How to bootstrap your business

More Holiday bootstrap goodness

 

As part of our series of bootstrapping profiles for the Christmas/ Hanukah season, here’s the story of bootstrapper Andrew S. Field:

• Filling a need. Field built his company on the simple concept of finding a need and filling it, in this case the need to provide printing services from a wide variety of formats.
• A growing fan base. Field’s company probably wouldn’t have to advertise if he didn’t want. His large fan base of satisfied customers spreads the word.
• Starting small. Field’s operation didn’t start as the online juggernaut it is today, but rather as a conventional printing business the entrepreneur bootstrapped into an online contender using his company’s own revenues to grow.
• The mother of invention. Field’s approach to the Net wasn’t even particularly visionary. He simply found that his traditional printing business had reached its limits in his small Montana community and was looking for a way to do more.
• Humble beginnings. Instead of hiring the best online programmer in the business or a full sales staff to man his new online model before it had made a penny, Field had an employee with programming experience build his first site and another spend part of his day answering calls.
• DIY distinction. Instead of paying a bigger company to build a state-of-the-art order tracking system, PrintingforLess did it themselves. Field believes he got a better deal than he would have outsourcing his technology needs.
• No investment interest. Field believes even if he had been interested in outside investment it wouldn’t have come his way. His initial responses from Venture Capital investors was negative.
• Never satisfied. Today Andrew Field continues to be on the lookout for new opportunities and ways to grow his business. For a look at his company today see their website.

Watch for the next of our Holiday bootstrapper profiles coming soon and if you know of a bootstrap entrepreneur you thing we should profile e-mail us today.

Seattle tech startups prefer bootstrapping

 

Photo: Kristine Kisky, MorgueFile

 

An indicator that may seem obvious to many, in a poll of Seattle startup entrepreneurs like Christian Chabot of Tableau Software, Steve McCracken of CultureMob and Josh Petersen of the Robot Co-op, bootstrapping is the way to go.

 

This from blogger Gregory T. Huang at Xconomy who admits:

 

…these entrepreneurs were self-selected for not taking VC money in the early stages of their companies. So what they say is not necessarily representative of the innovation community.

 

He plans to balance out with some thoughts from Venture Capitalists and Venture Capitalist-backed companies in a future post.

 

What are the problems associated with taking too much outside funding according to these entrepreneurs?

• Giving up too much equity or control in your company
• Having unreasonable profit goals that cannot be met given your company’s business model
• Being pressured to meet those goals even at the expense of more modest success
• Better return on smaller investments.
• Operational inefficiency because of too much early financing (How do you know how many employees you need or can support before you’ve even made any money.)

 

All of this might seem perfectly reasonable in an industry that requires very little in terms of heavy capital investment but consider Jackson Fish Market co-founder Hillel Cooperman’s comments on what kinds of business probably should consider bootstrapping:

 

In general, I think most consumer Web startups, unless they have to produce something physical, or buy some type of machinery, or have some unusual technological infrastructure need (indexing the Web for example), or have to upend some huge player in an established market, should always operate at the barest minimum they can.

 

Now eliminate the first use of the word Web in this sentence and think about how many non-Web 2.0 businesses this could apply to. Any ideas? Comment below or on our Yahoo! or MySpace Groups.

 

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Bootstrap your off shored empire

As anyone who’s paid any attention to the changing global economy knows, big companies have found many ways to outsource key functions, sometimes overseas.

In doing so, they shift the headaches of daily production and service to contractors who can do the work cheaper and with less overhead than companies who once handled many of their operations in house.

At the same time, these decisions have demonstrated how easy outsourcing and off shoring can be, and not just for corporate behemoths.

Tim Ferris, author of “The 4-Hour Workweek” advises everyone from the full-time employee to the entrepreneur to outsource the parts of life they would rather not handle making room for bigger issues.

Here are some important steps to outsourcing in your own bootstrapping startup just like the big boys but without a fraction of their existing costs:

• Don’t pay up front. Drop shipping wholesales like Lightinthebox.com, a major Chinese seller, are on the increase and the best offer no cost access to their inventory allowing you to order only once you have made a sale. Read more about the idea in this drop shipping guide at Taming the Beast.net or watch the below video, then research to find the company/companies that are right for you.
• Keep the best, outsource the rest. Serial entrepreneur and blogger Scott Burkett advises “Never, ever, ever, ever, ever offshore a core competency.” Another way to look at this would be that it is unwise to send overseas those things your business does well, is known for doing or that the entrepreneur most enjoys—the reasons you got into the business in the first place. Outsource instead functions like taking calls or orders, billing, on demand publishing or manufacturing, or drop shipping retail services.
• Use technology--big time. The Internet is your friend when it comes to outsourcing. In fact, I’ve become aware of many opportunities simply by blogging. The days when only huge corporations had the resources to operate and outsource over great distances and across national boundaries and time zones are over
• Work from home. This should be an obvious one, but I’ll state it all the same. If you don’t need an office and are doing all of your work through off shored subcontractors, why add the overhead of an office. Having someplace to go does not make your business more legitimate or make you any more of a success.
• Keep your focus. The fact that there are plenty of opportunities out there doesn’t mean you should follow them all. Decide what you want your bootstrap venture to be and, just like the corporate giants, stick to your brand and company identity while outsourcing where necessary to cut costs.

Bootstrapping in a real estate downturn

Be it ever so crumbled there’s no place like home…or whatever other building, nice as it may be, that you’ve gotten stuck with during the real estate downturn.

But seriously, there is a way to bootstrap unused space to profitability even without being able to sell.

Listen to this interview with co-working space founder John Eric Metcalf at Mashable Conversations about a trend Mashable’s Mark ‘Rizin’ Hopkins calls one of the “5 Web 2.0 Businesses That Will Thrive in a Down Economy”.

Here are some of the reasons co-working spaces may be the perfect choice for real estate bootstrappers:

• Space is the premium. If you’ve already got that property, you’ve got the major draw those seeking a co-working space are looking for—a place to hang out and work besides the local coffee shop.
• Payments come first. In his case, Metcalf said a core of interested tenants paid upfront for their space specifying the kinds of amenities they sought making the start up a complete bootstrap.
• Adding is easy. Once you are up and running adding services is not difficult. Use some of your income to upgrade, renovate and make improvements, or start other small business services.
• Camaraderie is key. In addition to paying for space, your clients will be looking for that almost incubator feel of being with others also working on start-ups and other kinds of high tech business. Get to know this community, they may include the folks with lap tops hanging out at the local Starbucks looking nervous as if they feel as if they are staying too long.
• Costs are minimal. Beyond the necessary high speed Internet access and the space, there’s much else too it. I once worked at a newspaper office where freelancers used to sit in their cars outside at night using our wireless high speed connection to send in stories and get other work done so the service is valuable in almost any setting.

For more on how to join the co-working revolution, visit the global wiki for co-working space developers at coworking.

Don’t give in to startup terrors

A little late for Halloween I admit, but looking at this photo of my 10-year-old in his homemade spaceman trick or treat costume makes me think of terrors both real and imagined.

And some that are a little of both.

With the economy in disarray, TechWag speculates the time for bootstrappers may have come:

Of course this is the best time to start a startup, bootstrap your way to not having to worry about being laid off, there also has to be some social reasoning on this one. If you suddenly find yourself with a lot of time on your hands, then this might be the way to go.

Craig Hayashi at StartupNorth adds:

In today’s challenging investment climate, start-ups are going to have to rely on bootstrapping even more than ever. Providing cash flow by doing consulting services is a perfectly viable way to do this.

Strange to even be talking about business startup, or so it would seem, in a period when we are told that credit is unavailable and consumer spending is down.

But here are a few reasons why the prospect really shouldn’t give you goose pimples or send you running screaming into the night:

• We don’t need no stinkin’ credit. Sure, some bootstrap entrepreneurs have used credit lines (or sometimes just plain old fashioned credit cards) to start their businesses and done so successfully, but the classic bootstrap model looks at building your business with cash flow and nothing else.
• No one will stop buying things that they need. In the world of business this would involve any consulting you could offer that would help improve the bottom line or figure out how to maintain quality without the 20 extra employees they just had to get rid of.
• You can keep your day job. Though some might disagree, part-time entrepreneurship is a way of life for many bootstrappers, so if you haven’t yet found yourself in a layoff situation there’s really no reason to leave your job in a troubled economy just to start a business.
• You don’t need any collateral. I hate to bring this one up, but with the tough economic times or preceding it has come the variable rate mortgage debacle so even if you find yourself moving into an apartment, don’t despair that you need to get yourself back on your financial feet again before starting a business. Bootstrapping can be started RIGHT NOW, and without a house to put at risk. Get someone to pay for what you do and the rest will follow.
• You don’t need a track record. People who try to start a business in the field in which they excel often fail to understand that they are really asking investors or banks to do two things: believe they have the experience to provide the product or service at the core of their business, believe they have the experience to run the business side of the endeavor profitably

In reality, no credit or collateral is needed to start a true bootstrap business and you need only create a service or product that people will pay for within those constraints.

Let’s banish fear and usher in a new era of bootstrap business startup with an economy that no credit crunch can squelch. The future belongs to bootstrappers. Join us today!