Founders need to build real sustainable businesses from day one.
That doesn’t necessarily mean being profitable from the start, but setting yourself up for success by not relying on huge amounts of capital coming in. We talk a lot about how to fundraise but that is not always the solution for a new business to grow. I encourage founders to not only rely on the boom cycles of VC that come and go. We need to be thinking about how can we strategically set up to deliver ROI on smaller budgets.
In this kind of environment, it’s critical for founders to consider bootstrapping their own business and to examine their profitability timeline to move out of the red and into the green more quickly. Let’s talk about the benefits of building sustainable businesses from the start:
# 1 You Make Better Decisions
When a startup has limited capital it is forced to make tough decisions about where to allocate resources, this can lead to a deeper understanding of the business and its metrics.
When a startup has a large amount of capital on its balance sheet, there can be a tendency to spend it freely without necessarily thinking through the potential risks and rewards of each investment. This can lead to a lack of focus and discipline, and a failure to prioritize the most important growth opportunities. In contrast, when a startup is running on fumes, it has to be much more careful about where it invests its limited resources, and this can lead to a more thoughtful and strategic approach to growth.
Less capital can mean entrepreneurs prioritize the most critical aspects of the business and focus on what really matters. This disciplined approach can result in a more beneficial growth trajectory, making a better business and a better entrepreneur.
#2 It Might Lead to Investments Later
One of the main goals for any company is to demonstrate that it has a strong potential to generate a high return on investment (ROI) for its investors. This can be achieved through various means, such as developing a strong business model, building a talented team and securing key partnerships. However, another important aspect that can demonstrate a company’s potential for delivering ROI is the ability to operate efficiently and effectively with smaller budgets.
Operating on a smaller budget is not only a sign of fiscal responsibility but also a showcase of the company’s resilience and adaptability in a challenging market, that they are able to maximize resources to achieve goals. This can be a powerful selling point for startups looking to attract external investors in later funding phases.
In the latest episode of Venture Forward, I was joined by Deborah Benton, Founder & Managing Partner at Willow Growth Partners. Benton has decades of experience in nurturing growth and supporting founders. By building a strong community around founders, she is able to set them up for long-term success. This kind of support is crucial in the early stages of a business, where the right guidance can make all the difference.