from friends and family may be enough to get some businesses off the ground, sometimes bigger guns are required. Citing her own experience, Hughson is quick to encourage caution when it comes to giving away equity in your burgeoning business. “I met someone with cash and skills and gave her a fifty percent stake in my business for $30,000 because I was so desperate,” she says, explaining that three years later she bought that partner out with a multi-million-dollar loan. “She did really well.”
While Hughson acknowledges that the agreement was not in her best interest, she also knows she might not have succeeded without it. Co-founders can be tremendous assets, but do your research before making any agreements and be clear about what you’re giving up.
3. Build your customer base right away
While you may have big plans for your business, the best way to start making a profit is to do something that can generate revenue right away, even if it is small. “Bring a limited product scope to your minimum viable product. What can you get to market immediately?” says Hughson, who built an audience for her first business by giving educational workshops for seniors’ groups who then independently inquired about the services she was selling. “If it’s selling T-shirts with your company’s name on them, do that. Figure out who your customers are, and then determine what they will buy from you in order to start engaging. Get some cashflow coming in.”
4. Learn everything you can – and be creative
There is no rulebook when it comes to entrepreneurship. Though it may no longer be possible to buy a house with a credit card, Hughson encourages aspiring entrepreneurs to think creatively about how to get their businesses off the ground. “Think of every obstacle as being a little game or problem you have to solve,” she says, explaining that she took courses in financial literacy and real estate in order to be well-situated to make decisions. “Your entire life as an entrepreneur is figuring out little games every day… and there are always tricks. Go and do your own research and figure out what you can live with.”
5. Consider crowdfunding
“Crowdfunding is a phenomenal way to bootstrap, and something we did not have access to when I was starting out,” she says. “But it’s not really about funding – it’s about marketing. It is a way to get customers and market validation. It also gives you access to cash because you are basically pre-signing up customers who give you money before you even have a product.”
She says it is important to know how much you need to raise in order to get a minimum viable product built and to market. Hughson warns, however, that fewer than 20 percent of people who support crowdfunding ventures ever receive the product they pre-purchased. Don’t be overambitious with your campaign: know how much you need to raise, and then deliver.
6. Think carefully before borrowing from friends and family
While borrowing from friends and family is a tried and true bootstrapping tenet, Hughson urges caution. “Do not take money from someone if they cannot afford to lose it,” she urges. “If your family member is cashing out a GIC or RSP to support you – if they are not sitting on a bunch of cash - do not take that money.”
Hughson says it is also important to go into borrowing from family with your eyes wide open. “The survival and success of your start-up has to be the number one priority, and you may have to make some tough decisions. Be aware that if you take money from family, you could be damaging family relationships down the road.” If you do borrow, make sure you are clear on the terms (is it a gift? a loan?) and know what it will mean if you can’t pay it back.
7. Be cheap
For Hughson, the early days of entrepreneurship meant eschewing all unnecessary purchases, restaurant meals, and alcohol as she lived without income. “To this day, I am cheap. If you are someone who loves fancy things, you will struggle,” she says. Hughson, whose early ventures saw her waitressing on the side to make ends meet, believes being careful with money will ultimately lead to better decision-making. In fact, she attributes her business failures to having too much money to throw around when things went wrong, rather than working to solve the root problem.
8. Don’t have regrets (so don’t be afraid to fail)
Hughson admits that while she could feel angry with herself about mistakes made along the way, she knows that each one helped to move her closer to where she is today. Though giving away too much equity in her first business cost her a lot of money, she could not have launched her subsequent ventures without that experience – and that wouldn’t have been possible without giving away the equity. “I didn’t want to regret that I never launched that business,” she recalls.
Hughson admits that she loved the bootstrapping years and the rush of seeing her ventures thrive. “I was firing on all cylinders,” she says. “I loved the rush of pushing an idea forward, even while waitressing full-time – it was phenomenal. Even if it had failed, I wanted to have no regrets.”