I get asked by a number of people to write in the Startup Iceland blog, most of them are aspiring journalists and writers who want to have a portfolio to show or companies trying to get a backlink from a high ranking domain like Startup Iceland. I usually don’t do it unless it is a topic that helps startup founders and entrepreneurs or the Startup Community in Iceland. It is very easy to see if someone has #Givefirst in their DNA or not.
I got an email a week or so back from Ronald Don giving insight into doing SEO right. Doing Search Engine Optimisation is hard given how many nuances goes into it and building good quality websites with useful content is also hard. The penalty for trying to short circuit this is quite harsh if you are motivated by having your website rank high on a search result or if your business depends on traffic sent by search engines. I thought his context was useful and he was saying the right things. I thought his writing was from the heart and he is an entrepreneur himself and I wanted him to write something that has a personal context to help fellow founders and entrepreneurs. I think Bootstrapping is under appreciated in the startup world, there are a lot of reasons why founders should raise less money or no money at all if they can help it. I don’t know how many times I have counselled founders to not raise money. Sam Altman just wrote a blog post about Dilution, go and read it. Ron thank you for writing this.
here is the article:
Growing a business is difficult and, sometimes, can feel almost impossible when bootstrapping it, but, luckily, it doesn’t have to be if you are strategic and do the right things to grow it. As someone who has been growing his bootstrapped business—for four years, now, into a very successful agency—I can attest that growing your bootstrapped business isn’t impossible; you just have to be smart about how you do it.
Throughout my time growing Visiture (formally Grey Umbrella Marketing), I have taken it from a freelancer to a 25(ish)-employee organization with a goal of growing 100% each year for the next two years. I didn’t get there by being lucky. I got there by failing a lot and learning from those failures. I also had a lot of great help and advice along the way, which I am forever indebted to. As one of my old mentors said: If we give you advice, it means you have to give back to the community, eventually.
With that being said, here are some tips I have learned throughout my short career growing Visiture, 100% bootstrapped, into one of the fastest-growing agencies out there.
Identify Customer Acquisition Channels
This is one of the most difficult components of a business, and it is “how you get customers.” Some companies rely on having a great product, word of mouth, or other channels, but, whichever channel it is, you have to find it and leverage it as much as you can to get high-quality leads in the door. Having sales cures “business cancer,” and there haven’t been many businesses, out there which go out of business, that have a huge sales funnel and inbound leads.
The key to getting a good customer acquisition channel is trying out a lot of different marketing activities. At Visiture, we have a super-high customer retention rate (95%), but we do not get many referrals. We found out most members of our target market don’t know similar people in their industry, which makes it almost impossible to get referrals from them. So, we found out our best marketing channels are SEO, PPC, and partnerships. We use Google to find a steady stream of leads and work with partners to fill up our sales funnel.
What works for you is what you need to figure out, but having a steady stream of customer leads is the best friend for a bootstrapped business.
Don’t Be Everything to Everyone
This took me a long time to figure out. Say someone is looking for a website design partner to make them a website, and they are a dog-walking business. They are evaluating two firms, one of which specializes in making websites for dog-walking businesses, while the other is a digital marketing agency which has full-service digital marketing services, including a website design program.
Which would you choose? Most likely you would choose the one which specializes in the dog-walking businesses because it sounds more appealing. So, when you start out, be very specific about who you serve but do not make it so small you have a very tiny niche.
If you are a service business, I recommend doing one service for one type of customer. It is how I was able to catapult my business to where it is today.
Keep Your Margins High
One mistake I did, when starting out, was to not worry too much about margins with my pricing. I literally would guess how much to price my work, without any strategic thought behind it. This was a mistake, but I was able to overcome it.
Generally, you want your gross profit margin around 50%, and your net profit margin around 20%. This enables you to buy more marketing, hire more people for growth, and add any other activities to help you grow. Plus, companies which are not profitable—unless you are Amazon or Uber—are hard to sell/have value, later, if they are not profitable.
Don’t Do What Everyone Else Does
Growing alongside competitors who have larger budgets than you is always a bad idea. At my agency, we are focused on doing things differently than our competitors because if we do the same things as them we will be as successful as them, which is not what we want. We want to be more successful than them.
A good example: There are many industry tradeshows we can attend and industry publications our competitors use to advertise their content. We could try to match them, dollar for dollar, with our marketing resources—but doing so would be madness. We want to make our marketing dollars go as far as they can and be as impactful as they can be.
Another example: Our competitors have a very old system of managing clients. They have one account manager per each of their client’s accounts. This is a very old model but very inefficient because when that account manager quits someone else takes over the account, and they must learn all over again. We decided to make a team that manages the account, which enables more successful transitions and makes a more superior product for our clients.
Grow Through Organic Marketing
Speaking to the same point above, you also want to focus intently on organic marketing. Earning customers through Facebook ads, Google ads, or other paid mediums is really difficult for bootstrapped businesses and, sometimes, does not provide the ROI necessary. I recommend getting effective by using organic marketing to acquire customers and achieve a sustained stream of customer leads.
Focus on items such as SEO, content marketing, social media, or other vehicles to achieve higher ROIs, as organic marketing will be the most sustainable customer acquisition tool you have.
Follow Successful Competitors & Their Stories
This is slightly contradictory to my edict “do not follow your competitors,” but you still want to understand how they are successful and take the best things away from that. Even though we may not go “toe to toe” with their marketing budgets, we could replicate the good things they do or even what they are doing with organic marketing, company structure, and more. Piggybacking off the successes of your competitors is always a good idea, as long as it will work for you.
Focus on Customer Retention
One of the most important pieces of bootstrapping a business is not losing customers. Eventually, you will lose them, but you want to keep them onboard your company as long as you possibly can because it is much easier to keep a customer than to get a new one. Focus on what you are doing well and improve what you are not doing well. Have constant communication with them, run surveys, or even take them out to lunch and ask them, “Is there anything we can be doing to better serve you?” Everyone likes to hear that, and, usually, they will give you good input.
I hope you enjoyed this piece, and I hope it helps you in your journey of bootstrapping a business. Bootstrapping a business has the bad reputation of being one of the most difficult ways to grow a business, which is a shame—because it doesn’t have to be.