Why Bootstrapping Is the Best Way to Start a Business (20% Higher Success Rate)

People sometimes have the wrong idea about starting a business – they think you always need a lot of money. But you don’t need a small business loan, investors, venture capital (VC), or a big bank balance to start a business.

The truth is that many successful small businesses start with very little money. This is called “bootstrapping.” You literally bootstrap your business with next to nothing in the bank. And bootstrapped businesses can outperform venture-backed startups.

Let’s look at some of the benefits of growing a small business on your own.

Benefits of bootstrapping in your business

When a business starts without the support of outside investors or bank loans, it can make business owners even more resilient, creative, and determined to find a way to succeed. So much so that some studies show bootstrapping companies have a 61% success rate, compared to 41% for venture-backed companies.

Market researchers Gitnux.org have more good news about bootstrapping companies. They say that bootstrapping companies:

• They are 3.6 times more likely to achieve profitability
• Achieve 25% higher customer retention
• Spend 33% less on marketing
• Achieve 20% higher employee retention

There is something about starting a business without investors that motivates entrepreneurs to save more (less marketing money) and be more profitable.

Bootstrappers find ways to reach profitability faster. They build businesses based on real-time customer feedback. You can take your product to market, find what customers want, and deliver more.

Bootstrapped companies also tend to have more loyal customers and even more loyal employees than venture-backed startups. Perhaps there’s something about being a small, scrappy company that leads to more customer-centric service and a happier work environment.

Lessons from a Successful Bootstrapping Company: PowerSetter

We interviewed a bootstrapped entrepreneur who built a company from the ground up. Mark Feygin is the founder and CEO of fully bootstrapped PowerSetter, a digital energy comparison platform that helps over 250,000 people save money on their energy bills.

“If you value maintaining full control over your business and are comfortable with slower, steady growth without external pressures, bootstrapping may be ideal,” Feygin said. “However, it does require a high level of financial acumen, a willingness to take on multiple roles and the ability to leverage your network effectively.”

Here are four lessons Feygin taught other entrepreneurs who were just starting out without capital.

1. Apply strict financial discipline

When you’re bootstrapping a business, every dollar counts—even if you just made a big sale or acquired new customers. “Track every dollar you spend and prioritize necessary expenses,” he said. “Avoid unnecessary costs and always look for cost-effective solutions. Use financial software to monitor cash flow and create a budget that aligns with revenue projections.”

2. Be versatile and adaptable

Small business owners have to wear many hats and be willing to take on any task or project. Sometimes you’re the CEO in the boardroom, and sometimes you’re the janitor. This is especially important for bootstrapped companies.

“From marketing to sales to customer service, bootstrapping requires versatility,” Feygin said. “It not only saves money, but it also gives you a deeper understanding of business operations. Learn new skills with online courses and apply them directly to your business.”

3. Focus on your customers and get their feedback

Small bootstrapping firms may have one surprising advantage: they are close to their customers. Their small size and the nature of having limited cash in the bank mean that bootstrapping firms are often more responsive to customers.

“Engage with customers regularly and ask for their feedback,” Feygin said. “Use surveys, social media, and direct communication to understand their needs and preferences. This feedback is critical to product development and can help you make informed decisions without expensive market research.”

4. Optimize your revenue

Bootstrapped businesses need to make money as they grow—and every new influx of revenue is another opportunity to grow. Find out what makes money for your small business and do more of it.

“Identify your top revenue streams and double-cap them,” Feygin said. “Experiment with different pricing strategies, upselling, and cross-selling to maximize revenue. Keep your sales funnel optimized and make sure your marketing efforts are focused and effective.”

Summary

Bootstrapping, like any other way to start a business, isn’t easy or risk-free. Success isn’t guaranteed. Gitnux says 66% of bootstrapping business owners work part-time while getting their business to profitability. But if you can hustle, learn, and adapt along the way, bootstrapping can help you get your business off the ground.

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