This post is the second installment of my bootstrapping an ecommerce business series.
I already wrote about the benefits of bootstrapping. I spoke how with bootstrapping you don’t run into debt and retain the control over the business and how it forces you to be creative and validate your idea before you launch it.
But as with everything in life, for each positive there is also it’s opposite counterpart. Regardless of how daunting bootstrapping might seem, you should be aware of some potential problems with it too:
1. A bootstrapped business grows slow
Building a business without significant financial resources to scale takes longer, fact. Moreover, you have to sacrifice many ideas that could potentially propel your business’ growth because you can’t afford them. You may not be able to carry all the stock your customers want from the start or hire help to increase the company’s productivity.
Because of those and many other issues, reaching your goals and milestones may take longer than you expected.
2. You may have limited stock options
Getting stock in will cost money. Unless you build a drop shipping business (which I personally believe to be a perfect way to enter ecommerce), you will have to either pay for the stock upfront or try to negotiate a pro forma orders. The latter is what Andrew Pallett did when launching Urban Alpha straight out of college but you should also be prepared that not every manufacturer offers that option.
3. You might not be able to hire staff straight away
It is only natural that once work starts piling up, you may start thinking about hiring someone. Without funds however you might have to hold it off until your sales reach a level permitting such an investment.
While it should not be a big problem in a long run, it can affect your business’ development in a number of ways:
If however you can learn to live with those limitations until your company grow to levels allowing you to hire, this will not be a problem.
4. You might get caught in emotional decisions
When you have to constantly choose what you spend your money on, it’s easy to lose track of which of those things are really important to your business. At the same time, having too much money might bring the same result. Nonetheless, when you have to pick only one thing, you can get caught in emotional decisions and focus on quick wins, rather than invest into what’s good for your store in a long term. The best example of this is investing in website functionality you think your customers need rather than research to find out what their actual expectations are.
5. Your competition might gain market share quicker
Your competitors, especially those equipped with better resources, might be able to gain market share quicker, ultimately overthrowing your position and impeding your growth. This is not a problem if you are fully aware of this situation and work to develop a unique selling proposition that will differentiate you from competition regardless of market share. It can however be stressful to see other businesses growing faster (and push you into emotional actions, see problems 4 & 7 below).
6. You can end up buying only cheap stuff
Similarly to emotional decisions, lack of money might force you into buying only the cheapest solutions. A strategy I am sure you know is never good for any business.
7. You might start changing direction at a pressure of the cost
This is not only a problem of bootstrapped businesses. It is however so persistent among businesses that try to grow with their own resources that I had to include it on the list.
When your sales go down, and given the nature of business they do, you might feel pressured to change direction and pivot from your original idea. Such actions might achieve some quick wins and improve your cash flow for the time being but ultimately they might sentence your business to failure in the long run.
8. In a bootstrapping model, clients take the centre stage
In a funded business investors take the centre stage, imposing their decisions on the owner.
Bootstrapping on the other hand retains you the control of the business. There is however a different problem with it. In a bootstrapped business, clients take the centre stage. This means that with limited resources, you are at their mercy. Losing a regular client for instance or having a dissatisfied customer complaining on social media and spreading negative feedback about you might cause a massive blow to your business.