Bootstrapping = Using Freelancers Effectively

To bootstrap well you absolutely need the flexibility of hiring and managing freelancers well.

This is the conclusion i’m making more and more as we continue our journey with my D2C ecom brand, Reviv.

I feel like i’m riding on my foundation the past 4+ years of using freelancers as part of my Beast Method.

The uncertainty is far too high early on to hire people and yet you still want to grow and try new things.

How do you do that?

You need to be really good at finding and managing freelancers.

And today I want to discuss this in a bit more depth.

Last month at Reviv

I want to set some context to my thoughts today. We had a very solid revenue month, well over 100% month-on-month, however my profits came in far lower than I had hoped.

We’d made a lot of investments that will take at least a couple of months to get a solid return on and I figured I had it covered with the increased margin that our growth was gonna generate.

The problem that I didn’t realize till we calculated our P&L at the end of the month was…. our product mix had also changed quite a bit. We were now selling far more appliances without support. And support is where most of our profits come from as it’s nearly 100% margin.

And since we’re boot strapping and using our own cash reserve to fund the business… we needed to turn the dial back on some of our costs fast.

Scaling back the costs

The minute it sunk in as to what had happened to our margin I went to work thinking about what this would mean for the current month.

There were certain costs that were one-offs last month and we’d play it far more conservative in April, so that would help to some extent.

But we’d need to go further. And so i started scaling back on some of our ‘extras’.

• For example I was having someone help create more podcast content. Paused.

• I was about to have someone scale us to a lot more affiliate networks in the US. Paused.

• I was thinking of having a freelancer create a more robust content strategy. Paused.

• I dialed back the hours on 3-4 of our freelancers who are creating content and doing various marketing activities for us.

All of this took me a few hours to implement. A few emails and comments on Clickup cards and I was done.

It was almost like turning off a faucet.

Let’s look at what happens to most startups when this happens

Most funded startups go and hire lots of people. Particularly executives.

And those executives start hiring their teams.

Almost all of whom end up being full-time employees.

But what happens if the business doesn’t take off as expected? Or what if the burn rates ends up being much higher than the cash position allows for?

I’ll tell you what.. because i’ve seen it many times in companies that i have worked for in the past.

They start laying people off. Many of whom hadn’t even been working for very long. And that often means paying some kind of severance.

Additionally, it means that a lot of projects end up getting paused and so the people that are not laid off end up being utilized far less. So you’re still paying them a full-time salary but now they’re only required to do a fraction of what they could.

I don’t have any of these problems. I don’t have to pay a dime of severance.

I don’t have to apologize to some exec as to why I hired him from his other job and then needed to lay him off only a few months later.

I don’t underutilize anyone.

I turned the faucet back on my costs like i’m turning off the faucet in my bathroom.

Managing variability is critical to bootstrapping

When you’re bootstrapping you don’t have deep pocketed investors you can call in at the last minute. So you need to be a lot more careful.

And you’re still subject to the ups and downs of any other startup. So how do you manage the variability?

Well, you get really good at something like the Beast Method. Where you’re managing freelancers very tightly and dialing them up and down at the drop of a dime.

Sure it requires a bit more work for you, the founder, as you need to get more in the details. But it is so worth it in my book.

Why? Because everytime founders of VC-backed companies make these expensive mistakes it means that they need to raise more money faster.

When VC-funded companies are ‘forced’ to raise money its a downward spiral

When founders ‘need’ to raise money it essentially usually means selling away their control. Which in turns means trading away their vision till one day they are just a pawn of their investors.

And usually the story even gets worse. Because you’re bringing these new investors in at a time when they have poor leverage, which in turn means the terms are very unfavorable to the founders.

And that, in turn, translates into a situation where the company needs to be even more of a homerun for the founders to make a good financial exit.

A double or a triple no longer cuts it. And that raises the risk a lot.

Because you probably have like a 30% of getting a double or a triple, but only perhaps a 10% change of getting a homerun.

And therefore the founders often find themselves in that other 90% eventuality of being screwed in the end. After all that work.

Closing thoughts

These days it is no longer cool in my view to raise big rounds and flaunt the fact that you’re selling your company away to your investors.

Because the reality of most of those companies is that they will never become the thriving success that makes all the founders lots of money.

More likely they will be a mediocre success, which will only potentially make the investors a decent return. While leaving the founders with a return that they probably could have beaten had they worked for someone else.

How do you avoid this? You stay extremely flexible with your cost structure.

And how do you do that?

Beast Method + Freelancers.