Starting a business can be the hardest journey taken in life. While most of the conversations center around outside funding to make that journey easier, it can be worth exploring funding the business with customer revenue. Even though it is not as sexy, it can often lead to a more sustainable business. In this guest post, 1871 alumnus Jamie Johnson -- Founder and CEO of Verde Energy Efficiency Experts, which helps companies find, implement, and maintain energy-efficient solutions, shares his insights on how you can effectively bootstrap your company.
Guest Author: Jamie Johnson, Founder and CEO, Verde Energy Efficiency Experts
I started Verde Energy Efficiency Experts in 2010, and arrived at 1871 in June of 2012 bright-eyed and optimistic. I was excited to be a part of the startup environment - learning and growing with my venture.
I very quickly learned something that surprised me - often a startup’s founders spend more time seeking funding from Angels and VC firms than they did seeking out customers for their products. In fact, a majority of the support and mentorship in tech seems to surround this topic.
Funding can do great things for your business, like paying yourself a salary (which I consistently didn’t do for the first four years). However, with that funding comes great responsibility -- and often, a lack of patience to find a product-market fit. Here are five reasons you should consider bootstrapping your startup.
- Client Revenue
In Bootstrapping, you take your clients' revenue and reinvest it back in your business. This isn't quick and takes a lot of patience, client conversation, and interaction. However, you know that what you're building is worth someone paying you for. At the end of the day, client revenue is what builds a business, and when you build out your business based on the needs of client driven growth, it can be powerful.
This can be done on a really small level with a very customized solution in the beginning.
- You Retain Control
If you are a solo founder like I am, you get to keep control over the decision-making process. While this might sound a bit egotistical, it really is more about picking a consistent direction and vision and sticking with it.
If you're fortunate enough to have a co-founder, it's important to hash out ideas and challenge each other, but you still have to pick a cohesive, singular direction forward. I'm a huge fan of agile development and testing product-market fit, but there has to be a plan that is united in strategy.
- Clients Lead to Referrals
I'm still humbled by how often we get referrals when our existing clients refer us to new business opportunities. Sales is so crucial to any business but even more so to an early-stage company. Once you get a few positive clients under your belt, you'll benefit from potential referrals.
How you get those referrals is an art in itself and one that I have still not mastered or maximized. However, the fact is that you can't have client referrals if you don’t have clients and warm leads are so much more powerful in a conversion than cold leads.
- Client Feedback
I always assumed that I would have to hire an outstanding, experienced salesperson to grow my business -- but I was wrong. While I had not experienced sales in my life (I was a firefighter), my passion for my product helped me succeed in founder selling, and I sold over $1 million of our services for four years in a row.
Much of our operations and product offerings were improved because I was able to hear directly from clients what they wanted. In 2016, we rolled out a new product based on market requests -- which accounted for 25% of our revenue last year. We're always looking for the next opportunity, and it's so much easier to sell clients something that they want rather than something that you think they might want.
I also spent a lot of my early journey avoiding clients -- fearful of the negative criticism or disappointment that might come with those conversations. I continue to work on this and really try to embrace making situations right by the customer, and that has proven to be the right long-term move.
Chicago was built from patient civic investment. It was once a small town that was a drop in the bucket compared to Milwaukee and St. Louis. Civic leaders dredged canals to make Chicago the distribution center of a growing nation. That led to the railroad investment, and later, to O’Hare becoming the busiest airport in the U.S.
Great civic leaders were patient, made personal investments to improve the city, and led the way for great growth and patience. While investment from others is powerful in the short run, it can also hurt you in the long run. Why else would folks invest in your business, unless the returns to them would be great?
The more early traction you can find through customer revenue, the greater portion of your business you can retain as you grow it. Of course, there are exceptions -- and a small piece of a big pie is better than a big piece of no pie. However, if you really believe in your product and you can do it without funding, consider staying tight with clients and using them to help fund your growth. And then, stick around and let's build out this great city together.
The opinions of our guest bloggers are their own and not those of 1871. To learn more about Jamie Johnson and Verde Energy Efficiency Experts, follow this link.