Bootstrapping: “The art of learning to do more with less.”

Gary Rushin

Gary Rushin – Turnaround Specialist

Bootstrapping…bootstrapping…bootstrapping, it can be said that the purest form of entrepreneurship is bootstrapping.  During the prelaunch phase of a company and at times when access to business capital is difficult, bootstrapping is the way to go. To compete with existing businesses entrepreneurial firms face two major disadvantages: the burden of smallness and the disadvantage of newness. The reality means that the majority of start-up businesses and small businesses lack available resources to effectively compete (Winborg, 2009). Access to capital is a major issue for entrepreneurs. Inexperience of many entrepreneurs has made it extremely difficult to obtain debt and equity when lack of a track record, reputation, or collateral for loans exists.  Starting with personal savings, followed by funding through family and friends, have been the main sources of finance for the vast majority of entrepreneurs. Engaging in “bootstrapping activities” is the way to go in operating the business.

Do not be discouraged with the thought of bootstrapping. There exist many great American bootstrapping success stories. A snippet include (Sherman, 2005):

Apple Computer. In 1976, Steve Jobs and Steve Wozniak sold a Hewlett-Packard programmable calculator and a Volkswagen van to raise $1,350. Through bootstrapping, the partners built the first Apple I personal computer in Job’s garage.

Hewlett-Packard Co.  Starting with $538 in 1938, Hewlett-Packards first client was fellow bootstrapper Walt Disney, who required sound equipment for the production of Fantasia in 1940.

Microsoft Company. With is high school sidekick (Paul Allan) and dropping out of Harvard University, Bill Gates moved into an Albuquerque hotel room in 1975 to start the company and write the programming language for the first commercially available microcomputer.

Nike Inc. William Bowerman and Philip Knight in the early 1960s sold imported Japanese sneakers from the trunk of a station wagon with startup costs of $1,000.

Lillian Vernon Corp. With her brainstorming idea of selling monogrammed purses and belts through the mail, Lillian Vernon established a mail-order company in 1951.  As a recent bride and four months pregnant, Lillian needed to earn extra money to support her new family. Society in the 1950s dictated that she stay at home for the duration of the pregnancy. A home-based business was her answer.  Lillian took $2,000 that her husband and she received as wedding gifts and designed a bag and belt set targeted at high school girls.  She manufactured the set through her father’s leather goods company. Than placing a $495, one-six-of-a-page ad in the September 1951 issue of magazine Seventeen the company generated $32,000 in orders by the end of the year.

The use of bootstrapping requires imaginative and parsimonious strategies for marshaling and controlling necessary resources. Think of bootstrapping from two perspectives:

1.    Raising money without the use of banks or investors.
2.    Gaining access to resources without the need for money.

First, entrepreneurs can raise money through the use of personal credit cards, cross-subsidizing from other businesses owned or through employment, reducing the time for invoicing seeking advanced payments and loans from friends and family. Entrepreneurs can hire temporary employees, share premises and/or employees with other entities, share or borrow the use of equipment, and obtain emotional support, skills, and knowledge from friends and family.

A key question that should be asked, “Do I need it or want it?”  In the event the entrepreneur needs a resource, try to use a bootstrapping technique to get it. If the entrepreneur wants a resource, defer the purchase. Preservation of cash is important.  This means controlling cost too.

Based on the writing of Oswald Jones and Dilani Jayawarna (2010) some bootstrapping techniques include:

•    Customer related

  • Receive payments in advance
  • Obtain advance payments
  • Increase invoicing
  • Select customers that pay on time

•    Delay payment

  • Negotiate payment conditions
  • Barter for goods and services
  • Lease rather than purchase

•    Owner related

  • Change salary payment period from weekly to bi-monthly
  • Use personal credit cards
  • Cross-subsidize with other businesses or employment
  • Fund through friends and family

•    Joint use

  • Borrow equipment from other companies
  • Use temperate employees or contractors
  • Share equipment, premises and employees

Simply put, bootstrapping is “entrepreneurship in its purest form” (Salimath & Jone, 2011). Overcoming resource constraints enables business operations to continue with the aid of external financial resources. Bootstrapping transforms human capital into financial capital also known as sweat equity that converts into bankable equity. It is about creating value that includes the idea of “meeting the need for resources without depending on long-term financing (debt or equity).  Bootstrapping is the strategy of necessity for entrepreneurs and not of choice.

For entrepreneurs that want to learn how to raising money for their business, go to http://GaryRushin.com to sign up for a free video training course. The course is offered for free for a limited time. Sign up Now!!

Gary Rushin, CPA/CIRA (GaryRushin.com)

Gary Rushin, a licensed Certified Public Accountant and is a Certified Insolvency and Restructuring Advisor mentors entrepreneurs and business executives on business strategy and corporate renewal. Gary Rushin taught executive level business students in the U.S., India, and China and has advised donor agencies and a central bank on prudential underwriting and supervision.

Sign up at http://garyrushin.com to follow the series.

 

Sources:

Jones, O., & Jayanwarna, D. (2010). Resourcing new businesses: social networks, bootstrapping and firm performance. Venture Capital , 12 (2), 127-157.
Salimath, M. S., & Jone, R. J. (2011). Scientific entrepreneurial management: bricolage, bootstrapping, and the quest for efficiencies (Vol. 17). Orange, CA: Journal of Business & Management.
Sherman, A. J. (2005). Raising Capital (Vol. 2). New York, NY: AMCOM, 2. 30-33.
Winborg, J. (2009). Use of financial bootstrapping in new businesses: A question of last resort? Venture Capital, 11 (1), 71-83.

You can leave a response, or trackback from your own site.

37 Responses to “Bootstrapping: “The art of learning to do more with less.””

  1. We are a group of volunteers and starting a brand new scheme in our community. Your website provided us with helpful info to paintings on. You’ve done a formidable task and our whole neighborhood will be thankful to you.

  2. I’m baffled by the knowledge in this blog I found it to be not only extremely remarkable but it really also made me think. It is hard now a days to find related information to ones search, so I am pleased that I found this article post

  3. It’s difficult to find experienced people on this topic, but you audio like you know what you are discussing about! Thanks

  4. you have an excellent weblog here! would you like to create some encourage material on my blog?

  5. berrier says:

    I really do accept each of the ideas you’ve introduced as part of your submit. They can be really genuine and definately will certainly work. Nonetheless, the particular threads are certainly speedy for starters. Might just you want expand all of them just a little coming from the very next time? Just article.

  6. Tommie Elbie says:

    Thank you so much for bringing this to our minds eye. This is a very informative article with a lot of information, great content!

  7. What’s up it’s me, I am also visiting this web site on a regular basis, this web site is truly good and the viewers are actually sharing good thoughts.

  8. Waqar Ansar says:

    I believe that is just about the most vital information and facts in my situation. That i’m happy researching a person’s post. Even so should really watching with interest upon handful of typical challenges, The website style is fantastic, the particular posts is at simple fact great : N. Beneficial approach, kind regards

  9. Fawn says:

    Gutter Drainage Again

    Here is my web site … pinterest.com (Fawn)

  10. link says:

    Chelsea footballers has failed to score in 5 games at the leagues.

  11. Don’t you care plainly reference this specific in this little site merely post a web link back to this fabulous website?

  12. magnificent submit, very informative. I ponder
    why the other experts of this sector do not understand this.
    You should continue your writing. I’m confident, you have a great readers’ base already!

  13. Which is worth it to read, You happen to be a completely skilled blog writer. I have become a member of a person’s nourish and turn into in place to get looking for extra of this excellent submit. Additionally, We have discussed your internet site at my internet sites

  14. The CRM is for you, as the client, to get updates and reports about the campaign.
    The other ways in which they help the small business owners are discussed below:.

    The importance of the services of a virtual controller
    or third party professionals for tax and accounting services comes in useful for the following reasons during the start up
    process when a number of actions are being taken to create the foundation of
    a successful business:.

  15. Going Here says:

    You need to make click here sure that everything is okay, you may
    need? Striker has always attached great importance to product quality control,
    but the main one of them?

  16. Awesome blog! Do you have any tips for aspiring writers? I’m hoping to start my own site soon but I’m a little lost on everything. Would you propose starting with a free platform like WordPress or go for a paid option? There are so many options out there that I’m totally confused .. Any recommendations? Thank you!

  17. Waoo this is a very good topic i would like to fallow you blog regularly.

  18. www says:

    Howdy! It appears as though we both have a interest for the same thing. Your blog, “Bootstrapping: “The art of learning to do more with less.” | Ember Carriers Blog” and mine are very similar. Have you ever thought about authoring a guest article for a similar website? It will certainly help gain exposure to your website (my site recieves a lot of visitors). If you’re interested, contact me at: sitab@op.pl. Thank you. Kindest regards www

  19. I believe this internet site has got some rattling fantastic info for everyone :D. “This is an age in which one cannot find common sense without a search warrant.” by George Will.

  20. Calvado says:

    What i do not understood is in fact how you’re not actually a lot more well-appreciated than you might be now. You are very intelligent. You realize therefore considerably on the subject of this subject, made me personally consider it from so many varied angles. Its like men and women aren’t interested unless it’s something to do with Woman gaga! Your own stuffs great. All the time deal with it up!

  21. dc says:

    I was reading some of your content on this internet site and I think this internet site is really informative! Keep posting.

  22. Thank you, I have just been searching for information approximately this topic for a while and yours is the best I’ve came upon till now. However, what about the bottom line? Are you sure concerning the supply?

  23. What i do not understood is actually how you are no longer actually much more smartly-favored than you may be right now. You’re so intelligent. You realize therefore significantly on the subject of this matter, produced me in my view believe it from so many numerous angles. Its like women and men are not interested until it is one thing to do with Lady gaga! Your own stuffs excellent. Always maintain it up!

  24. It’s awesome to pay a quick visit this website and reading the views of all mates on the topic of this piece of writing, while I am also keen of getting familiarity.|

  25. Admiring the hard work you put into your blog and detailed information you provide. It’s awesome to come across a blog every once in a while that isn’t the same out of date rehashed information. Excellent read! I’ve saved your site and I’m including your RSS feeds to my Google account.|

  26. Dead composed subject material , regards for selective information .

  27. F*ckin’ awesome things here. I’m very happy to look your post. Thank you a lot and i’m taking a look forward to contact you. Will you kindly drop me a mail?

  28. Simply wanna say that this is handy , Thanks for taking your time to write this.

  29. Thank you for the sensible critique. Me and my neighbor were just preparing to do a little research about this. We got a grab a book from our local library but I think I learned more from this post. I’m very glad to see such wonderful info being shared freely out there.

  30. Perfectly composed content , thanks for entropy.

  31. F*ckin’ remarkable issues here. I am very glad to peer your article. Thanks so much and i’m having a look forward to touch you. Will you please drop me a e-mail?

  32. Simply wanna input on few general things, The website pattern is perfect, the subject matter is real great. “To imagine is everything, to know is nothing at all.” by Anatole France.

  33. Aletha Stady says:

    property turkey

  34. What’s up, the whole thing is going sound here and ofcourse every one is sharing data, that’s
    actually excellent, keep up writing.

  35. Thanks for your own labor on this blog. Debby enjoys making time for research and it is easy to understand why. Many of us learn all of the compelling ways you offer very useful tricks via this web blog and as well as welcome participation from other individuals on this subject matter so our princess is actually starting to learn a whole lot. Take advantage of the rest of the year. You have been conducting a splendid job.

Leave a Reply