I was curious about where the term "bootstrapping" actually came from – it turns out that a bootstrap is the "loop of leather or other material sewn at the side or top rear of a boot to help in pulling the boot on".
And of course, the bootstrapping I am referring to here is "to start a business without external help".
From Rich McIver of BusinessFund.com comes a handy little article called How to Bootstrap it (27 tips) that serves as both reminder and inspiration for those of us who are trying to build our "mini empires" without the investments of others!
There is the usual advice – personal savings, home equity lines, and credit cards, but there are other ideas that you might not have considered, such as:
5. Licensing: Instead of sinking a bunch of money into producing and marketing your product, sell licenses to companies that have the need and the resources to make it work. The company gets the product they need, your product is in the market and you can sit back and collect the royalty check. (Philippa’s comment: the gist here is – you put the idea together, protect your intellectual property and then license the right to use your idea to people who have the means to produce and market your service or product)
6. Trade Credit: Basically, this entails receiving goods from a supplier without having to pay cash up front. You may be able to get 30, 60 or 90 days to pay for the goods. This is a good, short-term method of freeing up working capital that can get you on your feet. Of course, you will have to sell the goods before payment comes due or you will be paying with your working capital anyway. If you use trade credit, expect to pay interest on the goods. (Philippa’s comment: this is most typically done if you have to use raw materials in manufacturing, or items such as software or hardware)
7. Customer Financing: Ask your customers to pay up front and use that money to buy the materials that you need to do the job. The most common place you might have seen customer financing is when a builder or contractor asks you to pay up front to put up a fence or hang gutters. The contractor then uses that money to buy the materials before he returns to complete the actual work. (Philippa’s comment: Imagine you want to put together a "whiz bang weight loss program" that is based on a methodology you have used successfully in your office. You could approach a large corporation who might be interested in buying 50 copies of your program. You’d ask them to pay for the 50 copies in advance, providing you with the capital to print your books and create your CD-ROM and web-based interactive components…..or something like that!)
You’ve heard this from me before, but it doesn’t hurt to get a nudge from someone else!:
11. Know Your Limits: Before you drain your savings and max out your credit cards to turn your revolutionary business idea into reality, step back and take a look at your situation. The plan is, of course, to pay off all of the ensuing debt and rebuild your savings from the piles of money that are going to be laying around after your business takes off. But how realistic is this plan? Can you achieve this goal? And, most importantly, can you afford to take the hit if the business fails?
12. Map Out Your Finances: Start from day one. Figure out how much money you are going to need for development, production, advertising, payroll, distribution and any kind of overhead that will be associated with running your business. Don’t overlook the small things like rent and utilities. Take into account that it might be days, weeks or even months before you see any money generated from your goods or services so don’t plan to use accounts receivable early on. You need to have a plan to cover all of your expenses three to six months in advance.
18. Keep Your Day Job: To minimize the risk of losing everything, continue working and build your business on evenings and weekends. This way, if your business doesn’t work out, you will have something to fall back on. If it does take off, you can quit your day job as soon as you are able to sustain yourself through the business alone.
And finally, some sound marketing advice:
25. Do Something Different: Any lawn care service will come to your house, mow the lawn, trim the weeds and edge the driveway. Include watering in your service. If you’ve become a full-blown landscaping service, some plants require more care than others do. Include detailed instructions on how to care for everything, tell them to call with any questions and maybe even schedule a return visit to ensure that everything is going well. Go the extra mile.
26. Get the Word Out: Buy some paper and business card stock and make your own fliers and business cards on the computer. Take your cards and fliers door to door. Introduce yourself to everyone and tell them what you do. Add a second phone line under the name of your business and get listed in the phone book. Get out there and build a customer base. (Philippa’s comment – this is where it pays to learn how to become an ace networker.)
27. Create a Joint Venture: Find a similar business in its infancy with identical needs as your business and join forces. You can share office space, supplies, equipment, cost, employees and profits. Once you are both ready you can split and go your separate ways.
Any other success tips from physician entrepreneur bootstrappers?