"My first big purchase was a personal computer," Shatto recalls, "and we tore the doors off a closet to construct a workstation. When I later hired a part-time secretary, she worked in the closet." Only after he won a big federal contract, in 1990, did Shatto move into commercial offices. Finally, he says, "I had to face fixed operating costs." But he furnished his new digs on the cheap. "There was another defense contractor whose lease was six months out of sync with his contract," Shatto says. "I let him share our office space for free, and at the end of six months, I took title to all his furniture. So we furnished the office for free."
One benefit of working from your house is that help -- that is, your family -- is close at hand. When Richard Caudle founded Rock 'n' Learn, in 1986, he had only $500 to launch the educational-audiocassette business. He set up shop in his home in Amarillo, Tex., later moving to Conroe, Tex., and continuing operations in his new home. For the first big shipment to Barnes & Noble, in 1990, trucks jammed Caudle's garage, and he and his family worked frantically, hoping the neighbors wouldn't complain. They didn't, but the company, which is growing like fertilized kudzu, has moved to its own facilities, employs 11 full-timers, and contracts out warehousing and fulfillment.
Mark Ozkan's neighbors weren't so patient. His company, Vektron International, in Grand Prairie, Tex., distributes mail-order computer equipment. It's now a $25-million business, but in 1989, starting with only $3,000, Ozkan staged operations from his house. In 1991 the city objected to the 18-wheelers going through the neighborhood and cited him for a zoning violation.
Gary Berman remembers how it was in 1988, when he started Market Segment Research & Consulting in a tiny room in his rented house. "Every morning, I'd wear a suit, tie, and wing tips," he says. "If I turned left from my bedroom, I was in my little office. I bought a cassette tape, Office Chatter, with sounds of keyboard strokes, muffled conversation, and even pagings. It wasn't to deceive callers. I had to convince myself that I was really in business."
Seven years later Berman's ethnic-research firm, in Coral Gables, Fla., is a $3-million business. But he had no money in 1989, when he hired his first employee and needed office space. "I was looking for deferred rent while I got the company going," says Berman, who called himself "director of begging." ("That's how I dealt with rejection. It was in my job description.")
He tried a building where a tenant had gone bankrupt. The idle space was desirable -- a four-office suite equipped with furniture and phones. "The agent," Berman recalls, "asked about the company and our reputation. I said, 'As a matter of fact, I'm in the current Newsweek.' It was my first and only published mention at the time -- one sentence -- but it impressed him, and he gave me six months rent-free."
The "office challenged" bootstrapper prefers to be discreet. He's loath to have customers visit his humble headquarters. But sometimes a customer visit cannot be avoided. In 1985 Robert Dobrient and Aurora Pucciarello were just starting Max Distribution, their Dallas-based contract logistics company. Strapped for money, they leased a small room in the back of a larger company.
Dobrient had befriended the front-office receptionist, and when his first big prospect, Southwestern Bell, wanted to come by, he asked for her help. The Bell people arrived, and the receptionist escorted them to Dobrient's little area, acting as if Max Distribution had the whole space. "We were bidding on courier service," he says, "and I asked a bunch of my friends to call us between 2 and 3 o'clock, so the phones would ring continually while they were here."
Phones
As an image builder with the outside world, the phone is a key asset. Most bootstrappers use the royal we, not I, on the phone, even when they're flying solo.
Others, like Pucciarello of Max Distribution, take liberties. She'd often put callers on hold, wait a few seconds, and "send" them from department to department, changing her voice with each transfer.
When George Heinrichs founded SCC Communications with $200, in 1979, he rented a closet for his answering machine so he'd have a phone number with an upscale dialing exchange in Boulder, Colo. Steve Safigan, who started Universal Tax Systems in 1989 in his Fredericksburg, Va., home, installed a second phone line that he made sure always to answer professionally.
A bootstrapper's loyalty is, first, to cash flow, and the long-distance wars provided some relief for Berman, whose Market Segment Research racked up big bills. "We switched carriers at least 20 times," he says. "We went with whichever one had the best deal at the moment."
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Staffing
There's only so much you can do alone. Maybe a spouse pitches in, or a retired in-law catches the phones. But if you can barely afford yourself, how can you pay a regular employee? Ken Gansmann and Alex Amigoni set up their salespeople as joint ventures. Their company, UniSource Energy, in Chicago, markets specialty petroleum products. It does more than $12 million a year in business now, but start-up capital was zero in 1986, when Gansmann and Amigoni left Exxon and hit the bootstrapping trail. They decided to put salespeople in business for themselves. UniSource establishes base prices by adding overhead to product cost. It then shares profit margins with its salespeople.
Mike Hosford of PCs Plus says, "We told salespeople we couldn't wait more than a couple of months for them to break even or turn a profit for us. We'd hire them at low wages, and if they did well, they'd get bonuses and commissions. They did everything -- made sales, built machines, shipped them, helped with bookkeeping. Some got raises of 20% a year, and most have doubled their starting incomes."
And at FlexCorp, a specialty business-card designer and manufacturer in Charlotte, N.C., founder and "head buckaroo" Baron C. Hanson gets along with part-timers who work in shifts -- using a single set of equipment. Four years old, FlexCorp projects that its 1995 sales will reach $700,000, but Hanson plans to hire few full-time employees. He read The Goal and believes that most full-time people work only five hours a day and goof off the other three.
