Bootstrapping using a paycheck is a tried and true method for starting your business. Learn Sramana’s tips for following this method.
- Another route for bootstrapping is the bootstrapping using Paycheck mode. And there you're going to preserve your day job and you're going to find a problem to solve around which you're going to start the validation exercise, your process, your journey of looking for a product market fit and so forth. And before you quit your job and go full into the business. Now, that process of finding what you're going to work on again goes back into searching within.
Is there a problem that you see out there that you are in a unique position to solve or that you're particularly passionate about solving? Then you go through applying the same validation methodology principles of figuring out which customers are willing to buy, what are they willing to pay, et cetera. And, you can, ideally, you want to start selling. The reason that's valuable, and again, I've used this actually with companies in the One Million by One Million program who are using bootstrapping with the Paycheck as their methodology of building a business.
We've actually in some cases gone all the way to break even before these entrepreneurs quit their jobs. That's a very, very powerful position to be in. If you have been able to get your business idea to a level of maturity where you know not only are customers paying, you have customer relationships, customers are paying, cash is coming in, and it covers your costs, you are in a particularly strong position.
Not all entrepreneurs get that far or want to get that far, maybe the amount of work just becomes a lot, depends on if you're a one-person team, or a five-person team, the specific case that I'm talking about, where they went all the way to break even was a five-person team. You may be a one or two people team and you have less resources, and it's just a bigger burden on you and you need to quit sooner. But at the minimum, I would say go until validation and achieving product market fit before making the decision to quit the job and go full time.
One big concern when you're using the Bootstrapping using a Paycheck method is that you're essentially doing two big jobs, right? You're doing your day job and you're doing another job as a startup founder. So, it is intense, it is a lot of work, and you're basically signing off all your nights and weekends into building the business. It's something that requires a trade off in life. You know, my take on life is life is full of trade offs.
So you have to, all points of life, you're going to have to make choices. Now, this is great if your family's comfortable with that, if you don't have a lot of family commitments that require your nights and weekends and so forth. If that is not the case, you should pause and decide against perhaps following this path because you don't want to blow up your marriage, those are not necessarily good trade offs to make.
One concern that comes up in the bootstrapping using services methodology is how do you prioritize, and do you lose focus. I mean if you're really only working on a product and that's all you're doing, you don't have to fulfill some service obligations, service contract obligations and so forth, you are really focused and you can put everything into building the product. My answer to that is it doesn't need to be one or the other.
I don't particularly believe in doing random service projects. Like for instance, if your product is in the realm of cyber security, and your service project is building websites for ecommerce companies, the two have no synergy. You don't learn actually from your service contract in the context of your product vision. But if your vision is in cyber security and your service contract is also in cyber security, if your vision is in IT management tools, and your service contract is also in IT management tools, those are synergistic areas where customer intimacy in the context of services is actually very valuable to bring into your product from a perspective, from a specs, from a customer input point of view, those are the best scenarios when it comes to bootstrapping using services.
Now you might be wondering if I'm bootstrapping a startup within a larger company, or even a smaller company, what does my employer think about it. There are actually multiple answers to that question. The first one is today, in a lot of large companies, innovation, intrapreneurship, entrepreneurship, all these are desirable qualities.
And desirable practices. So, you could very well be in an organization that actually wants you to do stuff like this, wants you to be entrepreneurial, wants you to do something that is forward thinking and out of the box, et cetera. In which case you might get support from your company to do that. We have lots of case studies where entrepreneurs have actually even raised seed capital from their employers based on this kind of work.
The one thing that you have to be careful about is disclosure. These kinds of things are best done with disclosure done in a clandestine way. Now, if the tricky situation comes if you are competing with your employer. If your idea is in a domain and in a business that is directly competitive with your employer. The employer may not want this motive and entrepreneurship to be happening within their employment agreement, in which case you're better off not pursuing this path.
And in some cases, some employers may not want this at all. Check your employment agreement. If in your employment agreement there is specific clauses that prevent or prohibit this kind of behavior, then you can't do it. Not in that company. You need to find a company where it is okay.