How Bootstrapped Businesses Grow (and 5 That Did)

As a high schooler, I had a part-time job at a dry-cleaning business. It wasn't the most glamorous or engaging job and I worked alone. Since there was a lot of quiet time between customers, I had the opportunity to daydream.

I've always had an entrepreneurial spirit, and I thought to myself:

If I could start my own business, what would I do?

My key requirements for the business were:

1. It had to be inexpensive to begin.
2. It needed to be something I could do on my own.
3. It needed to have a positive impact on customers.

Through a lot of Googling and research and reading at the library, I decided I'd make soy candles.

Why soy candles?

1. The startup costs were manageable for a teenager on a minimum wage budget.
2. I could manage every aspect of the business (production, marketing, sales, etc.).
3. Candles made from soy wax are more eco-friendly than the paraffin wax used by most brand name candle companies.

After learning how to make candles through YouTube videos, books, and blog posts, I was ready to get started. I created a business plan, used a portion of my savings, purchased candle-making materials, and made my first batch of candles in my parents' kitchen.

Since materials were my biggest expense, I had to minimize costs in other areas. I used a free tool to create my website and social media (e.g., Facebook and Twitter) to get the word out about my business.

Reflecting on this experience, I realize 15-year-old me built her own bootstrapped business.

While my business didn't see the same success as well-known, bootstrapped businesses (e.g., Apple, Dell, Facebook), it did allow me to run it effectively with little capital and resources.

You'd be surprised by how many successful businesses got their starts from bootstrapping. Ready to find out which companies are actually bootstrapped businesses? Let's take a look.

What is a bootstrapped business?

A bootstrapped business is one that's started without external assistance or investment. These businesses are often funded on personal savings. The money earned from sales is reinvested in the business to help it grow.

It's often used by small businesses and startups as an early-stage strategy. Then, once the business is more established, some entrepreneurs accept outside investment and funding.

Bootstrapping Business Strategy

Bootstrapping is predicated on the ability of the organization to run efficiently on its own revenue and internal investment. In order for it to be a successful strategy, the leadership team of the organization must make good decisions when managing cash flow, budgeting, acquiring assets, and sharing equity.

Bootstrapping works well for organizations that thrive best when innovating for necessity. At the same time, it requires strategic planning to be executed in a way that's beneficial, and not harmful, for the company. Here are the main plays for a successful bootstrapping strategy:

1. Managing Cash Flow

The bootstrapping strategy works best for businesses with short business cycles so that managing cash flow doesn't become an issue. Otherwise, you'll need to plan to have enough cash on hand for all operations. The last thing you want is capital tied up when you need it most.

2. Budgeting for Need

The art of bootstrapping really comes down to making good decisions — with access only to personal and internal capital, each expense should be carefully considered. Despite having greater creative freedom due to the lack of external stakeholders, it's important to categorize expenses into "musts" vs "would like tos" to keep perspective and stay running lean.

3. Acquiring Assets

In the context of bootstrapping, the discussion often involves acquiring financial assets, but there are other assets that must be acquired at as little cost as possible:

• Skilled employees to fill knowledge gaps
• Relationships with third parties, vendors, and clients alike, who can add value to your strategy
• Tools and resources for streamlining operations at little to no cost

4. Sharing Equity

While it seems counter-intuitive, bootstrapping may involve leveraging equity instead of capital. There may be situations where accepting smaller profit shares for the growth of the company may be necessary such as implementing performance-based profit sharing with internal stakeholders as motivation or entering into strategic partnerships.

Advantages and Disadvantages of Bootstrapping

Bootstrapping isn't for all businesses or even business models. Weigh the pros and cons as you decide if this financial strategy is right for your organization. 

Advantages

Financial Control

With bootstrapping, you are in control of all finances because it's your money that's being used to fund business activities. This allows you to allocate the money to areas of the business that you believe are the most important.

Creative Freedom

Since you aren't responsible to investors, you're able to use the money in the way you see fit. You have the freedom to identify the things that are most important to you and your business.

Reinvest Profits

Instead of paying back investors, you can reinvest the money you earn into the company. This could be spent on product development, marketing, or other areas of the business.

Disadvantages

Personal Risk

Since you haven't taken any outside funding, you're personally responsible for the results of the business. This can be especially challenging if the business goes under and you're left with loan and credit card debt.

Lack of Connections

If you don't pursue funding it can be more challenging to find opportunities and connections. When investors and venture capitalists invest in your business, they often bring their expertise and network with them. Without their advice and connections, it can be challenging to identify potential business opportunities or partnerships.

Slower Growth

Depending on how much money you have to invest Typically, more money allows you to invest in product development. So if you're strapped for cash, it can be difficult to grow your business quickly.

Examples of Bootstrapped Businesses

These businesses began with a bootstrapped model and ended up flourishing. See how they were able to achieve great success:

1. Apple

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Apple was founded in 1976 by Steve Jobs and Steve Wozniak. They started building computers in Jobs' parents' garage. They started with a minimum viable product (MVP), the simplest, most basic version of your tool or service possible. It was named: Apple I.

This quote from Steve Wozniak sums up his intention behind starting Apple:

"My goal wasn't to make a ton of money. It was to build good computers."

A mindset like this is necessary when bootstrapping a business. Growth is often slower when you fund your business yourself. Your priority should be to create the best product or service you can.

With a well-developed product, you'll have satisfied customers and word will spread about the quality of your product. Fast forward to the present day, and Apple is valued at over $1 trillion dollars.

2. Patagonia

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Patagonia's founder, Yvon Chouinard, began making pitons (metal spikes used to secure mountain climbing rope) in 1957.

"Chouinard made his first pitons from an old harvester blade and tried them out … on early ascents of the Lost Arrow Chimney and the North Face of Sentinel Rock in Yosemite. The word spread and ... before he knew it, he was in business."

He built a shop in his parent's backyard and he sold his climbing gear from the back of his car. This led to the creation of Chouinard Equipment, which became the largest supplier of climbing hardware by 1970. The business eventually became Patagonia, and Chouinard didn't take outside investment along the way.

Patagonia has seen even more success in recent years, with Yvon Chouinard's net worth valued at over $1 billion and Patagonia's sales approaching $1 billion as well. When asked about its success he says, "I know it sounds crazy, but every time I have made a decision that is best for the planet, I have made money."

The company continues to innovate. And Chouinard's passion for change, and changing the world for the better, is reflected in his business.

3. PleaseNotes

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PleaseNotes sells personal development and motivational paper products such as affirmation collections, guided journals, and decals. The company has been endorsed by thought leaders such as Les Brown and Monique Coleman and has gained popularity on over 15 countries.

But the company itself was born from a weird period of transition. Founder Cheryl Sutherland took the leap and quit her corporate job to follow her passion of helping people become their best selves. She began in 2016, using her personal savings, credit cards, and crowdfunding to get PleaseNotes off the ground. After meeting and then being subsequently ghosted by investors and turning down one bad investing pitch, she chose to continue on her own.

After securing a grant and getting mentorship, PleaseNotes got the boost it needed. The business has been featured in publications such as Forbes and Fast Company, and PleaseNotes products were finalists in the 2017 National Stationery Show for "Best New Product."

4. GoPro

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Bootstrapping allowed GoPro to begin its journey to success. Founder, Nick Woodman said:

"The slow bootstrap worked really well [for GoPro] … As long as you can bootstrap not at the sacrifice of competitive advantage, bootstrapping is a really powerful thing because it allows you to be totally devoted to your vision."

Woodman realized the importance of having control over your business, without the pressure from outside investors. By staying true to his business, he was able to build a company that had a $3 billion valuation at its IPO.

5. Spanx

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Sara Blakely, the founder of Spanx, bootstrapped her business with $5,000 from her personal savings. She had the idea for her company when she was working as a door-to-door, fax machine salesperson. To save money on legal fees, she even wrote and filed her patent application herself.

Her advice for entrepreneurs is clear, "Don't be intimidated by what you don't know. That can be your greatest strength and ensure that you do things differently from everyone else."

As a bootstrapped business, it's important to rely on your creativity and innovation to grow your company. With the success of Spanx, Blakely now has a net worth of over $1 billion.

Keeping the pros and cons of bootstrapping in mind along with the lessons from these four inspiring companies, you'll want to decide if bootstrapping is a strategy that you want to use in your business. 

Editor's note: This post was originally published in May 2019 and has been updated for comprehensiveness.