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Branching Out By Bootstrapping

October 9, 2018

In last week’s article, we discussed how to branch out your cleaning company via large account acquisition. We now turn to a similar but different strategy which I have dubbed “bootstrapping.” Along with large account acquisition, this has been my company’s preferred and most successful form of growing. While not for everyone, this method can be very effective if combined with the right long-term strategy. Additionally, it can have some positive impact on your selling process as well. So let’s dive in and look at what this strategy is along with some positives and negatives associated with it.

 

Description: The Bootstrapping Method

The bootstrapping method of growth consists of the following: identifying a new territory you want to grow in, targeting all accounts that you would like to have, and committing whatever financial and management resources necessary to make the new branch succeed. Instead of waiting for a large account to “anchor” your branch, you are committing on the front end to make the branch successful. This may involve renting an office space, getting a local phone number, putting the branch location on your website, etc. From day one, you want to be seen as a “local” company vying for business.

 

Strengths of This Method

This method is very attractive to a company focused on gaining a strong presence in a certain geography. If your goal is very targeted growth in certain markets (as opposed to certain types of accounts in any geography), then this method can make a lot of sense. When you “commit” to a market by hiring managers, getting office space, etc., it gets easier and easier to acquire new customers. Prospects leery of out-of-towners will be more likely to see you as local. We have found this approach to be very successful in mid-sized market where the competition is weak. The other benefit to this approach is that it lets you start growth immediately by targeting smaller accounts. You can gain a presence in an area within a few months through $1,000-$5,000/month accounts.

 

Weaknesses of This Method

This method of growth has two downsides in my opinion. First, by going all-in in a certain geography, you run the risk of that branch not being successful in the long run due to stiff competition. While your operation may be strong, you may have strong competition that has a big share of the market. This could result in much financial bleeding for many years. The second downside is that you will lose money for a period of time. Our experience shows that you will likely be in the red for a period of 6-24 months. However, when compared to opportunity costs of not growing, this is a fairly reasonable tradeoff from a risk perspective, as the losses incurred are usually very small.

 

In next week’s article, we will discuss the final method of branching out, acquisition.

 

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