How to Build a Bootstrapping Culture Here are some tips to the art of building a business with little or no cash.
By Venuri Siriwardane | Sep 20, 2010
Ask an MBA how to start a business, and they'll likely tell you to craft a business plan, pitch it to investors, secure a healthy dose of initial funding and start cranking the PR engine. But the reality is that most entrepreneurs just usehomegrown ideas to take their start-ups to the next level — without much help from the venture capital circuit.
Bootstrapping, or the art of building a business with little or no money, is the most common way to start a company. Most are launched with $10,000 or less, according to a Wells Fargo/Gallup study. And some, such as Apple and Dell, became industry juggernauts, dominating their sectors andreaping billions of dollars in revenue — with $1,000 or less to start off with.
The appeal of bootstrapping is simple: freedom.
"When you raise capital, it's not uncommon to end up selling your soul for a pile of money," says Greg Gianforte, CEO of RightNow Technologies and author of the book, Bootstrapping Your Business: Start and Grow a Successful Company with Almost No Money. "The biggestbenefit of bootstrapping is that, in the end, you own the business and you end up with the fruits of your labor."
To get your start-up off the ground — without investors watching your every move —you'll need to build a culture that inspires creative money-saving tactics, attracts talented employees who will work for less, and controls cash flow to keep the lights on until you achieve profitability.Here's some tips to get you started.
How to Build a Bootstrapping Culture: Make Everyone a Bootstrapper
When hiring an employee, don't just focus on technical skills and experience. Find out if he or she has a bootstrapping temperament, says Peter Cobb, senior vice president of eBags, the Denver-based online retailer of bags, luggage and other accessories.
"It's important that they share thevision," he says. "When you're starting out and can't afford to pay market wages, people will work for you because they want to be part of something special — it's just a fun, high-energy environment."
The goal is to make each employee a bootstrapper, who is willing to sacrifice and accomplish tasks with minimal resources, he adds.
Cobb started eBags with four partners in 1998, when e-commerce wasa novel idea. But the five co-founders, most of them veterans of the luggage giant Samsonite, knew people were comfortable ordering bags via catalogue — a good precursor to buying online. And selling suitcases, high-margin goods that leave ample room for marketing and other expenses, seemed like a bulletproof idea at the time.
Then 9/11 happened, virtually grounding air travel for weeks, and thecompany hit a stump.
"We gathered all our employees and said, 'We can either lay off six people, or we can ask every person here, including senior management, to take a 10 percent pay cut,'" Cobb says. "We didn't lose a single person, it allowed us to save a lot of money and it rallied the team around a plan to make it out of this."
Besides sharing the pain, Cobb recommends offering stockoptions to each new hire. It has become an indispensable way for bootstrappers with limited means to recruit, retain and motivate employees, he says. Today, eBags has 100 employees, is the largest online retailer in its space, and has sold 11 million bags to customers worldwide.
Dig Deeper: 14 Bootstrapping Tips
How to Build a Bootstrapping Culture: Take the Minimalist Approach
Adopt a no-frillspolicy, says Gianforte, whose first company was Brightwork Development, a network management firm he launched in 1986 and eventually sold to McAfee Associates for more than $10 million.
In Brightwork's early days, Gianforte avoided renting office space and set up shop on his partner's sun porch in Tinton Falls, New Jersey. The pair would pass the phone back and forth, taking turns being the sales...
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