Venture Financing

Strategies for Successful Bootstrapping

Osnabrugge M.V. and Robinson R.J., the authors of Angel Investing

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Employing bootstrapping measures to grow a small firm clearly relies greatly on networks, trust, cooperation, and wise use of the firm's existing resources, rather than collecting new financial resources from outside.

Strategies for successful bootstrapping are based on the following seven recommendations:

Venturepreneur

Innopreneurial Journey

9 Maxims of Venturing

① Get operational quickly

Use a copycat idea in a small target market to get a firm off the ground fast. New and bigger opportunities are certain to develop once the firm is in business.

Entrepreneurship

Entrepreneurial Success

② Look for quick, break-even, cash-generating products

Firms that are making money build credibility in the eyes of customers, employees, and investors. Therefore bootstrapped firms may wish to take on profit opportunities that large firms regard as distractions.

7 Routes to High Profits

Entrepreneurial Opportunity

③ Offer high-value products or services that sustain direct personal selling

Since it is usually difficult and costly to persuade customers to switch from a familiar product or service to a substitute offered by a new firm, successful entrepreneurs usually choose high-ticket products and services where their individual passion and marketing and sales tactics can substitute for a large marketing budget.

Marketing Rainbow

Virtuoso Marketing

Sell Dreams and Emotional Benefits

Creative Marketing

SWOT Marketing

How To Sell to Six Thinking Hats

④ Forget about the crack team

Small bootstrapped firms do not have the financial means to afford and recruit a well-balanced management team of seasoned veterans. Reliance on inexperienced personnel is common – and not always a disadvantage.

Entrepreneurial Attributes

Management Team

Entrepreneurial Creativity

⑤ Keep growth in check

Since bootstrapping supplies only limited financial means for growth, bootstrapped firms should take care to expand at a rate they can control. Too many start-ups fail because they grow beyond their financial means.

Start-up Capital Formation Process

Minimize the Need for Capital

⑥ Keep growth in check

Focus on cash (not on profits, market share, or anything else). Because of their financial means, bootstrapped firms cannot afford to pursue a number of strategic goals. Bootstrapped firms cannot pursue loss-making strategies to build a market share or a customer base. Having a healthy cash flow is critical to survival, so their sales strategies must ensure healthy returns from the outset.

Meet the Need for Capital

Sample Cash Flow Forecast

Venture Planning Checklist

Financial Assessment

Reality Check

⑦ Cultivate banks before the business becomes creditworthy

Bank financing is usually unavailable to start-up firms, especially if little or no collateral is offered. However, bank financing is quite important for all small firms once they are established and making some profit. Keeping good books, immaculate records, and sound balance sheets from day one allows you to approach your banker with confidence once the firm has been in operation for a few years and is creditworthy.

Bootstrapping Strategies for Product Development

Bootstrapping Strategies for Business Development

Entrepreneurial Strategies