Over the last few years over 8 million entrepreneurs started their first business often while holding down a full time job including myself. I thought I’d share some nuggets of information on the subject.
Bootstrapping in Business is to start a business without external help/capital. Start-ups that bootstrap their business fund development of their company through internal cash flow and are cautious with their expenses.
What follows is some practical advice for bootstrapping a start-up or small business.
First, focus on cash flow, not profitability. Generating revenue and profits is the key to survival. If you could pay the bills with theories, this would be fine. The reality is that you pay bills with cash, so focus on cash flow. If you know you are going to bootstrap, you should start a business with a small up-front capital requirement, short sales cycles, short payment terms, and recurring revenue. Service oriented businesses or new products in hot market segments come to mind immediately.
Hire an affordable mentor or small business coach to offer guidance based upon relevant experience. Most likely they’ve bootstrapped their own businesses in the past. They can provide you with valuable objective advice steering you around potential pitfalls and hopefully save you money, along with time, by keeping you from making the same mistakes as they did in the past. They also aren’t going to want equity in your business just by having their name attached to it or request a seat on your board of directors.
Hire young, cheap, and hungry people. Employees with passion and desire along with low overheads are going to be much more likely to stick beside you during the inevitable ups and downs your business will face. Once you achieve significant cash flow, you can hire adult supervision. Until then, hire what you can afford and make them into great employees.
During the start-up stage be prudent and focus on value. You don’t need the fanciest office furniture, phone system or computers. Look for the best value, haggle and shop around for the best deals. There is no shame is negotiating pricing and terms on almost anything related to your business. Sometimes the best isn’t always the best either; it’s just the most expensive.
Go direct and sell, sell, sell. The optimal number of hands between a bootstrapper and customer should be zero. Sure, stores provide great customer reach, and wholesalers provide distribution. But e-commerce was invented so that you could sell direct and reap greater margins. By taking this route you’ll also learn more about your customer’s needs. Stores and wholesalers fill demand, they don’t create it. If you create enough demand, you can always get other organizations to fill it later. Sell, sell, sell and if you’re not good at selling one of your first hires better be a superstar in that department.
Bootstrappers have more freedom and flexibility. When you take external funding, you become a slave to your business plan and you have to constantly answer to third parties: banks, private investors, grant agencies, etc. This destroys your ability to respond and adapt to unanticipated business challenges, changing market conditions, and unexpected business opportunities. Bootstrappers, on the other hand, aren’t hampered by these forces. They can change direction overnight if that’s what circumstances call for. This adaptability significantly increases their likelihood of near- and long-term success.
In summary, focus on creating revenue, retain a qualified affordable mentor/business coach, pick the right business model for bootstrapping, focus on value when purchasing goods and services for your business, take your time to hire the right people and sell, sell, sell. For a small business or a start-up nothing happens until someone sells something to someone. Period.
Byron Lewis founded UniWorld Group, Inc. in 1969 after searching unsuccessfully to find employment within the historically restricted mainstream advertising agencies. Over the past 35 years he has built a company that produces advertising, event marketing, public relations and promotions for an impressive roster of clients including Fortune 500 companies. UK advertising conglomerate WPP Group acquired a 49% stake in the company in 2000.
Here are some great government resources for the new entrepreneur or start-up business.
The following resources provide information on government programs and services that help members of minority groups start their own businesses, and conduct business with the federal government.
click here for the Minority Owned Businesses | Business.gov page.
Running your own business is a rewarding but engaging career and life choice. It demands your time and focus. Start by expecting to live your work until it is established so it can get off the ground. There are many different opinions about how to start a business from researching and writing a detailed business plan -- to organize it all -- to just jumping into a passion and trying to make money out of it.
Steps
- Start with your idea. This probably isn’t a brand new invention or new product. In fact, many successful small businesses have found a way to deliver an existing service or product more efficiently and economically or have customized an existing product or service to fit an opportunity.
- Put together a business plan. This doesn’t require hundreds of pages with thousands of charts. Include research into things like how much you can charge for your product/service, how much it will cost to produce or deliver (include variable & fixed costs), and the size of your potential market (i.e. number of customers). The plan should evaluate your competitors – how many competitors, how strong are they, where are they, how will you compete. The plan should state what is required to enter this market, barriers to entry such as high fixed costs (factories, restaurants) and government regulations that must be met.
- Determine if you need financing. Your business plan will include a section on financing. How will you pay the costs to start and run your business? Do you need a bank loan? Use credit cards? Self finance? Also, you’ll need to consider how much salary you need to support yourself while starting your business.
- Put together your initial marketing plan. Marketing need not cost a fortune. Some businesses require very little. For example, many service businesses such as accounting firms build their practices through word-of-mouth referrals. You can also join free or low-cost associations to build awareness of your small business. Again, your business plan (product, customer, competitor) will help you determine the marketing efforts you need to undertake.
- Build your infrastructure early. This doesn’t mean build a big factory or a fancy office. It simply means keep accurate customer records, a clean set of updated books and a technology foundation, if necessary. One of the downfalls of many small businesses is that they don’t know if they’re making or losing money (i.e. the need for a clean set of books). Another downfall is when small business owners try to sell their company years later but lack accurate customer history and customer information. Many times, the customers of a small business are its best asset, and, without the records, the small business can be sold only for salvage.
- Move forward and get started. Once you know you can be profitable take the leap and get started. Besides getting business supplies or advertising, plan ahead by establishing some new business clients ahead of time. If you’re business is unlike a restaurant, that physically needs to wait for customers to walk into it’s doors, establish accounts ahead of time. In this way, you will have pre-planned future receivables to look forward to. Think about and focus on making money first, where ever possible, instead of spending money. The more money you can bring in, without spending money, the more profitable you are going to be.
- Use the web. Use every technology available that will give your business a competitive advantage. The internet is a customers research tool. Help future customers learn more about you and the details about what you sell and why your products or services are different and better for them than other competitors.
- Make paying for your items or service convenient. In today’s world, understand how people pay. Carrying cash can be risky. Therefore, most people choose to carry Visa, Mastercard, American Express and Discover. All these credit cards are part of our societies everyday life for making purchases. Debit cards are becoming especially popular. So, along with having a sales counter cash register, get set up to accept credit cards for your business.
Tips
- Use free resources. Your local library contains numerous useful references regarding incorporation, writing business plans, marketing, as well as information specific to your industry. The Small Business Association, Chamber of Commerce, …all of these offer training, materials, networking and sometimes financing. Another good option is SCORE, a group of retired executives who provide business start-up advice.
- Recognize that getting your business off the ground will take time. Most businesses don’t become profitable right away, so plan for that in your personal life too. You will be making sacrifices to be your own boss.
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An eBook consisting of 2 Volumes that takes you from making the decision whether to start a business to what you need to do and what to look out for. A valuable resource for those that consider starting their own service, retail or manufacturing business
Please edit this article and find author credits at the original wikiHow article on How to Start Your Own Business. All content on wikiHow can be shared under a Creative Commons license.
President Barack Obama on Friday will outline a proposal to extend more tax credits to small businesses in the hopes of spurring jobs growth, Labor Secretary Hilda Solis said.
“We’re going to have to work harder to create more jobs,” U.S. Labor Secretary Hilda Solis told Bloomberg television. “The president will outline more tax credits for small business because they are the engine of growth.”
President Obama is scheduled to make a statement on the economy at 3:40 p.m (CST)
Source: Reuters
