15. Perform Cheap Market Research. Jon Jordan founded truck-stereo-equipment maker Southern Audio Services Inc., in Baton Rouge, La., with $400, a sum that went into parts to construct a woofer-in-a-tube loudspeaker and install it as a traveling demo in the back of his pickup truck. How did he know there was a market for it? "Basically, my target market was me, and I was confident that if I really liked it, I could damn sure convince every other 20-year-old out there, too." Even if the new speaker was a great idea, there was no money to pursue it -- the bootstrapper's predicament. As Jordan, joined by his equally broke brother, saw it: "We had to justify the product by selling enough of them, then figure out a way to get them built. What was the worst-case scenario? We'd drive around and call on a bunch of dealers, come back, and not be able to fill the orders. So they'd scratch their heads awhile, wondering, What ever happened to those guys who came by here with that pickup truck?"
Undecided whether to quit their salaried jobs and go into business, Randy Amon and his partner, of ABL Electronics, implemented what they recall fondly as "the market-research minute": They called up one computer store. "We asked them, 'If we made a cable that connected opposing equipment, would you buy it?' " Amon relates. "Not only would they buy it, they placed an order with us on the phone. We didn't even have a company yet, or a product. They said they'd pay us $35 apiece for five cables. We went out and bought the stuff to make them with -- $60 from my pocket and $40 from my partner's." To this day, that ratio remains the split of business ownership.
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16. Open Multisupplier Channels for Credit Terms. If one supplier won't give you liberal enough terms to proceed apace, what should you do? Charge a small quantity from a number of different suppliers at the same time. "I'd never done anything real big," explains Contract Manufacturer's Ronald Jackson of his inability to get much credit extended to buy vehicle parts. "I picked three or four major suppliers and built a real good credit rating with each one; I paid them early, discounting the invoice. I'd buy a few tires from Goodyear, a few from Goodrich, a little steel from Nucor. I'd buy maybe $3,000 worth of product from each and get 30 days the first time. I used those companies as my credit references to gain credit with other suppliers. Some of them are very strict: on the 31st day they get excited; others have it in their system that they don't start being concerned about it until it's 15 days past due. You learn which ones are which and use them accordingly. If they don't really notice payment is past due for 15 days, you take 45 days. But don't ever hang your creditors out," he urges.
17. Change Direction. Maureen Barten of Z-Barten Productions started out in a Culver City, Calif., apartment, laboring over hand-painted greeting cards "that cost nothing but time to produce." They sold well enough, but Barten couldn't churn out enough of them to consider the custom-cards industry a growth situation. So she moved into faster-to-produce collages -- cards onto which were pasted tiny plastic figures, colored chips of paper, and such. It wasn't so much that the customers loved them, as that customers kept asking where they, too, could get those cute little sprinkles. Barten saw the writing on the wall: she became a full-time -- and high-growth -- confetti maker.
18. Never Say Never. More often than they care to admit, bootstrappers are so green that occasionally they're unfamiliar with the parlance of their chosen trades. Jon Jordan of Southern Audio Services faced the situation head on -- more or less. After Jordan made an initial impression, the customer asked how much he needed to buy to qualify for a freight order. "I don't have any idea what you're talking about," confessed Jordan, grasping that he'd better not blow it here. "With most manufacturers," explained the customer, "if you buy a certain amount of product from them, they'll pay the freight." "Oh, we do that. Our policy is if you buy six pairs, we bring 'em to you -- but if we do, we need the money COD, because I'm a new company and cash flow is important to me." Done, said the customer.
"Man, how easy this is!" Jordan congratulated himself.
-- Christopher Caggiano and Michael P. Cronincontributed to the reporting of this story.
THE BOOTSTRAPPERS
'91 sales '91 Mentioned
Company Founded On (millions) employees in text Line of business
ABL Electronics '81 $100 $4.4 39 12, 15 manufactures computer cables
American Playworld '78 $800 $13.9 157 5, 13 manufactures, markets playground
