14 common sense things to remember:
1. Realize that some businesses are easier to bootstrap than others. This will greatly determine what kind of business you actually start and/or if you will need additional financing.
2. If possible, run your business part time in the beginning. Running a business part time is a great way to determine if you actually like the business and wish to continue. As well, you will be able to gradually build a profitable business without sacrificing your current income from your job.
3. Focus on cash flow, not profitability. The theory is that profits are the key to survival. If you could pay the bills with theories, this would be fine. The reality is that you pay bills with cash, so focus on cash flow: a small upfront capital requirement, short sales cycles, short payment terms and recurring revenue–and pass up the big sale that takes a year to close and collect. Cash is not only king—it’s queen and prince, too.
4. Keep overhead low. Work out of your home as long as possible.
5. Negotiate time rather than price. Rather than expending effort negotiating reduced prices from vendors and suppliers, try to get payment extensions.
6. Maximize your resources. You don’t necessarily need top-of-the-line equipment and cutting-edge technology.
7. Forecast from the bottom up. Most entrepreneurs forecast top-down: “If 1 percent of U.S. car owners install our satellite radio systems, that’s 1.5 million systems.” The bottom-up forecast: “We can open 10 facilities that each install 10 systems a day.” Guess which forecast is more likely to happen?
8. Ship, then test. How can I recommend shipping stuff that isn’t perfect? “Perfect” is the enemy of “good enough.” When your product is “good enough,” get it out, because cash flows when you start shipping. By shipping, you also learn what customers truly want you to fix.
9. Focus on function, not form. Bootstrappers focus on function: computing, getting from Point A to Point B and knowing the time of day. All the chair has to do is hold your butt. It doesn’t have to look like it belongs in the Museum of Modern Art.
10. Understaff. Many entrepreneurs staff up for what could happen, best case. Bootstrappers understaff, knowing that all hell might break loose.
11. Go direct. The optimal number of mouths between a bootstrapper and her customer is zero. Sure, stores provide great customer reach and wholesalers provide distribution. But e-commerce was invented so you could sell direct and reap greater margins.
12. Position against the leader. Toyota introduced Lexus, claiming it’s as good as a Mercedes-Benz but half the price–Toyota didn’t have to explain what “good as a Mercedes-Benz” meant. How much do you think they saved? “Cheap iPod” and “poor man’s Bose speakers” work, too.
13. Stay focused. Bootstrapping isn’t easy. It requires discipline, diligence and hard work.
14. Finally, if at all possible, don’t finance your business with personal credit cards.
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