What is Bootstrapping? The dictionary definition is “to cause oneself to succeed without the help of others.” The emphasis in most peoples’ minds when thinking of Bootstrapping is without the help of others. . .do it on your own.
My thinking is very different. The emphasis should be on with the help of others. So, my definition is:
“To pursue success with limited resources and with the help of others.”
By limited resources, I primarily mean a shortage of money, a shortage of knowledge, and/or a shortage of helpful or essential contacts. These knowledge and contact shortfalls can emanate from lack of experience or know-how about the industry you’re entering or business in general.
|This book is for existing small and medium business owners or managers and those about to start their own business. It is also for those with experience in the corporate arena. Starting a Small Business is a whole different world from the corporate one.|
I assume you already have an idea and a passion for the venture and at least a rough plan. ..or you may already have an existing business.
This book is for existing small and medium business owners or managers and those about to start their own business. It is for people who find themselves with cash/knowledge shortages. Much of the subject matter is not taught in universities’ business classes. Therefore, these Bootstrapping tips apply no matter your prior educational level. It is also for those with experience in the corporate arena. Starting a Small Business is a whole different world from the corporate one.
This book will offer you proven, practical, and workable tips to help you build your business. The emphasis is on tips that require little or no money and where and how to get free help, advice, consulting, or whatever you want to call it. Bootstrapping addresses solutions for your limited resources problem and points you to the vast array of free help available to you.
It will offer ideas on how to operate efficiently and how to get things done with no, or minimal, cash outlays as well as ideas on minimizing risk and staging risk. You will see that you do not need to raise as much money as you think or as you may be told. It will also help you preserve cash for the unexpected bumps in the road, like forgetting to plan for certain needed expenses.
The less money you need to raise, the more equity you can keep in your company, the sooner you can start the business, and the more money you will have to grow your existing business.
Finding ways to get things done with less or no money (Bootstrapping) is important because of the difficulty of obtaining money for start-ups and Small Businesses.
Banks are an inexpensive source of money but will not lend money to start-ups unless there are assets to back up the loans. That is their normal way of operating.
Venture capitalists are for very few companies. They may fund as few as three out of every 1,000 companies they look at. If you do not have experienced and knowledgeable leaders, your chances are almost nil. If you are successful, you will have to give up substantial equity.
Bootstrapping is a good discipline to instill in a company’s culture. It will prevent wasteful spending when you have money. Steve Gordon, the founder of Restoration Hardware, said that if sufficient capital had been available to him in the company’s early stages, he might not have been as successful as he was. The good habits formed by the early need for Bootstrapping will carry forward, even in good times, to prevent wasteful actions. In bad times Bootstrapping could mean survival.
One of the major attitudinal obstacles to success via Bootstrapping is ego control. You will have to do many things you never anticipate or think are beneath you. For instance, cleaning the floors and even your bathrooms. Many mundane chores like shopping for the cheapest supplies, ordering a phone, getting an email address, etc. are necessary. Your station in life might not play well at your school reunion. Or you could be the type of person who when lost won’t stop to ask for directions. Somehow, in your mind, it’s a weakness to seek help. Ego is interfering with good judgment.
Let me give you my personal example of ego. My first full time job was, in my opinion, a great one for learning, but to outsiders it might
|This book will offer you proven, practical, and workable tips to help you build your business.The emphasis is on tips that require little or no money and where and how to get free help.|
have looked like a loser. After four years in college, two years in the army, and a fresh MBA in my hand, I took a job with a pencil company. While most of my classmates were going to work for management consultants, IBM, General Electric, Procter & Gamble, etc., I interviewed with the president of Venus Pen and Pencil Company for the assistant to the president position. He quickly offered it to me.
It was a great sounding job to impress my peers. I quickly turned it down as it was a purely staff job. I wanted to do real work and take on responsibility. We continued to talk. He told me about a position that he felt I would not like. He wanted me to start a division that utilized the 100 pencil imprinting machines they owned and were stuck with. I would be on my own and would have to figure everything out myself. Every negative he put forth was a positive to me. In my mind, the man was telling me I could learn how to start a business on his buck.
My biggest problem was how do you tell your parents after all your years of schooling that your first big job is selling pencils.
The point is: all of these mental challenges are within your control. No cash is needed. You have the ability to deal with them.
In the 16 start-ups that I have been personally involved in, I’ve employed almost every one of the Bootstrapping tips that I offer in this book.
Here is a quick synopsis of one of those businesses. Trivial Pursuit began in Canada and was invented by two Canadians. I already had twenty years of experience in the toy-game industry and knew about Trivial Pursuit’s great success in Canada. Shortly after its U.S. introduction, I decided that I wanted to develop my own Trivia game. At that time, my company, R&R, consisted of myself and a secretary. We were located in a small office in New York City.
Consulting with two of my New York Sales Reps, we decided the topic of our trivia game should be TV. Further, I decided that I needed a credible name to put on the game, and the logical one was TV Guide. At that time TV Guide had over an 18,000,000 weekly circulation, the second largest circulation in the country.
I then bought a TV Guide in my local supermarket to find their corporate address in Radnor, PA, and their publisher’s name, Eric Larson. I wrote a short letter to Mr. Larson in mid October, asking for an appointment to present my proposal to develop a TV Guide Trivia Game. Shortly thereafter, I received a phone call from the Assistant Publisher, Bill Deitch. After two phone discussions and a follow up letter, I was invited to their home office to make my presentation. The result was we entered into a contract with no guarantees or up-front payments. I traded additional royalty points for 5 free full-page ads in TV Guide. (The cost to buy was $85,000 each.) Further, we contracted with them to create the 6,000 questions and answers we needed. This was a time sensitive project as we had to have a plan and a prototype ready for the February Toy Show and would need to begin shipments in May.
I started a new company called Trivia Inc. and brought in a partner for this venture who could provide the financing and administrative support required and whom I could trust. He was the owner of our advertising agency that we had worked with for over 20 years. This freed me to develop and market the game.
The end result was that we started shipping in May and voluntarily disbanded the company in December. A seven and a half month company life. We ended up selling 580,000 games at $12.50 each for a sales figure of $7,250,000 that produced a profit of $3,000,000. All with one full-time employee.
Harvard Business School wrote up this case to teach in their Entrepreneurial class. The R&R case continues after 20 years and is also taught in over 50 other graduate business schools.
For those of you who wish to study all the details of this case, it is shown in the appendix I, followed by my comments on each Bootstrapping tip that was used.
I bring this business example up to illustrate that these Bootstrap tips are not theoretical but real life actions. It is my hope and belief that many of the tips offered here will help you to make a success of your business.