CEO who turned $345 into $30M reveals his surge to success

Sometimes I think back to the halcyon days of 2014. On a daily basis, I would get flooded with unsolicited pitches and pleas to get in early on the next big thing. The proposals were complex, but the message was simple: Get in on the ground floor; the elevator's about to go up.

Businessman speaking to a room of people
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Every upstart venture was selling an idea they were certain would disrupt their industry. I always responded the same way.

"Sounds good. What's your plan to make money?"

Invariably, the response was, "Don't worry about that now. We'll figure out that part later."

Well, later has arrived, and it has a bone to pick with yesterday.

The ship has sailed on $50 million capital raises based on a wistful idea. Paying for user acquisition, ignoring customer monetization and dealing with astronomical burn rates are a relic of days gone by. These extravagances have been replaced with layoffs, down rounds and shuttered doors.

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Market fundamentals reflect this shift in reality with VC activity declining to its lowest point in the last nine quarters. There is still a ton of capital out there; it is just being concentrated in fewer deals. The chip stacks remain high around the table, but smart money is being more selective about when to go all in.

Now, I'm not here to sing another tired song of doom and gloom. While the current climate is difficult, there is a proven solution. When market fundamentals suddenly turn, the market must return to fundamentals. Hope and optimism are no longer sufficient. Businesses must roll up their sleeves and put in work. This is my guide to achieving your aspirations through perspiration. Starting a business with no money — or very little — can happen. This is my love letter to bootstrapping.

Bootstrapping is cool again.

We started our business, BAMKO, in 1999 with just $345 in the bank. My business partner and I once nearly came to blows debating whether or not to take on the albatross of a $30/month cellphone plan. Last year we sold our company for nearly $30 million, having never raised a round of equity capital.

"We started our business ... with just $345 in the bank. My business partner and I once nearly came to blows debating whether or not to take on the albatross of a $30/month cellphone plan. Last year we sold our company for nearly $30 million."

We started out as a couple of naïve kids, unworthy of attention from equity investors. For better or worse, we didn't have the luxury of losing money. The fiscal discipline our bootstrap approach demanded drove an obsessive focus on a single question: How do we add value to our customers in a way that is profitable?

Bootstrapping: A how-to guide

Forces beyond your control may leave you with no choice but to adopt a bootstrap approach. Embrace that reality. Learn to love it. Then use it to streamline your focus to leave your bloated, undisciplined competitors in the dust.

Here's how to do it:

Fix your focus. Your focus must be singular — solve customer problems in a profitable manner. Selling filet mignon at six bucks a pop might solve your customers' desire to eat well at a reasonable price, but it's not a business. A good bootstrapper is always thinking about how to service the customer in a profitable manner. A solution that is not profitable is not a real solution. At least, not yet. Concluding your analysis without solving for profitability is an extravagance we bootstrappers cannot afford.

Burn the boats. Hernán Cortés' strategy of burning his ships upon arriving in Veracruz worked because there was no exit strategy. His men had but two choices: succeed or die. Too many entrepreneurs dilute their focus by keeping a constant eye on the exit sign. You can either focus on selling your business or focus on building a business that will last. Try both and you will fail at both. Forget being bought out by a bigger player. Become the bigger player.

Don't get seduced into hiring outside experts. When you have raised a lot of capital, it's easy to get seduced by the siren's song of hiring outside experts. On the surface, it seems appealing — leverage your time and focus on what really matters. Successful bootstrappers know that our biggest leaps forward come from the forced discipline of diving headfirst into the minutiae of your business. No one knows your business better than you.

Size up your hires early on. If you think you've magically solved a critical business problem with a high-profile hire, think again. Hiring is a difficult process, and you will be fortunate to have one superstar in three hires. Your new hire's first day isn't the panacea you've been looking for, it's the beginning of the hard work. Do not place blind faith in the pedigree (or price tag) of your hires. Dive into your new hire's responsibilities and identify their weaknesses early so you can shore them up quickly.

Count your beans. Bean counting gets a bad rap. Successful bootstrapping demands a fundamental understanding of accounting. Fail to understand your cash flow statements and your business will fail. I guarantee it. Accounting cannot be a black box for a bootstrapper.

Bootstrapping is not the only way to build a great business, and it's definitely not for everyone. If you have good sources of available capital, by all means, go for it. But don't fool yourself into believing that you can purchase focus or discipline. Excess and extravagance breed weakness. If you find yourself bootstrapping your business, embrace the discipline, love the fight, and appreciate the incredible opportunity it presents.

By Philip Koosed, co-founder and CEO of BAMKO and a member of the CNBC-YPO Chief Executive Network

About YPO

CNBC and YPO have formed an exclusive editorial partnership consisting of regional "Chief Executive Networks" in the Americas, EMEA and Asia-Pacific. These Chief Executive Networks are made up of a sample of YPO's global network of 24,000 top executives from 120 countries who are on the front lines of the economy and run companies that collectively generate $6 trillion in annual revenue.