Don’t Be Cursed by Cash: Bootstrap to Grow Your Business

One of my good friends was one of the first employees of a local software startup. The company had some interesting technology that would help big corporations find higher quality job candidates for positions they were looking to fill. The goal was to cut in on the business of the big headhunting businesses who charge corporations big commissions when they place a new employee.

The software that drove the business was pretty sexy (in a nerdy way, of course). Individual investors as well as groups were putting in cash, on the order of millions of dollars. The startup even had the classic brash young CEO who was going to set the world on fire with the new product.

A few big customers signed up for the service, paying hefty monthly fees, and things seemed to be going swimmingly.

But then those customers started demanding new features – features that might benefit them but not necessarily other users. The new business had to start hiring software developers to keep up with feature demands, and payroll shot through the roof.

This is the point at which a bootstrapped business would have had to say “wait a minute. We don’t have the money to keep up with every new feature a user asks for. We need to keep the product lean and mean, and in tune with the needs of our true average user.”

But because this startup business was suffering from the curse of cash, they didn’t slow down. They reached out for more investor money and built, built, built. They added feature after feature to the software, with nobody really taking a step back and saying “hey – is this product actually creating results for our customers?”

Long story short, the slick young CEO was fired when cash flow wasn’t coming even close to meeting expectations or costs. Worst of all, the investors’ money had insulated the company from the harshest reality of all – their product really didn’t work very well!

And that’s how cash can be a curse. All that extra money sitting in the bank distracts you from what really matters – the value and competitiveness of your product.

If you’re lean, mean, and practically starving – I mean really trying to start up a business with no money –  you’ll have no choice but to make revenue your only focus. You’ll have to sell, sell, sell – praying you can get just enough customers to keep the lights on while you improve your product and attract more attention in the marketplace.

And that’s how great products and successful small businesses are born. Keep that in mind before you go all out looking for cash to start a business.

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