One
of the earliest questions a fledgling entrepreneur needs to answer
is how to finance the new venture. While some may be blessed with
help from family, friends or both, most will need to do the start-up
company with self-generated funds -- a practice known in some entrepreneurial
circles as "bootstrapping."
Bootstrapping means getting by with as few resources as possible until
the cash starts flowing. While that idea may not give you warm fuzzies,
it is one of the smartest and most sound business philosophies for
safe, steady growth while retaining ownership. Bootstrapping isn't
often taught on university campuses because it isn't in vogue as much
as highly leveraged IPO's or using venture capitalists. But based
on my experience, it is a better way to build.
Here are some tips on bootstrapping:
Don't rush to employ. Keep the number of actual employees as small
as possible. Use temporary services, outsourcing and independent contractors
based on your needs.
Rent the minimum space necessary to perform tasks. Some employers
think they need to offer kitchens, elaborate conference rooms and
private offices, especially for the company founders. That just isn't
so -- especially not in bootstrapping operations.
Purchase used items. Refurbishing used equipment, vehicles and office
furniture almost always makes sense financially. The latest isn't
always the best -- or the smartest.
Ask suppliers for longer credit terms. This can increase cash flow.
But if you make special payment arrangements, be sure to keep your
end of the bargain. Discounted rates for professionals are also possibilities,
especially if you promise long-term loyalty.
Lease equipment. Leasing rather than buying isn't always good advice,
but as you bootstrap, a monthly lease expense that you can eventually
write-off may be a wise option to pursue. A good CPA who knows your
cash position can help you with these decisions.
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Reduce the
AR time-factor. Faxing, overnighting or hand-delivering invoices immediately
after services are rendered are good alternatives when you can't collect
on the spot. Following up on invoices almost daily with the accounts
payable clerk is also vitally important.
Put a value on your time. If you can hire someone
on an hourly basis to perform simple tasks, do it.
Use a delivery service instead of picking up
and delivering things yourself -- unless it is picking up a check
or delivering an invoice that can be collected upon presentation.
Use a bookkeeper and payroll service as soon
as you can. Instead of spending time entering data into a computer
or figuring payroll, make sales calls or build more product. Use high
school students for simple tasks. Some of my best employees have been
sharp high school students whom I have paid more than they can earn
working at fast food outlets but less than their older counterparts
would require.
Offer internships for college students. This
will help the students learn about the real world of business, plus
it will look good on their resumes.
You're not alone out there in bootstrapping your
company. A recent Inc. magazine listing of the 500 fastest-growing
privately held companies in the United States revealed that 54 percent
were started from personal funds and various other sources. |
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