The Secrets of Bootstrapping

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6. Take out an Ad; See What Happens. Some newspapers and magazines offer casual terms, leaving the ad taker sufficient time to determine whether his or her wares have market appeal before the bill comes due. For its first boating-equipment catalog in 1989, The Rigging Co., started in a Portsmouth, R.I., basement, bought a small ad in a monthly sailing magazine. As founder Jim Miller describes the process: "I wanted to advertise in advance, not having any sense of whether anyone was interested in the wire and stuff we'd be selling. I used a photo to represent the cover. When I got back 5,000 requests -- probably 5% of the magazine's readership -- I thought, Hey, this must be a good idea!" It was. The company hit more than $1 million in sales its next year.

Three Good Vehicles for Your Initial Ad

1. The Wall Street Journal: two-inch-by-two-inch display ad costs $3,488; only requirement is insertion order on letterhead; bills anybody in 30 days, no money down

2. Barron's : two-inch-by-two-inch classified ad costs $1,072; bills in 30 days

3. Electronic Buyers' News: One-inch-by-four-inch display ad costs $1,460; bills in 30 days but will knock off 5% if you pay in advance

. . . And Three That Are Not So Good

1. PC World: Inside cover costs $27,140, plus a 15% premium; credit required for new customers

2. Macworld: Inside cover costs $24,995; new companies pay in advance

3. PC Week: Two-inch-by-two-inch display ad costs $6,300. Runs credit check

Source: Inc. research

7. Skimp on Payroll. Maritime Services Corp., of Hood River, Oreg., which outfits the interiors of cruise ships, employs craftspeople of various disciplines. One cost savings, says founder George Selfridge, is that craftspeople generally have their own tools. More important, "one of the considerations of working for a bootstrapped start-up [with long-term job potential] is that often it's willing to do jobs for a little less. The key to making it as a bootstrapper is to start profitable from the very beginning. And the way to do that is not to pay very well."

8. Get Customers to Pay Fast. The Rigging Co.'s Jim Miller claims an average collection time of 28 days. "We use our newness and smallness as a lever. It's an appeal that's kept everyone paying us. Otherwise you wait -- and wait."

9. Coddle Suppliers. Some bootstrappers take it out of their vendors. But Brian Shniderson, of Premiere Merchandising Inc., in Inglewood, Calif., looked to his customers. "We never put carrying the business on our suppliers. We put it on our clients. We'd tell our clients, We're giving you good service at a great price, we're working our butts off, and we need to be paid within 10 days. We made sure the suppliers got paid no matter what. That way, there's nothing they wouldn't do for us."

10. Don't Sell at Retail When You Can Take Orders at Wholesale. Stuck (by choice) in the sparsely populated reaches of central Maine, with no phone and no electricity, Roxanne Quimby and her apiarian partner, Burt Shavitz, started a business they called Burt's Bees. Quimby and Shavitz bottled honey in kitchen canning jars, cast candles out of beeswax on a wood stove, threw the finished lot into a pickup truck, and hied off to seasonal crafts fairs. After two years it struck Quimby that "being on the road every weekend and coming back and making candles and going on the road again was ridiculous." Plus, the team's market was limited to the territory they and their tiring Datsun could span. They plowed their meager profits into an indoor space at a wholesale show and sat in it and wrote orders. That, Quimby says, is when the business took flight. "We concentrated totally on wholesale," she says, "because it was easier to open markets that way than by retail." The company now sells more than 100 gift and skin-care products and is about to launch a line of country clothing. In 1992 it'll take in about $4.2 million.

11. Do It Yourself. Because bootstrappers often come from backgrounds other than business, they mistakenly assume they don't know how to run their companies as well as the textbook-trained do. That's not necessarily so. Because Richard Cheng of Eastern Computers Inc. was a professor of engineering, when his company got a major, multiyear contract, he hired a seasoned ex-banker to be full-time "chief everything." The first year out, the banker lost money. Cheng fired him, took a leave from his college job to try to salvage something from the disaster, and turned the contract profitable immediately. The Virginia Beach, Va., company hasn't lost money since. Cheng's secret: "I didn't know the rules, so I ran it with common sense."

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