The Secrets of Bootstrapping

Tweet

2. Tap Vendors. In economically flourishing sectors, this put-it-to-'em tactic doesn't stand a chance. But when trade is off, not only can vendors and suppliers be cajoled into extending credit to the uncreditworthy; they can also be used as an inexpensive research-and-development arm. Ronald Jackson, founder (on $500) of Contract Manufacturer Inc., a maker of flatbed trailers and horse carriers in Madill, Okla., relied on sales-hungry suppliers to execute both his engineering and his budgeting. "Find someone who's looking for clients," advises Jackson. "Many suppliers have in-house expertise and big CAD systems. I tell them I'm coming out with an advanced product -- a new-style fender, for example -- and they say, Let us run it by engineering. So I give them a sketch, and they come back with the engineering and the design and the cost on it. It's not a paltry effort; I'm talking maybe $5,000 worth for nothing."

Like many bootstrappers, Randy Amon, cofounder of ABL Electronics Corp., in Timonium, Md., tried to get his suppliers to extend long credit terms even as he was persuading his customers to pay invoices promptly. "We expected COD from our customers, but we paid net 45 or net 60," he admits. "I don't see anything wrong with using your vendors to help fund your business."

Top Five Sectors with Exploitable Downtime
1. Steam engines and turbines

2. Asphalt paving and roofing materials

3. Shipbuilding

4. Aircraft and missile parts

5. Transportation equipment, space

vehicles

Source: U.S. Bureau of the Census

3. Do Consulting. Countless businesses have been launched on initial revenues radiating from consulting contracts. All you have to do is know more than your clients -- not difficult. Wind River Systems Inc., of Alameda, Calif., started with one consulting contract, over the course of which the company's now widely sold retail products were developed. The approach, according to founder Jerry Fiddler: "We'd ask, 'So, you'd like an automated system? We'll do it cheap, because there are some general-purpose pieces we want as part of our repertoire as a software company; in return, we'll retain rights to them.' "

4. Establish in Locales with Lots of Vacancies. Even the most tenuous of bootstrapped enterprises can carve out favorable deals in areas where landlords are desperate for the slightest promise of tenancy. Around 1986 Houston was one such setting. Things were so bad then, recalls Forrest Henson Jr., who in 1986 founded chemical distributor JTS Enterprises Inc., that landlords would grant large concessions simply to sign up a renter. Henson struck an arrangement for a three-year lease that called for virtually no rent early on. "The lessor gambled that we'd both last three years," he remembers fondly. Act fast if a prime location is available cheap, Henson advises. Houston has already recovered. "You could still do it in some areas of town," he says, "but no longer in the area I'm in."

The Five Most Vacant Metropolitan Areas
1. New Orleans -- 28.4%

2. Miami -- 26.1%

3. St. Louis -- 26.1%

4. Houston -- 25.9%

5. Dallas -- 25.8%

Source: ONCOR International (as of year-end, 1991)

5. Operate out of Your Home. Not only did Barry Mower, founder of $14-million American Playworld Inc., in Ogden, Utah, work out of a home office, he demonstrated and manufactured his first product -- a basketball backboard -- in his backyard. But, Mower says regretfully, "I could only do so much like that before I had problems." The town-father flaw: his home wasn't zoned for business. The bootstrapper solution: "We rented a storage building, one of those small garages, to establish a commercial address -- and actually did some of our work down there, too."

 PREV  1 | 2 | 3 | 4 | 5 | 6  NEXT 

Read more:

Sign-up for our Finance Newsletter

Email Address: