3. DEFINITION OF BOOTSTRAP
(OFTEN THROUGH IMPROVISED MEANS)
ENTREPRENEUR STARTS A COMPANY WITH A
LITTLE CAPITAL.AN INDIVIDUAL IS SAID TO BE
BOOT STRAPPING WHEN HE OR SHE ATTEMPTS
TO FOUND AND BUILD A COMPANY FROM
PESONAL FINANCES OR FROM THE OPERATING
REVENUES OF THE NEW COMPANY
4. 7 TIPS FOR BOOTSRAPPING YOUR STARTUP
Test the Market
Efficiency
Keep the Team Small
Interns
Marketing
Outsourcing
Social Networks
5. LIVE EXAMPLE OF BOOTSTRAPPING
In fact, as Gammalink’s founders learned, an
entrepreneur’s time is rarely well spent courting
investors. Despite a well-written business plan and
excellent contacts, Lutz and his partner failed to
attract venture capital in a year of trying. Eventually,
they contributed $12,500 each to launch
Gammalink. Years later, after their company was a
proven success, it attracted $800,000 in unsolicited
venture capital
6.
7. TYPES OF BOOTSTRAP FINANCING
Factoring
Trade credit
Customers
Real estate
Leasing
8. Factoring
Using accounts receivable to generate cash flow by
selling them to a ‘factor’ at a discount,in exchange for
cash.
9. Trade credit
If your business can find a vedor or supplier
to extend trade credit and allow you to order goods
on net 30, 60, or 90 day terms, that is another form
of bootstrap financing you could use. If your
business is able to sell the goods before the payment
is due, then you just generated cashflow without
using any of your companies own cash.
10. Customers
Your business can use a letter of credit from your
customer to purchase materials without using any
company resources. Just like when a contractor has
their customer pay up front and then uses that
money to buy the materials they need to complete
the job.
11. Real estate
Leasing, refinancing, and borrowing against equity is
a great way for a company to generate capital by
using its own assets.
12. Leasing
Free up cash by leasing equipment rather than
purchasing outright.
13. Bootsrapping options
Product development
Business development
Minimization of capital needed
Meeting the need for capital.
14. Product development
Prepaid licenses, royalties, or advances from
customers
Special deals on access to product hardware
Development of product at night and on weekends
while working elsewhere
Customer-funded research and development
Free or subsidized access to general hardware
Turning a consultant project into a commercial
product.
15. Business development
Foregone or delayed compensation
Reduced compensation
Personal savings
Working from home
Deals with professional service providers at below-competitive
rates
Space at below-market or very low rent
Personal credit cards and home equity loans.
16. Minimize the need for capital
Buy used equipment instead of new
Borrow equipment from other businesses for short-term
projects
Use interest on overdue payments from customers
Hire personnel for shorter periods instead of
employing permanently
Coordinate purchases with other businesses (mutual
purchasing of goods)
Lease equipment instead of buying
17. Meeting the need for capital
Withhold entrepreneur's salary payment for short or
long period of time
Seek out best purchasing conditions with suppliers
Deliberately delay payment to suppliers
Use the entrepreneur's private credit card for business
expenses
Obtain capital via the entrepreneur's assignments in
other businesses
Obtain loans from relatives and friends
Barter underused products or services with other firms
Franchise or license the product or business idea to
others for a royalty fee.
18. Benefits
Total control
A bootstrapping business has total control over its
destiny – the business owners answer to no VC, bank
or outside imposed board of directors.
Customer focus
The business that is focused on funding itself pays
close attention to the needs of its customers. The
distraction of raising, and then managing, investors
or lenders can distract from building the business.
19. Validating the business model
A successful business that has grown through
funding itself is has, by definition, a valid and
profitable business model. This is not necessarily
true of VC or debt funded enterprises.
Overcapitalisition
“raise as much money as you can.”
20. DISADVNTAGES
Undercapitalisation
One of the main reasons for business failures is under
capitalisation; simply not enough money to grow the
enterprise or to put it on a sustainable footing. This is a
constant risk for bootstrapped businesses.
Inability to focus
Many owners or managers of bootstrapped businessese
focused on making sales so they can pay the rent and
make payroll; this distracts management from executing
the longer term aims of the business.
21. Expertise
In taking an equity partner – either in private equity,
venture capital or angel investor – the founders get the
benefit of the investors’ expertise.
A good investor who has similar objectives to the
founders can add real value and complement the original
team’s strengths and weaknesses.
No one size fits all businesses
Overall there’s no black and white to bootstrapping
versus borrowing money or finding an equity partner; all
of them have their risks and benefits.
22. Flying on Empty
1. Get operational quickly.
2. Look for quick break-even, cash-generating projects.
3. Offer high-value products or services that can sustain
direct personal selling.
4. Keep growth in check. Start-ups that failed because
they could not fund their growth are legion
5. Focus on cash, not on profits, market share, or
anything else
6. Cultivate banks before the business becomes
creditworthy
23. Swot analysis
Strengths&Weaknesses
It's one thing to be able to sniff out opportunities,
having the competencies to take advantage of them is
just as important. You don't have to correct all of
your business's weaknesses (that's usually
impossible). The big question is whether or not you
should stick to opportunities where your company
has the necessary strengths, or whether your
company should acquire or develop new strengths.
24. Opportunities &Threats
Opportunities are areas of buyer need where your
company can perform profitably. The best opportunities
are the ones that are relatively easy for the company to
pursue and that have a high probability of success.
Threats are the challenges posed by unfavourable
developments or trends that could lead to reduced
profits. Examples of threats could include the
development of a superior product by a competitor, a
high chance of a prolonged economic depression or
unfavourable government legislation. Of course, there
could be many more.