Ryan Rutan: On today's episode, Will and I cover what it really takes to bootstrap your start up from zero. You're probably wondering how the heck do I get the people I need market my stuff and keep the lights on without big money. We walk you through it all step by step from how to compensate people without paying them the big bucks to how you can build your first marketing department and more, you'll find out the strategies that work for us bootstrapping 10 plus companies to over a billion dollars in total reven. So let's dive into making it happen against the odds. Enjoy the show. Welcome back to the episode of the Start Up Therapy podcast. This is Ryan Rin joined as always by Will Schroeder, my friend, the founder and CEO of start-ups.com. Will. Uh you know, we talk a lot about bootstrapping. The entire start up world is starting to talk a bit more about bootstrapping, which we're really happy about because we do want people to remember that funding is not the only path to success with a start up company, but then it begs the question, how do I actually pay for all this shit if I'm bootstrapping, how does this actually work? Right. Cool. I'm not gonna go raise money. But how do I pay for things with money? I don't have is the lingering question that we're always left with.

Wil Schroter: You know, I'm tired of not answering it. Right. I'm tired of saying, well, everybody bootstraps,

Ryan Rutan: bootstraps. Everybody does it

Wil Schroter: figure it out. Yeah. Well, it's this weird thing is, is we just say bootstrapping as it's as if it's this magic Pixie dust. But if we just say bootstrapping, you're like, oh, there is that pile of money? I did. No. Oh, hang

Ryan Rutan: on. It's right next to my Amex. It's the bootstrap there. There it is. I've got it. I found it, I got my bootstrap

Wil Schroter: and it's become this overused. Um, almost like, totally amorphous term to mean you don't have money. And it's like, how useless is that as feedback. And I say that as a guy who gives that feedback and I'm tired of giving that feedback. Right. I'm tired of giving all the time because I know what it means, you know what it means. But I'm 99% certain the people that we're talking to just look at us going. Yeah. Great. You solved nothing

Ryan Rutan: for me. Go continue to not have money and not buy things and nothing like

Wil Schroter: you, you, you and your magical bootstrapping today. I want to dig into exactly what we mean when we say pay for things without money. Right. How do I hire people? How do I, uh, be able to do things like launch marketing? Which is like one of the first things I'm gonna raise money for anyway. Um, how do I pay for all the stuff? Right. Because it's cool that I'm quote bootstrapping. But what does that actually mean? So, we'll dig in today, we'll talk about those different categories. We'll talk about the actual, um, techniques that folks use like how it's actually done. What's worked for us, what works for other people. We'll let you know this is what you can do. And specifically, here's what you can't. There's plenty, there's plenty of limitations here

Ryan Rutan: because there are a couple of do not flies, do not do

Wil Schroter: this. Let's set it up just by, at a high level. Um Talking about where the challenges are kind of in this space now. Everybody knows I don't have money, right? Shaq. OK. Uh That's clear. But what we're really saying is I know I need like $500,000 to, to capitalize this business, to pay my, my salary to pay for a couple of the people and get shit done. There's nothing you're gonna tell me in this podcast that's gonna show me how to get $500,000 with, you know, without an investor, et cetera and you are 100% right? You're not getting $500,000 right? The first thing I wanna start off with that's not how this works, right? Part of what we're implying when we say bootstrapping is trying to figure out how to beg borrow steel, which we're gonna talk about specifically, um, for tiny milestones that, that's where I want to start things off. Right? Like all we need 500 K to do the whole thing. It doesn't work that way, it

Ryan Rutan: doesn't work that way. I think that's the, that's the biggest misconception in bootstrapping is that I need $2 million to go build my product. Begin marketing, hire a team and do all this other stuff and have 18 months of runway. And so you say bootstrap? Ok, cool. Then I have to bootstrap 2 million. That is not at all. I know you just said this, but I'm gonna reiterate. That's not what we're talking about. When we go to bootstrap mode, we are talking about getting really nitty gritty with the calculus around. What is the next thing? I desperately need to just move an inch forward? We're buying our way to the finish line, an inch and a dollar at a time. Not big tranches a fund that's, that's called funding, right? This is not funding. I'm gonna remind everybody. Bootstrap is not funding, right? So we're gonna talk about the not funded path

Wil Schroter: here. You touched on something that's super important and, and kind of how I wanted to frame this. This is about operating week to week. This is about operating week to week. I'm, I, and I don't want to even say hand to mouth. Use one of these bizarre euphemisms that doesn't have an actual context to it. We are planning, spending, executing and returning on a seven day window. Ok. We're making decisions within seven days. Why? Because that's all we can afford. That's how far we could look out. And if that, if that seems small minded, if that seems like, well, uh, what a shitty way to run a business. It is later. It is later, right? If you're seven years into it and you're still doing that, things haven't gone. Well,

Ryan Rutan: the boots off

Wil Schroter: exactly where you're at now. Um, you know, in the, in the very formative stages is you're just learning, you're just trying to figure out how to get from point A to point B as fast as inefficiently as possible. So again, let's go back to the three categories that we'll cover. We'll start with the first one which is people, then we'll get into marketing and then we'll get into what I'm just gonna collectively refer to as stuff, just everything else you need. How do we pay for people? Uh Ryan, when, when you talk to folks that are, say, hey, I need to bring this person on develop or whatever, what do you

Ryan Rutan: tell them? Ok, I think it depends, it depends on, you know, the, the situation depends on what that next milestone is. How far are we from being able to generate cash with that decision. There's a lot of things that go into it. But at the high level, you know, there's, there's a couple ways that we can do this and I think the two that you and I probably recommend most often are some version of equity or deferred comp, right? This is where this is where we're going to start um equity deferred comp or in some cases depending on who you are and what you do, there may be some horse trading that can be done. There may be some bartering. I have certainly in the past done work for people and gotten their work in return, they need something I need. I can, we can, we can do a horse trade. Those are the three, right? And actually in order of preference, it would be the reverse order. I would love to barter time for time. Um so that I can get what I need without parting with, with equity or without stacking up debt in terms of deferred comp, I would say in terms of ease. Um deferred comp is often an easier sell because look, equity is a form of deferred comp anyways. Yeah, it is. But it's a, it's a form of deferred comp with a much lower likelihood of an actual payout whereas promising to pay somebody, then they assume rightfully so that someday you are going to pay.

Wil Schroter: Right. Of course. And here, here's the way I would look at it when, when we say to somebody that it's, it's always, I need to hire a developer. Right. And I don't have any money, so I'm gonna go raise money. But I can't, investors won't talk to me. And by the way that that's why they won't talk to you because you're supposed to have been able to figure this stuff out before you get to them. They don't just give you a magic check and say, OK, now you don't have to worry about anything. It just doesn't work that way. Right now. Again, you also don't know that because you've never gone through this before. So that none of this makes sense, which is why we unpack this stuff. So first things first, we need to find this developer. What what are we gonna say to them? OK? We find a developer, you know, let's say some random place like upwork or something like that. And we reach out to him and say, hey, I've got this project. I don't have any cash upfront and I understand cash is king. I get it right? Not, not um masking that fact. However, here's what I would like to do. I'd like to be able to get to this tiny milestone, not build the whole product, tiny milestone just so I can have something to show either customers, investors, et cetera and for your time and investment, you'll get uh X amount of stock right? Usually a very small amount of stock, a lot if you're doing it all wrong and you're like, why would anybody agree to that? Yes. And that is how most companies get built.

Ryan Rutan: Yeah. Yes. It sounds really difficult and yet somehow it still happens every day, day in, day out. You, you made a great point here. I want to stick on it for a second. Which is that, uh, too often what we see is somebody pitch like, yeah, and we've, we've told the, the horror stories around this around like, you know, you, you need, you need to get some little feature developed. We need to get an MVP or a proof of concept app out the door. Uh Something really basic and what do they end up doing? Giving away a bunch of equity and bring on a CTO who it turns out was just a relatively run of the mill junior developer who's now your CTO. You can see how well that ends and you gave a bunch of equity to do it. Cool and cool. So I think that there's two things about this. I think that when you make a mountain out of a molehill and you're like, we have all these crazy things to do here is what we're building because we get so used to pitching the vision that we pitch way too much and we make it sound like a lot of work because it is, but it's all undefined we don't really know what we're doing long term. We have no idea what we're actually gonna end up building at the end. And so we over pitch, the, the, the, the workload for what we actually need for right now for, if we're thinking about in terms of a week, we're pitching up 35, 10 years worth of development. And we're like, what we actually need is a feature by next week. So we oversell it. So then we have to overbuy. So now we have to bring them on as like a full season eto, we have to give up way more equity because you're gonna do all this stuff because if you're just like, hey, I need to release this feature by, by like, you know, two weeks from now and like, I, you bet the skill set to do it. Uh What if I kicked you a little equity or some defer operate? That's a much easier conversation to have. You're much more likely to get a yes because they're looking at going, yeah, for them. That'd be really difficult for me. That's like three or four hours worth of work. Cool. Right. I don't need to be a partner in your company to do three or four hours of work. Um, you don't want me as a partner in your company to do three or four hours of work. So, I, I think it's important to make sure that we're right. Sizing the ask and the give, um, and, and buying what we actually need with the person we need at that

Wil Schroter: time. That, that is exactly it. Right. So, I, if, if I only need two months worth of work, why am I trying to hire a full time CTO to quit their job to come work for me? Right. Just to your point. Hire what you need. If you

Ryan Rutan: need a date to the prom, don't send out marriage

Wil Schroter: proposals. Yeah, exactly. You're, you're over selling it also. If you, if this person can't get past this first milestone of delivering something in two months, who cares how committed they are after that? Because they suck.

Ryan Rutan: Exactly. You'll be really happy. They don't have 30% of your cap table at that point.

Wil Schroter: Right. Right. There's this great story by, uh, Felix Dennis, who's the founder of Maxim magazine, uh, the week, a bunch of biz bizarre stuff. But he's this crazy guy. Um, that's lived this incredible life. He's passed since then. But, uh, he lives this incredible life and he wrote a bunch of books, uh, toward the end of his life and one of the books he wrote was called How To Get Rich. Right. And I love the title. It's, it's so spot on. Right. But he's this, like quirky brit and like, he talks about his life in a very bizarre way when he first started back, like, in the early seventies. One of the things he wanted to do was create a, uh, uh, a comic book. He tells the story about how he, like, went to each person in the production line, the writer, the graphic designers, the printers, everyone, right, the marketers. And what he said was I found out what was important to each of them and I sold them that. Exactly. And he said, so I went to the writers and I said, you know, you'll get your, buy a lot on here in a way that you've always wanted. I went to the designers and I said, you'll be able to create something, draw something that you've wanted to draw, you'll have total license. Whereas before you're just like a person with a, with a paintbrush, right? Um, I went to the printer and I said, I'll pay more than you'll typically get on your rate if you just defer the, um, payment terms. Right. And he's like, and that's how I paid for it. He said that at the time I had deposited £50 into, um, uh Lloyd's or, or wherever he was banking at the time, I think it was Lloyd's. Um, and he said within two years that that turned into £500 million or I'm sorry, uh, £60,000 that I think he said was a half million dollars in today's uh dollars. Right. And he's like, and I never had a penny. All he did was align what he needed with what other people's interests are, my problem is most people are too lazy to do that. They're two better. It

Ryan Rutan: is. That's the hard part. Right. You have to do, you have to do the investigative journalism, you gotta dig in, you gotta find out what is going to motivate these people. What, what do they want to get from this? Because that's, ultimately, that's the, that's what they're thinking on their side. What's in it for me? What's in it for me? Uh Normally if I work, there's cash in it for me, you have no cash. So what else is in it for me? And I love that story because it's, it's exactly what bootstrapping is about bootstrapping. Isn't this like prescribed particular path around? You always pay for developers this way, you always pay for marketing this way, you always do this this way. It's about looking at each situation and saying in order to get to the very next milestone, I think you put it beautifully. What? To get to next week to get to keep playing this game. I have to win this round. How do I win this round? How do I win this hand at the table? Yep. And think about all the resources available to you and what is the scrappiest way I can get to that result with what I have knowing cash isn't one of those things. This is what's constantly happening in bootstrap. It's a crazy, crazy process that I don't know, has ever looked exactly the same twice and we've done this number and number of time and time again. Right. Well, that we build our businesses and it's never looked exactly the same, that underlying principle has always been the same. How do I make sure I'm not asking for anything more than I need at any given time. And I mean, this across the board, like it from the, you know, my own desires with what I want to have happen with the company. Did I make that next milestone? Small? Did I make it short enough? Right? If you're thinking like here's what you need to accomplish in the next three months, bullshit. Again, break that down. What do I need to accomplish by next week? Because if I don't get to next week, three months is a pipe dream, right? Seems like a short amount of time, but not when you have to pass next week to get there. So break things down and don't chase any more than you absolutely need to get to that next

Wil Schroter: level. I, I agree and, and look at the other side of it too is um it's understanding what would equate somebody wanting to take risk. Ok, so let's, let's back that up just for a second because it's so important. Um I, I if we're trying to hire, uh let's say, um a person uh doubles of the marketing, right? Um And, and we're like, why would they possibly help us with our social media. They're great at doing social media, but why would they possibly help us? Well, let's break it down. Uh Number one, is there some way that they could wind up making more than they'd ever make doing this for what they normally, uh, get paid? Right. Um, which is usually the promise of equity. It could be the promise of, uh, uh, shared revenue, you know, per this campaign. That's what, that's what Felix Dennis did. He said, hey, if this comic sells well, Mr printer, you're gonna get more than you've ever gotten before. Right. That was appealing. The second is, um is there some way this would help you and, or your career, how many people do you know that are doing what they want to do, what they want to do, right? Not what they're good at, right? What they wanna do. Uh Artists are a great example, right? Every time I've been employed an artist, you know, because we used to own an agency. So we had an awful lot of artists. Um It was always, they're doing medical journal ads, I guarantee they didn't go to art school for that. Right. It sucks. It pays well really well. Right. But it sucks. Um So you come to them and you say won't you love to be doing? Right. Right. If you had it your way, you can wake up tomorrow and your job as a creative, your job as a social media marketer would be what you want to do, what would that look like? And by the way, be smart enough to even to ask that question, right? Uh Care about them in fundamental empathy. Um More so than yourself, they will tell you they're like, dude, I'm stuck doing these lame campaigns. Like I'm doing social media right now, you know, uh hypothetically for um real estate companies, right? Not exciting. I want to do social media for fashion, right? You're like, cool, I'm a fashion brand, right? Like now you get to do it for fashion. I don't think people understand founders, how few people get to do what they actually want to do. And if you are the opportunity to enable that for somebody, you are a God,

Ryan Rutan: you are and it could come in a lot of forms. I helped somebody sometime I, this time last year actually needed uh they, they had great technical founding skills, great leadership skills had at zero understanding of how to market anything. Just did not get it, didn't understand it. It was one of those skills sets. There was like, I just don't, I don't understand it. I don't get it. And I'm hearing what you're saying, I don't know how to go do that. We need a someone. And so I introduced him to somebody I knew was looking to start doing fractional CMO work because they wanted to be a fractional CMO because they were tired of being a marketing director in the agency that they were in and they, they wanted to do something else. So they wanted to, to upskill that uh career, but they needed some social proof that they could actually do this. So they took that project on for free, help them build up their go to market strategy at their first couple of social media and paid uh media campaigns. And they got to say I'm a fractional CMO for this company. Right. They've gone on now to pick up other clients. So there, there's so many of these opportunities. I think I'm just thinking now, well, just like the delta between when we started doing this, how much easier bootstrapping is now, I'm not, it's not easy. I'm not, I'm not saying it's easy, but in terms of being able to find the right fit right time, right place, resources. It's night and day. I mean, you and I were stuck like stomping around the, the 270 circle trying to find people that had the skills and had the time and one of the thing, right, it was a lot harder to do unless they wanted Damon's ribs. Um I happen to have a tab. Um Right. So I think that it's, uh it's the case now that we, we can find these situations because we're so much more exposed to so many people and what they want. Thanks to the old internet. Yeah. Well,

Wil Schroter: the other thing. Um As far as there are lots of ways to pay, people do not forget about a title, right? I go to

Ryan Rutan: this case,

Wil Schroter: that's what this person wanted. I go to a 22 year old developer and I say I understand you are a line level like almost intern level developer or wherever you're at now, at my company, you the CTO, right? Do not underestimate the value. And by the way that does have real value, it does have

Ryan Rutan: real value to that person. It does uh also be very careful because it can have real consequences when all of a sudden a junior developer is your CTO if you get tied into that. Oh sure.

Wil Schroter: But, but I mean, it, it wasn't everybody as of an unqualified CTO of like literally every tech company that's ever existed pretty much, right? You know what I'm saying? I just like it's kind of the standard fare. But what I'm saying is often when we say CTO, we're referring it CTO at a major company. In other words, the title, right is usually like, like we associate it with a major company um that it's with, right? So when somebody says I'm the CTO, they never think to themselves. Oh, wait, but I'm a CTO of a two person company. So I make like $25,000 a year. The the the value of it to them is I'm a CTO Ergo. I'm point for point with those people in, in bigger, um, jobs, not saying I know what they know, but I have the gravitas of that type. Right. Same with the CEO. Don't overlook that you go to a junior level person and you say in my organization you've got a AVP level title, ac level title, they will salivate over that. It's all, they'll tell their friends about their parents, everybody. Right. Um, it costs you nothing. No,

Ryan Rutan: but I, you don't even have to go that far if you can level them up to whatever the next career rung is, especially if this is, if this, I think, I think depending on whether you want this to be a long term engagement or short term engagement, right? If this is something, you know, is gonna be a couple of months and they're going to necessitous, move on to something else because again, like you can only, you're not, you're not paying them anything. You don't know when you'll be able to pay them, you're paying them a title that they can leverage into their next job. Then then, you know, giving them something like a, you know, go from junior to senior developer or senior developer to director something along those lines. Um It doesn't have to be the, the full on job. In fact, for, for their own career progression might be better because of course, people are gonna look at the resume like you were a junior developer at, at uh, at an Amazon subsidiary and now you're a CTO, um, and now you're applying for a mid-level programmer role. So we don't, we, we're having trouble sorting out. So, just even from, from their perspective can often be better to just like a couple rungs up doesn't cost you as much. It doesn't cost them

Wil Schroter: anything. Just senior of the title. Right. I mean, it can buy you

Ryan Rutan: more, but it is, it is a great conversation starter, right? Like, how'd you like to be a senior developer? I'd love to and

Wil Schroter: not overlook, right? Because you generally don't get the opportunity to go do that. Just like level up your title arbitrarily. The last piece of this puzzle that I wanna talk about is do not overlook the novelty of new, right? In other words, work on something new and exciting. Most people are working on stuff that they're bored out of their mind with, they hate their jobs, they hate the work that they're doing. They are bored. I meet like so few people and even think of the industry we're in where we live and breathe start ups where I meet people that let's say aren't the CEO. But even though II I apply it there as well where I'm like, um, is this the most exciting thing you could be working on or, or does it excite you? The answer is almost always no, you know, something that's really funny about everything we talk about here is that none of it is new. Everything you're dealing with right now has been done 1000 times before you, which means the answer already exists. You may just not know it, but that's ok. That's kind of what we're here here to do. We talk about this stuff on the show, but we actually solve these problems all day long at groups dot Start ups.com. So if any of this sounds familiar, stop guessing about what to do, let us just give you the answers to the test and be done with it, especially in today's day and age where we need so much stimulation. So just bringing something to the table that is novel and new is compelling as hell to way more people. And you think, you know, it's particularly compelling to super senior level people, right? Which is why they always say yes to being an advisor because they're like, dude, I'm mired in corporate bureaucratic, political bullshit all day, all day. And now I get to use my brain thinking about something new and fresh and compelling and potentially worldchanging hell. Yes.

Ryan Rutan: I'm glad I'm glad you went there. I'm glad you went to advisor specifically and it doesn't have to be advisor necessarily. But I, I want to draw a distinction here um particularly around this, there's an intersection here between this, the new and novel, right? I want to work on something that's different than what I'm normally doing and I can do it fractionally. Right. In most cases, we don't need a 40 hour a week. Person said differently. We can't afford one anyway. So, you'll take what you can get. Right. So, if you can, if you can convince somebody that, hey, it'd be really fun to go work on. Like, I'm trying to figure out this new thing using A, I prompt you to do something else. I like, ah, you know, I'm actually super interested in that right now. Um I, I'd love to help out, oh, you want to be our strategic advisor or do you want to be our whatever right? You can come up with something that's compelling from a title perspective, um compelling from AAA workout, put perspective and an optics perspective out to the rest of the world. It also gives you exactly what you need and gives them that creative or whatever outlet it is they're, they're looking for and I, we see this happen all the time. Um It's a great way to get especially really small fractional uses of people's time, which again, often all we need,

Wil Schroter: right? Let's move on beyond people. Like we get a lot of examples of that. OK. Let's talk about marketing. I like marketing. I wanna start with it with a uh once again a little parable or story um about float, the magic of float for folks that, that, that, that means nothing to them. It simply means this float is what happens between the time that you incur an expense in the time that you pay it, it's called floating the difference. Ok. So you, you guys have all used float because you've all used your credit card at some point. Right. And you've paid for something, you've been given goods and you've then paid for it in actual cash 30 days later when, whenever you paid off your credit card that is float. Now, most of the time, we don't think much of the value of that, right? Most of the time we just think. Oh yeah, it's just convenient, right? When it comes to marketing float is everything float is everything. Let me demonstrate again uh through a parable of, of how that works in um in the nineties, Ryan when you and I were running uh agencies. Um AAA big part of how things worked. This was kind of pre flow. It was almost the opposite of float actually. Um a big part of how things worked was if you wanted to start a company, you paid cash on the barrel head for marketing generally. And then you hope you got customers back,

Ryan Rutan: waited for some results. Correct,

Wil Schroter: correct. Around the turn of the century. This really interesting thing happened um called paid search. What will later become ad words which as you know, folks know was stolen from, from Yahoo, more specifically overture, what happened. And this was so fascinating to me at the time was I could buy an ad on Google. I, when I say it like this, you know, I'm kidding. Right. I could buy an ad on Google now charge it to my AMMA. And then the Amex bill would come like 30 days later and then give me like a 15 day window to pay. So between the time II, I incurred the expense. Somebody clicked the time Google charged my card. Then amex ran my 30 days. Then I had to pay the bill. I had like 45 to 60 days of flow. Why would anyone care about

Ryan Rutan: that? Well, we talk about marketing too. Uh float is absolutely an important part of it for, for paid media. Um There are also lots of other ways that we can, we can fund our marketing um performance marketing being a major one of those where there's gonna be some share in the proceeds, right? Plenty of shops out there that will do that. Plenty of individuals you can do that with, you know, you can do things on, on just a, a cost per acquisition basis, a cost per sale basis, a revenue share. There's all sorts of mechanisms that we can use within marketing, right? Go to somebody that has an email list that has an audience that wants what you have um and test that, right? And then you just, they, they get paid when you get paid. Will everybody say yes to that? No. Is any of this easy. No. So just go do the work, you know, put, put your shoes on, start stomping around, go find the people who will say yes to these things. But there are tons and tons of ways of doing this from, you know, uh affiliate sales to uh you know, full on partnerships to uh list swaps to you name it. There are ways to get these things done with very little or no cash. Um that also don't require because of course, the other way with bootstrap marketing is the founder or you know, the founding team is just doing it all themselves. We're like, well, we're just gonna write scads of organic content and then wait a couple of years for it to rank. Um And yeah, you can do that, but there are also ways uh with, with zero cash that you can go out and, and begin to generate real real revenue. Um which I'm a huge fan of because if we want to go raise money to find out that advertising is not gonna work, why would we want to do that? Like, why would we want to go give up equity in our company to get cash to find out it's not gonna work. And if we can find out it's not gonna work in a very short period of time, we'll find out that it does and then eliminate the need for fun. Which one of those paths sounds better

Wil Schroter: to you. Think about all the different ways people have done this successfully. Um Kickstarter was built on this. Kickstarter was built like let's market it. Now, in this case, they had a platform to help people do it for free. But a lot of that, you know, wasn't on just Kickstarter, it was through social media campaigns, it was all, you know, through a lot of other mechanisms. Um But same concept, let's collect money now and let's pay for it later. I mentioned briefly that um terms is, you know, uh you know what it was, what it's historically been called with your vendors and your vendors say we're willing to give you a uh uh a window between when we give you the product and when you have to pay for it. I'll give you two examples when, when I gave you the Felix Dennis example. Uh He was the founder of Maxim magazine, the week magazine, et cetera. When he was starting that comic book, I mentioned he went to his printer and he said, I, I'll, I'll pay you more, but I need you to give me terms. In other words, I need you to tell me you'll print the damn comic book now, but you won't charge me for printing it for 90 days. That is the flow, right? And it's a magical form of capitalization.

Ryan Rutan: We all learned this in, in Popeye man. Wembley will gladly pay you Tuesday for a hamburger today, right? I'm not sure if he ever paid up on this. But, yeah. Well,

Wil Schroter: that's the other, not a good pay. The second one I always thought was, uh, fascinating. Although I don't know if it was a strategy or if it was just an outcome. My old, old business partner, uh, that, you remember Blaine, uh, we did Blue Diesel at the first, um, the, the agency with, um, his dad started Cardinal Health, which for those that are unfamiliar and most people would be, it's like $100 billion company. Um And one of the things that Cardinal did extremely well, which I always thought was hilarious, was not pay people. Now, now I say that Bob Walter, his dad is like, kill me. You heard me say this. Um But I just thought this strategy was brilliant. Hear me out where he basically just said, look, we will hit certain levels of scale where people have to do business with us. So we'll get paid when we get paid. Now, one of the things people always used to think was that the reason we did so well at healthcare back in the day was because Blaine's dad was, you know, essentially a billionaire and started this big company and, and the, the little known fact that I always thought this was hilarious. Those fuckers never paid us sure of their word. He never got paid from those guys. They would owe us money for the longest time. And I was always amazed at their resilience. They're like, look, we're huge. If you wanna keep doing business with us, we'll pay you when we pay you. Right. They were essentially making us finance them how they became a multibillion dollar company. That,

Ryan Rutan: that's, it's float of a different sort, but it's float nonetheless.

Wil Schroter: And to them it was worth billions of dollars to put people off. Right. Yes, it strains relationships, but it also builds billion dollar companies, you know, the float within marketing, you know, kind of bring this back. What we're really saying is what can we implement so that we can get paid now vis vis bring people in the door to, to, to um to collect some cash so then we can pay it back later. OK? The, the notion, the default notion for people to understand this, which is most people um would be no, no, no. Like I have to have a lot of money in the bank and I have to be able to buy marketing and maybe hope it'll work, but I have to pay for it, right? And, and when I say have to pay for it upfront, I would stack rank as anybody should. All of the different ways I can market and say, what can I do for free now? Newsletters, email, um social, you know, some, some level of sco that's like you said, deferred and you know, what kind of effort is required I would then say, what are all the paid ways that I can instantly drive traffic, um, or sales that I could find a way to pay for later host sale. I don't think people understand like, that's how you build a business.

Ryan Rutan: One of the more interesting tactic I've seen for this recently is this, uh this notion of like the, the add on sale? Right. So there's something I can tack on, you know, you also want to add this to your cart, right? And I'm using cart really broadly and this doesn't necessarily have to be a physical product. Could be digital, could be anything. But basically, you decided to buy something. Actually, let's use an information product. You've used, you bought an information product and then there'll be this additional, hey, for only $99 today, you can have this other thing that is actually a really interesting way. So you go out find somebody that's selling something that's fully complementary to what you're selling and then say, hey, you want to tack me on as a, as a post sell Upsell and I'll give you half the revenue, whatever, whatever you can afford to give them

Wil Schroter: huge cut because you're gonna zero otherwise, right?

Ryan Rutan: And, and you have zero acquisition costs because they're going to promote this thing for you. So they're running paid ads, they're driving people into a funnel, they're converting people and now you get to benefit from some of their conversions and yeah, they get to keep some of the proceeds. But again, it's like it's a digital product. Your margins are 100% so you can afford to give away 99%. Still make a dollar. Right. So, it kind of doesn't matter at that point.

Wil Schroter: I always hear people complain about how like, uh Amazon or ebay extracts, you know, or Etsy takes too much of a price and I'm like, easy solve, man, take exactly what you're paying them and go do the marketing and get customers at a lower rate of, of acquisition than they do. And you're good like, well, yeah, well, I can't do that then, dude, you're getting a discount every time.

Ryan Rutan: That's it. We, we actually, this came up yesterday in our getting customers workshops where somebody was talking about wanting to expand beyond Amazon. And I said, have you pushed Amazon for all it's worth and have you tested what it will take to acquire those customers? There were all these other soft, well, you know, but there's also the benefit of I can have direct communication. I can do this. And I said, OK, to what end, what do you want them to do? Now? You've got direct communication. What do you want them to do? Buy more stuff? Can you get them to buy more from Amazon? Yeah, then do that. And of course I'm oversimplifying it, but you know, we had a much deeper conversation but at the end that's what we came back to. It was like, ok, we're not done with this model yet and this is actually pretty damn beneficial to us. It turns out when people go and acquire all your customers for you, you will and you should pay for that and you don't, you'll pay more for it to do it yourself.

Wil Schroter: Ok, let's move on to stuff. Ok. So, so we've covered, we've covered marketing, let's cover stuff. How the hell do I pay for everything else? Ok. And that is everything from office space which people don't have as much of an issue with, with anymore to like just, um, the basic supplies, your SAS costs of just running a business, et

Ryan Rutan: cetera. Yeah. Was it, first thing that came to mind for me was SS costs is like that, that is the, that is the office furniture of 2024.

Wil Schroter: It is. I agree with that. Um, he, here's how it works. The short answer is you use credit cards and I was like, ok. Yeah, great. That's, yeah, I didn't know that. Ok. The longer answer is when, and how do you use credit cards? In other words, what's the right spend? What's the wrong spend? Ok. Because if you understand how to use, like where and how to use credit cards, they actually make a ton of sense and you almost can't believe like you're, you're able to get away with it if you're spending it on the wrong things. You're like, this is idiotic like I, but my, my bills are just getting astronomical like what's happening because there's a wrong and right way to do it. Ok. Both of them cost you money but one of them you can never get at. Ok, let's start with the wrong way. I think that's a little more important. Right. The wrong way are on almost always categorically these things, people, if you were paying salaries now, I understand that you, you kind of sort of can't pay salaries directly off a credit card, right? You know, as far as kind of the mechanisms, I'm well aware how to extract that value, cash

Ryan Rutan: advances. There's, there's, there are ways to do it and they're, they're all bad,

Wil Schroter: just generally speaking, if you're paying for people on a credit card where you can't directly get that money back, it's a bad idea. Examples, Ryan, if back in the day, you, you and I are running our, our, our agency. That's just a cost of good soul. If I'm paying a designer upfront, because I'm then gonna go back to the client and charge for that and get paid back. That's actually just float all over again. I'm, I'm paying upfront, I'll pay later for my credit card and that's kind of how I get my money back. People do it all the time. Right. It's generally a pretty good use because you're paying for Rod that you are directly selling it's

Ryan Rutan: inventory with a different

Wil Schroter: name. Inventory. Exactly. It, here's where people take that the wrong direction. Like, well, how is that any different than paying a developer to build my MVP of my product so that I can go out and sell my product and then get paid back. Right. Because you have no idea that you're gonna get paid back. Time frame

Ryan Rutan: would be one of those. Yeah.

Wil Schroter: Now, now that, again, you could make the argument to say, ah, the uncertainty exists in inventory too. If I buy 30,000, uh, t-shirts and nobody buys the t-shirts, aren't I in the same? Yes, you are. Just to be clear. Right.

Ryan Rutan: No. Think of the money you'll save on laundry for the next 15

Wil Schroter: years. But, but more specifically in this case, we're saying, don't pay for essentially nonrecoverable expenses, rent. It's not, regardless bets you pay for, you'll never see that money back. Right. Anything where you keep telling yourself it's an investment but you can't figure out how to get that money back within the next 30 to 60 days is a bad use of credit.

Ryan Rutan: Anything that doesn't have an obvious roi, a known ro I, right, there will be times where we have to, we have to float some stuff like marketing where we may not know it's gonna work, but we're also gonna be able to limit the period of time in which we, we don't know that we know that it works and we're, we're, we're gonna be able to cover that cost or we know that it doesn't work and we're not, and then we can stop

Wil Schroter: for things where, like, again, if I'm ba uh, buying inventory and I know that I can recover it because I'm gonna sell a T shirt and get my money back. I'm good. If I invest, I put, use credit and I can't sell the thing to get my money back directly. It's generally categorically probably a bad idea. I've done it and I've regretted the hell out of it. Um, early in the day, like I used to like, you know, basically indirectly pay for um uh developers or whatever on credit cards and it was awful. It never paid back, right? Because a lot of those things are just hardcore expenses that you need a different kind of more efficient mechanism to pay for like equity, like deferred comp, like, like some other thing that isn't cash on the barrel head on a high interest credit card. It just doesn't work.

Ryan Rutan: How do you slot something like SAS into this? Right. So if you're, you're using, let's say, let's do a comparison of like you got, you got slack in there, you've got, um, hubspot in there, you've got, um, brush desk or Zen desk or somebody like you get some customer service. How do you, how do you factor those

Wil Schroter: in? Here's how I factor them in number one again, and I don't want to be callous in saying this, I don't use them until there's absolutely no other way to do it. And it's like, well, but, but I, but I really need

Ryan Rutan: that. You use the free version, you use the duct tape and bubble gum version spreadsheet.

Wil Schroter: Like anybody that says it can't be done without X I, I'm like, ah, you know what a million people have done it without

Ryan Rutan: it. Anybody who says it can't be done without X was born after 2000. Let's just, let's just be honest, well done because we, we all know that it can be done because we used to do it for a long time without any of that

Wil Schroter: shit. That's what I'm saying. I still do it without any of that shit. Like, uh, time and time again, people say it can't be done without whatever one because they haven't tried or two just because they just don't know that, you know, they, they've never seen a world where you couldn't do it that way. Um, I'll take accounting, for example, most reasonable people are gonna be like, no, you need the counting package. Like that's why quick books exist. Ryan. We've been running for 12 years and we have no quick books, right. Our coal companies run off a frigging spreadsheet that costs $0 insufficient as hell. Right. I don't think people are willing to question that. There's another way to get something done. Right. Again, a lot of it comes from lack of experience. If you're coming to this for the first time and you don't understand the tool set that's out there or the options, then very naturally, you're gonna say, well, I guess you're supposed to use hubspot because that's what people said. Use hubspot last, use hubspot. Like once you've figured everything else out, then you eventually migrate to the gold standard, right? Um That would be like saying, hey, um I, I want to learn to drive, I need to start with a Bentley. That might be the way to start. I think part of it too is taking a look at everything that we need now operationally and saying, yes, we need this later. What is, what is the, what is the scrappy not as efficient way to do it? That actually gets this moving forward. That

Ryan Rutan: old, that old analog I keep using, it's aimed for the moon, clear the fence, right. What are we gonna do today to clear the fence? We don't need the dream house. We need a tent on the land. We need the most basic version that gets us to the point where we can accomplish the task at hand and nothing more. Right? Like when you have eight expenses and $0 in your bank, why do you need an accounting package? Exactly. Right. Like what are we accounting for? Yep, we're still poor. Ran

Wil Schroter: the report again. Let's use slack because I think it's, it's a great example. I, I love Slack. Honestly. I think it's may maybe one of the best pieces of software ever written. And I know that's a strong statement and it's not because I'm a fan boy by any means because we live off of it. Like, I don't, I don't know how you could build a more effective piece of software that, that does involve living off with, that said to this day, we don't pay for slack. I'm nervous even putting that in the universe, right? But a lot of people don't pay for it. We don't pay for us. If we did pay for it, it would give us things like more history. And we've had folks in the organization come to us and say, hey, we need to pay for slack because we need more history. And I'm like, no, we don't copy whatever you need. Stay at somewhere else. Problem solved, right? I'm not paying $25,000 for something. Drop

Ryan Rutan: it into a G dock, drop it into a notion, drop it into one of the other 50 million tools that exist to do things like record information

Wil Schroter: and we can afford it, right? Like we can afford Slack and we're like, yeah, not gonna happen. We can afford a more complex uh uh counting system and we're like, yeah, not gonna happen. Right? Because we've grown up with this discipline that because it exists, doesn't mean I have to have it, which I think is powerful

Ryan Rutan: and it's, it's a, but it's, it's so, it's so tricky because I think the narratives out there are that this is what everybody's using. This is the, this is the way you do this. This is your, here's your Martech stack. You don't think about anything else. This is what you need. This is what you have to have. Um And it's a dangerous mentality. It's the same, it's the same challenge you and I fight all the time around everybody thinking that they have to be a funded start up company. I have to have all of these tools so that I look like a start up company because it is what everybody else uses. One. No, you don't two. No, they don't, you don't have to use it and most of them don't. Um, I think this is the, the story that gets told. But yeah, especially the bootstrap stage. We have to just be scrappy, right. We're the macgyver's of the start up world at this point. It's duct tape, it's bubble gum. It's, it's a candy wrapper, it's whatever, right? We just have to get the job done, whatever tool we have we're gonna have to use. Right. Well, yeah. And

Wil Schroter: I, I it's also being able to say, is it necessary now? Not, would it be nice to have? Is it necessary? I gotta be honest, you've been at this for 30 years. There's an O there's, there's not, I said the opposite. There's not much that's necessary. There is just not, not

Ryan Rutan: absolutely

Wil Schroter: necessary if we go back game show style, right? Reality television style. And you say, uh you know, uh man in the wild Ryan and will, right? You have $500 of which to start building a company. Go. Right? And, and forget like personal expenses per

Ryan Rutan: second. I was like, man, they win 100 and 50 to ramen noodles.

Wil Schroter: But, but, but what I'm saying is like, we would look at that and we would stack rank all of our opportunities and say, what can we afford? What can we defer? And what I'm trying to say is show me a start up. That's like I need all this money and I'll show you a start up that has not gone through this process.

Ryan Rutan: Of course, they're just here, here's they build the ideal world scenario. Yep. Here's the hint. Folks you don't build start ups in an ideal world. It's about the furthest thing from that. You are Tom Hanks in castaway, right? You are gonna make friends out of volleyballs, you're gonna eat whatever you can catch, right. This is what it looks like.

Wil Schroter: Yeah. Yeah. Yeah, I agree. I agree. But, but what I'm saying, going back to stuff, right? Uh And I'm trying to do some hard first cuts. Number one, there is very little that you need to run. Most businesses need want. Yes. Need very little. Having been through this for a very long time. I can say that with certainty. Number two for the stuff that you absolutely need. Like there is no way you can move from week one to week two without it, put it on a credit card. Like, hey, where does the money come from? Dude, it comes from a credit card there. Actually, there is no other magic thing you don't know about. There's not the payday advance of start ups, right? Like it, it's a fucking credit card, right? It's your home equity line. It's your savings account now, most people are like, yeah, no shit. I already knew I had those. Yeah, because that's how you pay for them, I guess sometimes it helps to know that there actually isn't another answer and I'm telling you for all the little

Ryan Rutan: stuff. I think that's it. I think that's the most powerful thing is like that. This is what it comes down to, right? Do you want to do this or not? You don't have to play this game, you can go home. But if you want to play this game, it's going to mean pushing your chips onto the table, right? This is what it takes. You're gonna have to put some of your personal capital at risk. You're gonna have to put your credit score and, and, and you know your personal payments uh history at risk, right? This stuff happens. Um But to your point. Trim it down. Think about exactly what we need and what we don't need. And when we say need, right? Like we're talking things like, you know, if, if you want to have a website, uh you have to host it somewhere, right? You can't just be like, well, I'll just, I'll just, you know, host it in my hands. I'll just hold it. No, you gotta pay for that. Right. You gotta have a payment processor, right? We don't want you try and do that like, ok, just mail your cash and checks to, right? Probably not the right way to do it. Um You could do that. You absolutely could do that. Uh would it slit up? But, but again, you can get a payment processor for free, right? You can get these things, right? You'll, you'll pay for them. But in different

Wil Schroter: ways, all the things that you're paying for monthly. My first question is always do, do they deliver value monthly? Right? I I I'll give you a simple example. Netflix does not deliver value monthly and people like, oh bullshit. You know, I use it all the time. OK, cool. But Netflix delivered most like take any streaming services, they'll deliver most of their value based on back catalog, right? For the first few months to a year. But once you burn through most of the stuff that is interesting to you, the ongoing value each month thereafter can be zero. We subscribe to like five streaming services. So we're like on, on Max, on Hulu, whatever. And every month I look at them just because I'm a founder and I say, what is the Roy of Disney compared to what it was a year ago when, when, when my kids had back catalog to dig into now, back catalog is exhausted. All they have to deliver now. And I'm just using this as a, as an example is like one shitty show a month, right? So now we're paying the same price for essentially one shitty show a month. We'd be better turning it off waiting a year in, in paying for it. Then, you know, there's something back at, I say this because most Sass and services work the same way, right? Most SASS is like, it was really valuable in the first few months we needed it. Most vendors were very valuable in the first few months when we needed them. But that value drops off exponentially at some point. Yet we can keep, keep thinking in terms of paying them on a perennial basis, right? That's that kind of discipline is what we're talking about when we're talking about start

Ryan Rutan: ups. Uh There's another, there's an interesting trap that just came to mind and this is one of those where I think people get tricked into or convinced to pay for things before they need them. And it's this, it's this notion that well, if you don't build it right now or if you don't start with the right infrastructure now, it'll be a lot harder to switch later. Number 1, 99 times out of 100. That's just bullshit. It's not any harder to switch later. It's, there's, there's, there's, there's a little bit of extra work there. Sure. But you know what's a lot harder not being able to buy the other thing that you really needed because you spent money on something you didn't need now to save yourself some work in a future. You don't even know exists yet because you might not make it that far because you spent money on the wrong shit today. So there, there's, it's one of those things I, I hear founders say this all the time. Like now we decided to, you know, do you know the, the full full back end stack? We do, we're gonna, we're gonna do it right? Neat. How's that gonna help you make money tomorrow? How's that gonna help? Guarantee that you're around next week, the week after week after. And the answer is always, well, it doesn't, it'll just make life easier in the future. Sorry. But fuck your future, we need to worry about right now. If you're going to have a future, your future is inconsequential. If today doesn't work. If tomorrow doesn't work right? A month out is completely irrelevant.

Wil Schroter: I hate the axiom. Uh You have to spend money to make money. I hate when people say that because they use it as a blanket blanket excuse to spend money. Right. As if spending money is a challenge to

Ryan Rutan: convince people to spend money they don't have in most cases. Right. Like that's, that's where you see this come out the

Wil Schroter: most. We use the opposite. We use something called, you have to make money to spend money. Yes. Right.

Ryan Rutan: That's, that's actually, by the way, that's where the concept came from, right? Like you had to give something of value to get money so that you could give money to get something of value. This is the core concept of money. It was value for value exchange. And somehow we forgot that I need to go get money so I can buy things. No, you need to make money so you can go

Wil Schroter: buy it. Let's go back to our, our, our faux reality show for a second. We got $500. Right? And, and we sit down and we say we have to make money to spend money. What do we mean? Ok. Uh, in the next episode, Ryan and will, are bartenders. They're trying to make money so they can generate some capital so they can go spend it on their business, right? Um, make money to spend money means we need to do whatever the hell we need to do now so that we could have some cash to, to, to make investment with, we talked

Ryan Rutan: about this a couple of episodes ago and I think it was a great, there was a great discourse uh because I think that so many people feel like once they start the start up, it has to stay on this, like, really fine and narrow path that just points toward that product or whatever. As opposed to saying like, hey, I could trade my services to get this thing. I need, hey, I could sell services just to get cash to buy something I need. Um, and it, it too often goes by the wayside and, and we think that like, look, it's either raise $2 million or go home. That is one way of doing it.

Wil Schroter: It's good to ensure the answer is go home. Um, if you and I were starting a taco stand, ok. And it turned out that the fat was, yeah, we, we're, we're bartenders by night, we're, we're selling tacos during the day. But if it turned out that we were like, dude, for the time being, we can make more money selling, um, delivering pizzas as well as selling tacos, then guess what you and I are delivering pizzas are

Ryan Rutan: delivering pizzas. That's it.

Wil Schroter: Whatever it takes, we have to make money to spend money.

Ryan Rutan: This is bootstrap folks. This is what it looks like.

Wil Schroter: That's what we're talking about, right? It's, it's not what people think, which is I have this bolus of cash and I deploy it in such a clever way that it makes me more money. That sounds awesome. That sounds awesome. Right. Number one, it really works. And number two, that's usually not a situation you're going to be in, right? When we do these episodes, we're doing these episodes to break down all these bullshit myths so that you have something actionable that you can actually go do something with if we sat here in Gary V and this isn't even a disrespect to Gary V. But if we just said, oh, just crush it, you know, to me that's this, this a morph is bullshit, right? Um Or oh just raise lots of money. Yeah. Not really. Right. Like that sounds cool but it usually does walk up where you think it does and by the way, it's also not gonna happen to you, right? So to me that's useless advice.

Ryan Rutan: It is now I, yeah, I, I like, I like the point. There's so many of these little traps out there, right? Like that you gotta, you gotta, you gotta, you know, spend money to make money. Do you know what you have to do to make money? Will you have to make money? You have to make money to make money? That's actually just like it's to make

Wil Schroter: it right? How however you have to make it going back to that the story at the top of the episode, we were talking about Felix Dennis. Um He was like, I had so many side hustles on how I made money to actually fund my real business. And what I was trying to do that at the time, it would, if you looked at you, if you snapshot in my life at that moment, when I was starting whatever business I was starting, it wouldn't even look like I was starting that business. Why? Because he was busy making money so that he could spend the money again to go make money. Which I, I know AAA fact we, we're hammering home pretty hard, but it's fairly important. So here's what I would say if we zoom out and we say, what's this bootstrapping thing all about? Right. This bootstrapping thing is all about saying, how do I understand? Number one, what I need, how do I understand? Number two, the least that I need and what are all the most efficient ways to go about acquiring that thing? That ideally requires either no money or requires me paying money sometime in the future when I have some money. But if anybody's, you know, listening to this going, hey, all that sounds hard. Yeah, it's really hard if you're listening to this saying, yeah, it would be easier to raise money. Of course, it would. And by the way you're probably not going to. And that's perfectly ok. What we're talking about is being disciplined about looking for all the opportunities to maximize money that you wouldn't have otherwise had in, in silver linings. All this. If you apply these same processes in mentality. Now, this will make you a way more efficient company. If you decide to get capitalized or not

Ryan Rutan: overthinking your start up because you're going it alone, you don't have to and honestly you shouldn't because instead you can learn directly from peers who've been in your shoes. Connect with bootstrap founders and the advisors helping them win in the start ups.com community. Check out the start ups.com community at www dot start ups.com. To see if it's for, you could be just the thing you need. I hope to see you inside.