Ryan Beck probably didn’t know what was in store for him when he started his internship quest this summer, but he hit the jackpot when the luxury direct-to-consumer startup, Taft Clothing, gave him the thumbs up. Beck, an MBA Candidate at Stanford Graduate School of Business, was now able to get visibility into building a startup and extract priceless bootstrapping lessons as a result.
Said Beck: “It was an average weekday in early 2017 when I visited the global headquarters of Taft, a men’s shoe company based in Provo, Utah. Taft founders Mallory and Kory Stevens were camped out in their living room, surrounded by shoe boxes and toys, responding to the daily deluge of customer inquiries – their months-old daughter napping between them. Looks can be deceiving. This little family business the Stevens run from a small, rented apartment is now valued at over $15m. No employees. No office. No VCs. Just Kory, Mallory, and their two kids making it all happen on a shoe string.”
Silicon Valley is obsessed with the ethos of bootstrapping. Yet, even in an Eric Ries-inspired lean startup world, the Stevens’ story is unique. How exactly did a married couple with no e-commerce expertise get to 30K+ customers and $5m+ in annual revenue from their living room? As a result of Beck’s internship, these essential bootstrapping rules were extracted from the Taft playbook — and you should consider adding them to yours.
Rule 1: Market where you have advantage – go social: In most established industries, upstarts are never going to win on SEO or Google AdWords. Many of the most effective marketers find their initial footing on social platforms.
Winning in the organic search game for men’s shoes required capital we just never had and that meant we had to be creative,” says Kory. “Social media levels the playing field because it comes down to content quality. You can’t pay to be loved on social media, you have to earn it. And that’s why small companies like Taft can compete and win.”
Rule 2: Avoid the inventory trap: Inventory is the Waterloo of retail. Effectively managing orders, especially in the early days, is often the difference between those who make it and those who don’t.
For the first three months, we just had a pre-order sign-up form on the website,” says Mallory. “We posted pictures of shoes we still hadn’t ordered to ensure there was real interest. Managing supply and demand is always challenging in a business like this, but deliberately under-producing early on saved us. When you are small and money is tight buying inventory you can’t sell will kill you.”
Rule 3: Ignore early calls from Vcs: For many start-ups, interest from venture capital firms is the ultimate validation. But the longer you can make it without them the more value you preserve. Smart founders ignore those calls as long as they can.
The options you have for financing a business today are mind blowing,” says Mallory, “Between Kickstarter, lines of credit from PayPal and Shopify, leveraged debt financing through credit unions, and raised money from trusted friends and family, there are so many ways to put off raising. We worked largely through our personal network and it’s crazy to think that if we had worked with traditional VCs early on we would have permanently given away 20-25% of the company for a few hundred thousand dollars.”
Rule 4: Outsource the back office: Start-up founders often take pride in doing it all themselves. But bootstrapping well means knowing when to outsource to someone else.
We deliberately pushed all of our back-office tasks to third party providers,” remarks Mallory. “We leveraged nowcfo.com to handle all of our finances, we paid a third-party quality controller in Spain to ensure product consistency, we contracted with a third-party logistics provider to handle all of our shipping. We were delivering tens of thousands of shoes and we didn’t need to actively manage any of those operational details.”
Rule 5: Own everything customer-facing: While effectively outsourcing the back-office can be a boon to the business, relying on third parties to build your product or brand is fraught with risk.
We spend the majority of our time managing everything product and customer. We made the mistake early of trying to outsource some of our marketing content creation to a third party and it was so off message we had to pull it. The soul of Taft is what we know and we can’t outsource that,” says Kory. “We were handling all customer service requests through a text line on our personal cell phones for the first two years. I don’t think you can overstate how much that stuff matters early on.”
Rule 6: Invest in loyalty: The key to any successful e-commerce business is repeat customers. Building a community of loyal consumers is critical.
I still remember in the early days, when our shoes just started selling, Mallory and I pulled all-nighters writing hundreds of personal thank you cards to those early customers. We have poured our lives into building Taft, so a relationship with the company is a relationship with us. We are grateful and want our customers to know it,” says Kory.
Even now, thousands of customers receive personal thank you cards from Taft’s founders. That personal touch is largely to credit for the loyalty of customers like Jimmy W., who has purchased 50 pairs of shoes himself since 2015.
Rule 7: Defer payouts: A patience for payouts is a hallmark of the most successful startup founders. Pulling profits out of the business too early usually comes at the expense of future growth.
When we started this we had one child, we were living in a tiny rented one bedroom apartment and were taking just barely enough out of the business to cover rent,” says Kory. “I knew a dollar in our bank account would make .1% interest if I was lucky. Any money we invest back into Taft will double or triple this year alone. We are in this for the long run.”
Taft continues to grow and with that has come new hires and a real (albeit tiny) office, but don’t forget how they earned that $15M+ valuation — it was three years of bootstrapping done in all the right ways. Can you do the same?