How did you finance your first year bootstrapping?

Discussions
#1

I’m planning a blog post around the question of how to finance the launch of a product and support yourself financially until product revenue can take over. Looking for case studies, tips, stories to include.

  1. How much runway did you plan for (and how did that compare to reality)?

  2. How much money did you invest into development (and where did it come from?)

  3. Advice or what would you do differently if you’re making that financial transition over again?

My answers:

  1. I planned a 1-year transition. Reality was more like 2.

  2. I set aside 10k (which I earned from client projects) to help pay for some contractors and support a decrease in client work for a couple months. Over 2 years I slowly ramped down and became increasingly selective in my client engagements until they went down none.

  3. Focus. I should have stuck with only 1 product. Instead I went with a ‘lets try a bunch and see what sticks approach.’ That only slowed down the growth of my first, main product, and caused me to have to do consulting longer than I wanted to.

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#2

Thats a really interesting question, and one that there are not too many answers to on the net.

In my first start-up I started with nothing, it was 2008 and I had just been made redundant on xmas eve at 5 mins to midnight (sounds like a movie!). I had not been paid for months, and due to the company I was working for refusing to make me redundant, I couldn’t claim on my income protection. By the time they finally made me redundant I had missed so many payments that I no longer qualified for anything, and I had used up my savings just surviving. I had also swapped a percentage of my pay for shares in the company. The company in question did a “phoenix” and we were all left with nothing. I was completely wiped out with a wife, two kids and a house, my wife at the time took care of our kids so I was the only one earning.

Obviously it was the time of the global financial collapse so trying to get a decent job in the UK was really difficult. I met with a few contacts and the all kept saying the same thing “why are you not doing something for yourself”?. Long story short, I started cold calling the old prospects I was working on in the last company, I got a meetings with a hospital IT manager, I took the contract with me to the meeting and he signed it. I did a deal with a wireless engineering company to help me provision the service, and being public sector they pay annually in advance. This gave me the cash flow I needed to keep the wolves from the door, whilst there was little margin, I had to pay for the service monthly so it was almost like a loan. Anyway, from there I kept signing up more customers and eventually grew it to a multimillion pound turnover.

The one thing I would say though, is that I had no safety net at all, I was heavily in debt and it made every month stressful. Now whilst this is certainly not a good thing, I have found that for some people, their back needs to be against the wall to just summon the will to get past the procrastination and fear to actually go out and sell. Also back then I didn’t really see myself as a “start-up”, I just perceived it as business. I think sometimes the start-up culture can get in the way of actually just getting down to business. I find myself often getting distracted by Quora, tech crunch, and writing long replies to posts on forums :smile:

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#3

Great story, thanks so much for sharing.

I can certainly relate as I’m sure most of the people on this forum can too.

Personally, I never thought of myself as an “entrepreneur” until I woke up one day and realized I was one. At first, I quit my job because I realized I can do the same job as a freelancer (and that was attractive). Then I thought, “hey, I have the skills required to build a little product and maybe people will pay money for it” And then the bug spread.

#4

In the case when you continue a full time job and slowly transition, how should one answer?

I started while working at another startup. I then had the chance to work full time for one day per week, then two, then I hit ramen profitability and I left full-full time.

About six months.

Next to zero money (domain registration, web hosting, other small stuff, that sort of thing… say £200-£300?). Lots of time :wink:

I actually think the way I did it was perfect for me. It allowed me to measure the market as I developed the business, while having another job to fall back on.

#5

I worked part-time for a few months then lived off savings after that. I had about enough savings to last a year. I made a director’s loan of about £2-3k to the business. I was cashflow positive within a few months. It took about a year to get to the point where monthly sales were equal to my old full time income. See also:

NB/ I worked very hard that first year! There was no 4 hour work week BS.

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#6

That would be the quote of the week :slight_smile: So true hehe (at least for launch time).

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#7

My take (and I have an upcoming blog post on the topic - subscribe here if interested) is to mix products and consulting in a way that I call “indefinitely sustainable bootstrapping” (that will be the title of my article, please don’t steal it :-)).

I essentially assumed “very long SaaS sales ramp of death” from the start, and wanted to make sure family, health and finances would be ok as long as we’d need to.

I think this was a good idea at least for our first SaaS - I noticed that people who already launched 2 or 3 SaaS usually manage to be completely profitable in 2 months after launch max, because they do a great job at collecting emails, creating tension, doing pre-sales, selecting ideas which will allow much higher prices (like Baremetrics or Drip, typically).

But for most first-timers, I see that it is usually much, much longer :-), unsurprisingly because there is so much to learn (and these things seem obvious after the fact), and also because you usually have activities that take time to earn a living (eg: consulting).

What I do is book consulting sessions on a regular basis (2 recurring clients) and in a fashion that /increases/ my runway slightly gradually over time. I schedule strict days to work on clients work /or/ my SaaS.

I had runway when I started but we have much more now.

We are still not financially independent based on sales from WiseCash, but having that runway, always increasing, has allowed us to work on things that significantly improved our sales recently, hiring UX / copywriters etc etc, so we’re making good progress gradually (and we have time to do it).

Again - this is just a teaser, I will write a full blog post on that and will share it back here.

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#8

I’ve been failing for 2 years now so hopefully this helps somebody :wink:

1.

9/12 to 1/13 - 6 months of runway or so I thought. No freelance income. No existing products or anything when I started. Ended up having 3 months (budgeting failure and no freelance) and didn’t finish anything close to a product.

9-5ing

5/13-1/14 - 4 months of runway turned into 8 with freelancing. Had one MVP done when I left my job. Launched 2 products, one shut down quick, one had revenue but slow growth, bad pmf, co-founder issues etc and closed down 3/14.

Currently 9-5ing

Next time I go full time on products I should have > 6 months of runway in cash (12 months with freelancing), a product almost done, a marketing site finished with qualified traffic, existing and very excellent ongoing freelance contracts, a content site bringing in some money and two years of product building behind me. Hopefully it works out. :wink:

2. - About $2k of development and writing help. Came from living cheap and saving money.

3. - I have a burning desire to get out of 9-5 jobs so I made risky decisions without really knowing what I was doing. In retrospect I learned faster this way but wouldn’t recommend the path I took at all.

My mindset was that I was a pretty good developer so I could just program my way out of problems. Big mistake. I’ve basically spent two years learning the basics of all the supplementary skills a developer should learn before building a product or having success as a freelancer. Except I did it the hard way. Whoops.

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#9

I did not really plan anything. I build the first product while working 9-5 and it was already making a litte money when I left my job to travel the world with my wife. We hade enought cash to travel for maybe a year.

It was funded using money brought in by my 9-5 job. It took about 250€ (Hosting, Templates, Paperwork…) to get the first sale. It was profitable after about 4 months if you don’t value my development time.

I don’t think I would go back and change anyting. It not really planned to go full time on the product when we get back from traveling it just kinda happend. It takes quite some time to get used to the unsteady cash flow through.

#10

  1. I had 1 year of living expenses saved and thankfully a wife that was working. She’s a teacher so it didn’t quite cover our expenses, but it was close. Based on her working, the runway was more like 10 years, but it was just after crisis so I didn’t assume anything. She could lose her job and immediately we are down to 1 year.

  2. Mostly just time. A few hundred between some domains, hosting, design, llc, etc.

  3. I wouldn’t really change anything other than I wish I started sooner. I’m not sure I’d really want to have less runway, but I wish I’d have focused on saving the runway sooner so that I could have quit sooner.

As someone in the mobile apps business, I really wish I would have gotten on the store sooner during the gold rush. I replaced my old salary starting basically from 0 in 6 months, and that was in 2011. I suspect it would have been easier, and I would have blown past my old salary if I had started in 2009. Life in the App Store likely would likely be a bit easier now too with 2 more years of downloads and reviews and users on my initial apps. oh well.

#11

I’m impressed with the level of financial discipline mentioned here. I’ve been self-sustaining since 2005 as a consultant (and off-and-on employer) but I’ve never had much runway. I’ve historically done very little long-term financial planning. I’ve assumed that being frugal with my spending, pushing my consulting rate high, having some credit and working a lot would naturally increase my reserves but bad financial habits & speculative money-losing projects have a way of pushing you down, not up. It’s a crappy way to live, and to run a business.

I’ve finally settled into a much more stable, methodical approach that sounds like what @thibaut_barrere is describing: sustainable, profitable consulting while also making the time to bring a product to market. It doesn’t happen as quickly, but I think of it as more of a long-term investment. My end game is to run a small portfolio of software products, and to have them make up the majority of my income. I’m giving myself 5 years for that, and I’ll dial the consulting up and down as needed, always treating that as my stable foundation.

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#12

Bingo Card Creator launched in July 2006 and I went full time in April 2010. By that time, it was routinely getting sales numbers which were higher than my salary, but it was an open question whether I’d sustain profit numbers to support my standard of living, particularly over the lean summer months.

I had been planning on perhaps tapping savings or using credit cards as a buffer (pay business expenses on cards, transfer all sales as cash to self, roll balances for a few months, repay once the summer was over) but it turned out that a few months before quitting I suddenly had a consulting pipeline.

I had approximately $4,000 in cash the day I quit the day job and, hmm, $4k in BCC sales on $1.5k or so in costs a month. (Again, super seasonal – the July after quitting was $2k in sales on $1k or so in expenses.) I would highly recommend not starting a software company with $4k in the bank, but it was reasonable in my circumstances due to the demonstrable revenues I already had.

If I knew then what I know now, I would have quit years earlier, used consulting to (more than) replace the money my software wasn’t yet making, and titrated down consulting as the software revenue grew. Also, I would have started doing one-off infoproducts earlier, as they generally have favorable “time from release to time they make you enough money to meaningfully impact your standard of living” characteristics when compared to SaaS apps.

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#13

Thanks for this Patrick - very helpful insights.

I really like 2 things about this:

  1. You made a distinction between “sales” and “profits”. In general, when I listen to entreneur interviews and stories, theres too much of a focus on revenue levels, without much talk about profit or personal income of the founder. For bootstrappers who are making the switch, you’ve got to be focused on the latter, not just the top-line number shown in your Stripe account.

  2. “Support my standard of living”. It sounds like didn’t compromise or downgrade your living standard for the sake of launching your business. For self-funded folks, especially those who are supporting a family, “ramen profitable” is not a thing. By maintaining your living standard while transitioning, it helps you determine if the thing you’re building is actually viable.

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Trying to get a business going while working
#14

  1. How much runway? Zero. I planned from day one to develop and launch my first bootstrapped effort while continuing my consulting work. I had already made the jump to full time self employment years earlier so that was probably an easier thing for me than most. It did have challenges though, mostly balancing time and finding the will to continue work on the side project even when you feel spent. With a wife and four kids having a runway and jumping 100% into the side project on day one with no revenue was never an option.

  2. Aside from my time costs invested which was equal to about 6 solid months of development I have invested a few thousand dollars in setup, hosting and some advertising, all out of my own pocket.

  3. Advice, where to begin.

Every situation is unique so take anything you read about starting a SAAS or bootstrapped endeavour with a grain of salt.

I was fortunate to have an idea for something that I would use everyday on my consulting side and I could also sell to clients and freelancers I work with (http://pageproofer.com). Being able to leverage my knowledge base and client base was extremely beneficial, better than jumping into an area with little or no experience.

Celebrate the small wins, there are very few home runs on the first swing so don’t get down on yourself when you hit a foul ball or even strike out, it’s all a learning experience for the next swing. The important thing is you got up to the plate and you are in the game, that’s ahead of most.

Customer service makes up for multitude of problems. Give people great service and they will forgive mistakes and overlook that maybe you don’t have all the greatest features. Give people bad service and they will run to your competitors.

#15

Just a small technical point. In my mind a bootstrap company or project by definition supports itself. I use an arbitrary limit of ten thousand dollars where the project becomes a self funded project.

Am I crazy to even think about these type of details.

Here’s a post I wrote about my definitions:

http://inreallife.com/self-incubation/

#16

I personally consider bootstrapped and self-funded the same thing. It’s rare you can start a business with truly zero money even now so there’s always some self-funding. In my case, I left my job and worked on our first product for 6 months living off of savings. I still (obviously!) consider myself bootstrapped.

#17

This is very important advice and is reinforced by the varied responses. Some start off and live off savings, others wait until they have enough side income to replace their regular job income.

And others wait until they feel there is no other choice but to go full-time on the bootstrapped project.

I am more in the camp that @patio11 was. I could’ve gone full-time 5 years ago and done okay. But I waited until both my business and myself were ready.

Whether the timing was right was always a struggle for me.