If bootstrapping was easy, every startup would do it rather than spending so much time and energy courting investors and diluting themselves. In reality though, most businesses that launch without adequate startup capital fail. According to statistics compiled by U.S. Bank, 79% of all startup failures trace back to inadequate financing.
Ross Andrew Paquette has found a way to beat those odds. He’s the co-founder and CEO of Maropost, a digital marketing automation technology company he grew for years without outside capital.
Ross has led Maropost’s growth from a two-person operation into one with more than 200 employees and over $50 million revenue. Here are some of the key lessons he’s learned bootstrapping his business.
Be customer-driven in everything you do
Although Maropost is now working toward becoming an all-in-one ecosystem to help eCommerce companies scale up their marketing automation, it didn’t start out that way. In the beginning Ross was trying to build a self-funded startup that would help him lead a comfortable lifestyle.
“I was living in Toronto and was looking to build a business that could generate around $500,000 in annual revenue supporting around 10 clients. But it became clear after the first year or two that there was a path to a much bigger business if I was willing to put the time and energy into scaling things up.”
The key to making that leap, he says, was by focusing on running a lean operation and putting Maropost’s early customers first. Ross says, “We managed to increase revenue from $300,000 to around $3.5 million annually with no in-house sales and marketing team to speak of. Our early customers became evangelists because we did everything in our power to provide them with the tools to succeed. And their success became ours.”
In other words, investing in making customers happy led to organic growth.
Replicate success by continuing to do what works
One of the reasons that startups run into cash flow issues is that they believe that scaling translates to building a larger organization. However, that is misguided according to Ross. “It’s important to recognize what works and what doesn’t in your operations. If you can identify processes and workflows that lead straight to revenue, invest more in those. But you don’t have to add more management layers and extraneous business functions in the process.”
In general, a bootstrapped business should be allocating its dollars to functions that will make more money, and not much else. Ross explains, “In Maropost’s case, we were lucky in that neither my co-founder nor I had any idea what growing a startup by the book looked like. Because of that, we didn’t fall into the trap of making business decisions based on what other people thought was right for each stage of our growth. Instead, we doubled down again and again on the things that made us successful in the first place.”
Especially in bootstrapped businesses, identify your strengths and continue to invest in them before looking for other avenues of growth.
Know when to step back and look forward
Getting a bootstrapped startup off the ground means running lean for as long as possible. However, there will come a time that continuing to operate that way will stifle growth. And transitioning from a lean startup into a growing business is something founders can struggle with as it means ceding control over parts of the business to others.
According to Ross, “When you’ve been involved in every area of your business from the beginning, it’s really hard to unwind the internal discussions you’re used to having and just trust that someone else will do a good job making decisions in your place. But you’ve got to be willing to give your team space and power to make decisions. You can’t and shouldn’t need to be everywhere or something’s flawed in your business model.”
Turning over responsibilities to others allows you, as a founder, to step back and start thinking about the future of your business. It’s challenging to stay consumed with day-to-day operations and still give appropriate attention to developing forward-looking strategies. Once you’ve assembled a trustworthy team, you have to let them do what you hired them to do. That’s critical even if things don’t always go as well as you hope.
Ross says, “Getting comfortable with other people’s mistakes is hard. They always feel worse than mistakes you’ve made, even when they’re not. Keeping everything in the right perspective is important because you don’t want to split your attention between second-guessing others and doing your job.”
Unlock unlimited potential
Not every bootstrapped startup will rise to the heights that Maropost has, but it serves as an example of what’s possible. From its humble beginnings in Canada, it’s now one of North America’s fastest-growing marketing automation platforms and now expanding internationally with a recent acquisition of another major firm in Australia
By making every decision with the customer in mind, investing in what works, and empowering your team, a startup with a good idea can go as far as your hard work will take it.