Entrepreneurial | Nomad Talk

The term “bootstrapping” refers to the idea of starting a business with only your own money. That means using your savings and your personal debt capacity to fund the business until it starts to make money. The idea of bootstrapping has become popular in the digital nomad community because moving overseas can help reduce your personal overhead and thus increase the “runway” for launching a business and making money before you go broke. So, let’s take a look at bootstrapping your business, what you can do to help it succeed and why it may not be the best plan after all. The 10 Basic Rules of Successful Bootstrapping If you spend time around people who bootstrapped their businesses, it soon becomes clear that they have some things in common. Now, it’s not to say that you can’t succeed without following these basic rules of bootstrapping a business, but it is much less likely that you will. They Do What They Know The biggest mistake you can make with a limited pile of cash is to try and move into a field that you don’t know and understand. I’ve made this mistake (a software venture is now dead and with it a huge pile of cash is gone for good too) and I know many others who have done this too. The trouble with doing something you don’t know is that you don’t know what you don’t know and thus can’t manage people effectively, cost things effectively and even hold suppliers to account. When you do what you know, on the other hand, you’re playing to your strengths. You are ready to run a business in that sphere. They Trade Cash For Equity If you need other people’s expertise, you can trade off paying them money by paying them in shares. Now, it’s worth noting that you don’t want to give everything away, but it can be worth trading off some control over the business to get the best people. Also, when people have equity, in theory at least, they ought to have their personal interests aligned with the business and they ought to work harder because of that. They Plan Based On Cash In The Bank You cannot spend more than you have when you’re bootstrapping a business. Once you do that – you’re bankrupt, and the game is over. Yet, a lot of business owners plan for their dreams rather than for their financial reality. This is a recipe for near-instant disaster – if you don’t control what you spend, the money will run out before you get money in the door. They Seek To Make Fast Cash If your product takes 3 years to develop – you need to fund your business for 3 years before you see any money coming in. That’s not a good way to start your entrepreneurial journey. Your best bet is to find a product or service that can start making cash almost as soon as you go to market. This is why Sir Alan Sugar, of the UK’s version of The Apprentice, started a market stall trader before making millions – a market stall’s cashflow begins the day that you put products on tables to sell. Many other entrepreneurs start in car washing, lawn mowing, pool maintenance, etc. not because these are glamorous professions but because they get cash flowing quickly. Once you have a pile of cash, you can start to look at longer-term opportunities. They Test The Market Before They Go Full Steam Ahead If you think you can create demand for something, you ought to go out and see if you can. There is very little value in rushing to market with something that nobody really wants. Go knock on doors, go and ask people, what would you pay for “XYZ service?” and the more important question; “If I had one now and could sell it at that price, would you buy it, today?” They Ruthlessly Cut Their Own Expenses Smart people stop spending when they’re not earning. That means no visits to the pub, no new clothes, no brand new cars, no trips to the cinema, etc. until the money starts rolling in again. Many entrepreneurs launch their first business from home because it costs less than an office. They may skip lunches to further cut costs (and get a little healthier in the process). And so on… They Look For Advances On Royalties If you think you’re offering real value to partners in the future, see if they can pay a little of what they think it’s worth upfront. Talk to vendors too and see if they’ll be willing to wait a little longer for payment. Other businesspeople know cash flow is a challenge when you start out – you can get their help by talking to them. Think About Dropshipping Dropshipping in the hackneyed digital nomad “$997 course to dropship like a boss” style is a bad idea but there’s nothing fundamentally wrong with asking suppliers to help you out with your inventory. See if you can get them to ship directly to your customers to avoid paying for warehousing. They Ask For Deposits On Services If you’re going to provide a service – you should always ask a client to pay a deposit upfront. Not only does this improve your cash flow but it improves your chances of actually getting paid for the whole deal too. They Outsource Rather Than Hire Hiring means labor costs and it means benefits and an ongoing relationship. Outsourcing means someone does one task when they’ve completed it, they get paid and the relationship is over. This makes it much easier to budget for things you don’t need doing on a regular basis and can often mean you get a better end product too. A Little Side Note There are probably more than 10 rules of bootstrapping a business though many of those will be slight variants on the themes above. Bootstrapped businesses, in general, are all about cutting and deferring costs while focusing on rapid revenue generation. Why You Might Not Want To Bootstrap A Business As A Digital Nomad You may have heard a statistic along the lines of 90% of businesses fail in their first year of operation. Now, it’s impossible to measure whether or not this is true. But what is assuredly true is that a lot of businesses go under before they even really get started with trading. Sometimes this is because the idea for the business is terrible or the businessperson is completely incompetent but most of the time, it’s down to one thing – they ran out of money. Research shows, time and again, that you are far more likely to build a successful business if you have a full-time job and treat the business as a “side gig” until it’s profitable. Remote workers, which includes many digital nomads, are in a good position to do this. However, holding down a full-time job, a part-time job and trying to travel the world is a recipe for burnout. Nobody can do that very long, even if you try and slow down your travel to a huge extent. That may mean that you are better off staying at home while you launch your business and then when it’s seeing some measure of success – it could be a good time to quit your job and move somewhere cheaper to manage the business from. There are two reasons for you being more likely to succeed in this manner: You will have more money to bootstrap with. When you have an income, you’re not on a countdown to financial disaster. If your bank balance reaches zero before you make a profit things are going to be very bad for you. When you have a job – this isn’t going to happen, sure, you may have a tight month or two, but you won’t go broke. You will have a support network on hand. Don’t underestimate the value of support when it comes to building a new business. When you’re at home, you know people who can help, you speak the same language and are part of the same community. These can be powerful factors when it comes to getting help for a fledgling business. We don’t want to put anyone off becoming a digital nomad, but we do think that a lot of the entrepreneurs we meet on the road are setting themselves up for failure. Taking a crappy course online and then moving to Thailand with $3,000 in the bank and the intention of building an online business is not a way to succeed. Conclusion The most important part of bootstrapping a business successfully is to keep your costs as low as possible and get money coming in as quickly as possible. Research shows that you are most likely to succeed in building a business this way if you stay in a job and build it in your spare time. Once you’ve built that business, it’s the perfect time to pack your bags and move overseas. You can become a digital nomad AND start a business but your chances of failing a much higher than if you waited a little while and built the business before you left home.