The secret to scaling your business fast.
“Bootstrapping” is noble in concept but more expensive than you think.
I’ve bootstrapped a business enough times to understand the benefits and the allure of building something without spending much cash. Unfortunately, the bootstrapping method is slow. It typically goes like this:
- Learn and practice new tasks yourself.
- Create a set of standard operating procedures so you can…
- Eventually hire someone else to run those procedures for you.
- Take on the next growing edge of the business and repeat steps one through three.
It’s how most people grow a business. You do each job yourself (initially doing five jobs at once), and gradually hire people to help as cashflow allows.
There’s a Better Way
What is the specific transaction that will generate cash for your business? Do you have a crystal-clear answer to that question?
If so, you can fast-forward the process of scaling your business (and your cashflow) very quickly. Furthermore, you can do so at a lower total cost than the bootstrapping method would require.
First, let me briefly outline the method, and then I will answer the single big objection that will no doubt arise in your mind.
Having your end goal in mind allows you to discover shortcuts to get there. If you already know what value you must create so that you can then exchange that value for cash payments from your customers, then you should turn on that cashflow as quickly as possible.
If you know how you are going to produce cash, you can get there very quickly by hiring people who already have expertise in the various roles required to produce the outcome you have envisioned.
Learning each role so you can create a system or process to teach someone else is the slow way. It’s the method called “bootstrapping,” which costs you a lot of money by delaying the time it takes to explode your cashflow.
You should not go through the painstakingly slow process of learning each step of the way only to repeatedly stretch yourself thin as you try to simultaneously hire, train, and manage employees to take your place-only to repeat that same process again. Trying to do that while also wearing five hats in your company is a recipe for disaster. It leaves you no room for your highest leverage activity: thinking and planning.
Why is bootstrapping expensive? It is expensive because your time is worth more than you think, especially if you have an entrepreneurial mind.
If you think bootstrapping is the smart way to save money, it’s because you are discounting the value of your own time. Allow me to stretch your thinking on this for just a moment with a simplistic example.
Earn Twice as Much Money in Half the Time
Your 16-year-old niece comes to you for career advice. She has been offered the opportunity to sell sets of high-end kitchen knives door to door. With her natural confidence and social charisma, she could easily make $8,000 in a summer. But there’s a problem.
Your niece lacks the $1200 needed to get started. She has to purchase a display set for her demonstrations when selling these knives. She tells you her plan is to take a job at McDonald’s earning minimum wage instead. She’ll only earn $3,164 this summer working four times as many hours.
Your niece does not relish the idea of cleaning public bathrooms and wiping ketchup off tables at McDonald’s, but she knows it is the necessary step to save enough money over the next two summers in order to begin her career as a knife set salesperson on year three.
Naturally, you are horrified. You would gladly loan her the $1200 needed to get started on the career path that better suits her skills and earning potential. You know she has a good business plan, and you harbor no doubts regarding her ability to repay the small loan within a month once you get her started selling knives.
Your niece is not convinced. She thanks you for the offer but insists that it’s wise to bootstrap rather than spend cash she doesn’t have.
Have you made the same mistake in your own business venture? It shows up a little differently for entrepreneurs, so let’s take a second look.
Your niece says, “I can’t afford the startup kit of knives so that I can earn more money.” For entrepreneurs it sounds more like this. “I can’t afford the help I would need to achieve a higher cashflow. So I’m going to do the job myself until I can afford it.”
Why not go straight to the end result you desire? Why not hire people who are already experts at the various roles you need to fill so that your company can instantly produce the highest quality result customers will line up to pay for?
That includes the marketing experts who ensure your ideal customers hear about you. It includes the operations manager who expertly tracks all key objectives, employee performance, and new growth initiatives. It includes the help of a process engineer who works to capture and refine each new system and process required to constantly improve the product or service your company delivers.
It all sounds great in theory, right? But I can hear the objection rising in your mind, “I don’t have the cashflow to pull that off yet.”
Can’t afford it?
Look, I get it. You have a family to support. You don’t believe in taking on risky debt. You want to sleep soundly knowing you’re not in debt to anyone. You’d rather use sweat equity to test your idea.
I agree with all these objections. Fortunately, there’s a way to apply the principle here without taking on venture capital funding or a second mortgage on your home.
The solution is to hire based on speed of return on investment (ROI). You don’t start by hiring every person you’d love to have on your dream team. Instead, you treat this process like a rolling snowball that builds up momentum quickly.
It might be tempting to follow traditional advice by first hiring out the tasks you least enjoy. Or you might be tempted to outsource the task that takes up the largest chunk of your time. Both of these approaches would be a mistake.
Focus on speed of ROI. In other words, focus on hiring or outsourcing in ways that generate the fastest turnaround of cash invested.
Typically, this will be someone involved in sales. It could be an agency that brings you leads, or an in-house salesperson with experience and a proven track record in your industry.
What’s that? You don’t even have the budget for one in-house salesperson? No problem. Go to someone who is successfully employed, already doing the job for someone else. Ask them to work for you at an unusually high commission just four hours per week on the side.
Why start with sales? Because it unlocks the cashflow needed to hire everyone else more quickly!
Rather than learning sales skills yourself, put in a few extra hours working at your day job, and use that cash to pay a true pro to speed things up. Rather than bootstrapping it with your own sweat equity, use your cash to barter for the time of someone who can achieve ROI for your company faster than you could by trying to do it all yourself.
Don’t have a day job? You only need a short-term loan until the new hire begins producing ROI. If you start by hiring the people who can increase cashflow almost immediately, even a 30-day credit card loan can bridge the gap between the day you hire and the day your cashflow begins to surge.
Remember, it’s just like the situation with your niece. With a $1200 loan she can immediately begin producing a much higher cashflow that allows her to pay off the loan very quickly.
If you know how you are going to produce cash later (once you scale), then why not turn on that cashflow right now? You can get there very quickly by hiring people who already have the expertise you need. It’s much quicker than trying to learn the role yourself, only to become the bottleneck in your business.
The smartest entrepreneurs I know are very careful about one thing. They are constantly on the lookout for quicksand (recurring activities that take up their time).
They avoid taking on the “doing” roles in their businesses because they recognize it’s impossible to scale their own time. They only have 24 hours a day, and they carefully protect that time so they can spend it on thinking and planning, plugging together the right people and resources to unlock value for the rest of us.
The Patterns of Success
The honest truth is, I’m not smart enough to think up something like this on my own. I never would have discovered a strategy like this if it wasn’t for the fact that I serve entrepreneurs as a productivity coach. Here’s what happened.
Smart entrepreneurs hire me as a psychologist and productivity coach to help them with accountability and follow through. During my discussions with them, we inevitably end up talking about their high-level business strategies.
Over time, I began to notice patterns. Some of those patterns reliably distinguished between my less successful clients and my most successful clients. It’s an odd feeling to be hired as a productivity coach by business owners who make more money in a week than I do in a year. But over time, you get used to it, and you begin to notice the active ingredients of success that separate them from the rest.
One of those key distinctions is that they don’t bootstrap. They understand the concept and yet they choose not to do it. To them, bootstrapping is too risky. It’s too costly. They’ve learned the true value of time.
What’s the value of your time? Does a year of your time matter to you?
What will your cashflow be like a year from now? Take a look at your agenda for the next week. What mindset and mentality does it reflect? Bootstrapping? Or scaling fast to reach the outcome you know is within your reach?
P.S. If you’re interested in learning a few more of these distinguishing patterns and methods for scaling fast, I’ve captured them in an online course you can access here.
It catalogs the highest-level productivity strategies I’ve ever seen. It’s basically a toolkit that captures the mindsets that differentiate entrepreneurs who are scaling their businesses rapidly from those who seem to struggle to gain traction.
Originally published at https://www.toddsnydercoaching.com.