Bootstrapping is the process of building a business from scratch without attracting investment or with minimal external capital. It is a way to finance small businesses by purchasing and using resources at the owner’s expense, without sharing equity or borrowing huge sums of money from banks.

For many entrepreneurs, it’s not always clear which funding model best suits your business goals. Should you go with a VC, an angel, an accelerator, crowdfunding, or all of the above? Should you simply fund your company on your own? Each route, whether bootstrapping or tapping into outside investors, has its pros and cons.

You’re on your own

What bootstrapping really means is pulling your own weight, with maybe the support of another buddy who’s also crazy enough to believe that you can turn an idea into billions of dollars.

When you bootstrap, you need to solve more problems with fewer resources. However, that necessity allows you to become resourceful and learn new skills you never even thought are capable in a short span of time.

ORGANIC DEVELOPMENT

Without a large amount of cash on hand, the company might not be able to develop key components as quickly as desired.

A certain amount of revenue will be required for expanded R&D, hiring and marketing, and more time and planning will be needed to achieve those goals. Some growth milestones may take longer to reach, and targets might have to be pushed further down the line.

Limited resources also mean little money for attracting top talent

Although this becomes an upside when you find first-rate employees who are as passionate as you are in your vision. More often than not, these are buddies and former colleagues who are willing to leave high-paying jobs to join you in building what they believe would be a life-changing cause.

Founders Wear Multiple Hats

If you’re bootstrapping, you’ll need to keep costs down as much as possible. You can’t afford to pay a full staff or outsource work, so your job title won’t just be owner – it’ll be owner, marketer, accountant, manager, and so on. To successfully handle all of these responsibilities, you’ll need to dedicate extensive time and mental energy, which could lead to burnout. Your family and social life will take a firm backseat to your company, so you’ll need to ask yourself if this is a sacrifice you’re willing to make.

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“How big is your target market?” is a question often asked by investors. Naturally, investors want to invest in large and rapidly growing markets. Most entrepreneurs hesitate when answering this question. What if they are far off from a VC’s idea of the size of a market? More so, VCs will throw terms like TAM, SAM, and SOM at an entrepreneur in a rapid-fire fashion. There is no need to be intimidated by these acronyms.

What is TAM?

TAM = Total Addressable/Available Market is the total market for your product. This is everyone in the world who could buy your product, regardless of the competition in the market.

What is SAM?

SAM = Serviceable Available Market is the portion of the market that you can acquire. For example, your product may only be available in one language, so your SAM would be the subset of the TAM that speaks the language that your product is developed for.

What is SOM?

SOM = Service Obtainable Market is the subset of your SAM that you can realistically reach. This is effectively your target market that you will initially try to sell to.

Why does TAM/SAM/SOM matter?

The purpose of TAM/SAM/SOM is to validate that the opportunity is big enough to warrant the investment. The first target for your product should be to achieve your Serviceable Obtainable Market (SOM) goal. Once this has been achieved, you can now assess how you might capture more of the Service Available Market (SAM). You may, at this point, be able to cut out some of the competition by acquiring them or beating them on cost. If you’re going after the luxury market you may now have some exclusivity and hype that the market is vying for. Once your goal has been achieved in the Serviceable Available Market (SAM), you can consider how to extend into the broader Total Available Market (TAM).

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Increase Your Social Media Presence

More people are online than ever now. They are also becoming warier of personal interactions. But that doesn’t mean that they have lost interest in the businesses around them.  In some cases, enforced time alone has given people more opportunities to make Google searches and research potential items to buy.

We all know how powerful social media can be, but are you using it regularly? We have recently increased our social media presence and it’s reaping rewards already with engagement. We know how easy it is to get busy and forget to work on your own social media, but it is worth the effort.

Maybe you could explore new social media platforms that you’ve not explored before or you could start sharing your new videos and blogs on your existing social media channels simply telling “the story” of your business.

Paid Advertisements Are Cheap At The Moment! and what you are doing during this time.

The latest advertising trends we are seeing is that paid ads are becoming cheaper. This might be through Google Ads or Facebook Ads for example.

As many small businesses have stopped spending money on their adverts to cut costs, fewer competitors are out there. this means that the cost per click is lower for you.

COVID:19 is meaning more people are spending time online. So try to resist the urge to cut that cost, and if you can afford to, invest back into your paid adverts, as your money will go further at the moment.

Adjust your product offerings to accommodate new consumer needs

You need to be nimble and adjust to your customer needs. Assess your menu and identify opportunities for items that are designed for a new environment in which consumers could be reluctant to dine in or around others for a prolonged period of time. Smaller businesses may have to modify their operations for the situation. If you run a fast food store in an area not yet locked down, you might have to consider temporarily closing down your in-store dining facilities and ramping up your takeaways. If you are a gym that has to close its doors for a while, you might want to make some videos of exercise routines your clients can do at home, uploading them every day to YouTube. Launch catering items that are individually packaged and “grab and go,” like lunch boxes, or family packs for dining at home.

Market your special offer

Establish a reasonable budget, set up your special offer, and then target your audience at a small, sustainable spend across each channel. When you see a positive response, invest more in that channel, and spend less everywhere else.

When your audience is stuck inside of a house and spending all their time on the Internet, THAT is the ideal time to get in front of them and build your brand. Don’t miss the opportunity!

Plan policies for next 3 months/ 9 months/ 18 months

Since it is difficult to gauge how long this epidemic will last, it is important to be prepared for all scenarios. If we consider it as a 3-month problem, an instant halt on variable expenditures like hiring, marketing, travel, etc. can help. However, if the crisis continues for 9 months to a year, entrepreneurs will have to reconfigure their business strategy to reduce the variable expenses, renegotiate fixed expenses (rent, salaries, equipment lease payments, etc.), and focus only on the crucial essentials for survival. It may be a good idea to revisit sales strategy – selling online versus in-person. Analyze if you need to cut back or scale up on marketing costs. Some serious reconsiderations would be required if the effect of the pandemic continues for 18 months or beyond. Businesses will need to strategize, communicate, and act with compassion.

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