The Secrets of Bootstrapping

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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.

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

equipment

Burt's Bees '89 $400 $1.5 40 10 manufactures, markets gift items

Contract '76 $500 $5.6 68 2, 16 manufactures flatbed and

Manufacturer horse trailers

Design Basics '83 $1,000 $2.1 28 12 sells house-construction plans

Eastern Computers '80 $0 $49.8 350 11 manufactures electronic equipment

JTS Enterprises '86 $2,000 $18.9 3 4 markets, trades petrochemicals

Maritime Services '86 $1,000 $3.9 30 7 constructs ship interiors

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