Setting out to build any business singlehandedly is an undertaking, and a technology consulting firm is no exception. Just like many firms, 1Rivet started small and built into a big company by bootstrapping: leveraging growth without a leg up from external capital.
Bootstrapping allows you to maintain control across your business decisions and, when done strategically, sets your company up for prolonged success. These seven tips were crucial for developing 1Rivet into one of the fastest-growing consulting firms in the U.S. and can grow your business, too — whether you’re just starting to build your company or well on your way.
Be Tightfisted With Your Credit Lines
We were lucky to start out with a partner who could fund us (Thanks, Charlie), supplemented by a line of credit with a bank. Although we had income coming in, it was never enough to do all we wanted to do. Think carefully about where you’re going to spend your money.
We agreed we would only draw from the line of credit for things that led to growth, and not to pay ourselves or to pay overhead. We only borrowed to grow the business or to cover a gap while we waited for a client to pay.
After winning some initial contracts, we paid our partner back and had some cash to keep in our accounts to fund the company during lulls in business. But during our first year, there were weeks there wasn’t enough cash in the account to hit payroll, and there were clients who were late in paying. As owners, we’d pay ourselves last and put off paying our vendors to pay our employees.
Today, we have a solid line of credit to support our continued growth, but we follow the same rule for draws.
Go With Partners You Know Personally And Help Them Grow, Too
When we decided to hire developers offshore in India, we were fortunate to have a network of contacts there. I had worked with offshore most of my career, so I knew a lot of people who worked at small development companies in India. Some of them had gone on to start their own companies or had relatives who’d do so (relationships are paramount in India). We interviewed the people we knew and selected a small company as our partner. From that first project, we’ve stuck with our partner, helping them grow from 14 people to more than 120 over the past three years.
Our offshore partner was a development company that didn’t do testing or project management. As we grew in those areas, we had to hire people who knew those domains. The growth has been thoughtful and strategic. Even in our two buildings over there, the testers and developers sit on separate floors, so they don’t influence each other.
Here in the U.S., we use our network of friends and family to find amazing people both to work for us and with us and as contractors.
Don’t Pay For Private Office Space You Don’t Need, And Sublease The Space You Do Need
As consultants, the majority of our staff is either on the road selling or delivering services at our clients’ worksites. Instead of spending money on office space when we first started, we invested in JoinMe remote videoconferencing. We still use it to talk to our back-office folks in India plus, of course, What’sApp.
Sometimes you need to get together in person so you can see people’s body language and have huge whiteboards you can draw on. We migrated into an hourly WeWork space when we needed to bring our team together, but frequent use becomes expensive.
Even when we moved into a true office space, we worked with a broker and subleased a furnished space for $14 a foot from a company looking to get out of the last two years of its lease. We purchased extra furniture on Craigslist and built our own IKEA kitchen.
Now that we’ve grown to 60 employees in the U.S., we do have a headquarters office, but it’s only about 2,200 sq. ft. It’s mostly used by our chief operating officer, chief strategist, IT recruiters, and sales staff who like to work together at least four days a week.
As we move on to our next phase, we have more money, but we still think the same way. When this lease is up, we’ll look for another sublease with room for our whiteboards and space to meet clients
Add Employees Mindfully And Slowly
Hire only for roles that are core to your business. Do what you can on your own and outsource what you don’t have the time or expertise to do.
A lot of new companies think they need legal representation. When we were bootstrapping, we couldn’t afford an expensive lawyer to review SOWs. So I put to use the year of business law I took in college, looked up things on the internet, and asked friends for favors.
When you’re out selling, hustling, and delivering, you don’t have time for HR, PR, or accounting. Eventually, you have to offer healthcare, a retirement plan, and possibly profit sharing to attract employees and grow, but at first, you can probably get by with a payroll company, a bookkeeper, and an accountant to file your taxes. We didn’t move from having to bookkeeper to hiring a chief financial officer until we had $13 million in revenue.
Be mindful about every decision to move from outsourcing work to putting someone on the payroll.
Even If You’re Great At What You Do, Diversify Your Revenue Streams To Protect Yourself From Market Cycles
Once consulting was going well, we hired a part-time recruiter. He became full time, then we hired two more people and another salesperson. Our talent division now contributes 15 percent of our revenue.
Consulting generates uneven revenues because an engagement might last six months or two years. To offset that uneven revenue, we diversified into strategic outsourcing, a business with stable, multiyear contracts. We hired the two best consultants in strategic outsourcing and taught them how to build pitch decks and do sales cold calls. After 18 months, strategic outsourcing is winning contracts and adding real revenue to 1Rivet.
It feels great to say you added 25 employees last year, but if they’re all W-2s and 10 of them end up on the bench because you lose a contract, that’s going to hurt. Seek out a good blend of employees, contractors, and outsourced service providers.
Hire People Who Enjoy A Little Risk
It takes a special kind of person to work for a startup that doesn’t have a 401(k), might not be in business next year, and doesn’t have an official policy on much of anything. You can still sum up our unofficial travel policy in one sentence: Go with what’s right for the client and cheapest. Not all people are comfortable with corporate uncertainty. Some folks want to know you’ve been around for years. Others realize Arthur Anderson was huge and disappeared overnight after Enron. Seek to surround yourself with people who are OK with bootstrapping and will enjoy the journey.
Once Revenues Start Rolling In, Take The Opportunity To Give Back
By following my advice, you’ll reach a point where you do make money, and you start counting dollars instead of pennies. That’s the time to start giving back to your employees and to share your success with organizations that need money or time.
We’ve given money and donated items to Toys for Tots, Lu’s Labs, schools, and other local charities. Last year we did a nice infusion of cash into our employee’s 401(k)s because sharing our profits with the people responsible for our success is important to us.
Doing what you can to make the world a better place helps remind you what’s important when you’re hustling for the next dollar. Even the best companies don’t always win the deal or successfully launch the next great product. We lost a huge deal last year, and it was difficult. Sharing your wealth in good times helps balance the loss you’ll feel during the inevitable tough times.
While good and bad times fluctuate, consistently keeping your company’s growth in perspective while you’re in the process of bootstrapping is crucial. Think with an “up and up” attitude, be flexible, and modify these tips to suit your unique business needs to make bootstrapping your asset rather than your setback.