Just finished listening to Charles Plant Co -Founder and CEO of Synamics, and wanted to share with you his formula and benefits of bootstrapping. This is a system that works and can work for you and your business, when applied properly.
I never loved the idea of been funded by a VC or Angel investor now there are tons of reasons i could give for that but that will be for another post. According to Charles research and from his personal experience has shown companies that bootstrap have more chances of success and often do well than companies that are backed with venture capital. This is clearly visible as most successful companies today succeeded through bootstrapping, from Microsoft, Dell, HP, Black Berry and even up to Google all great companies and all bootstrapped.
Below is the formula that works for you as you bootstrap
Line up credit ahead of time: Get your available credit card limits up before you start, so while you make a few mistakes you have a cushion in case things go side ways and you do not call it in after your initial capital is spent.
Find a mentor: Someone with experience, do not use your mother or your uncle who is a banker as a mentor, they have a tendency of saying everything is fine and being unrealistically optimistic. Do not find somebody who has a big business degree. Find some one in your industry who has been there done that, and knows the tricks and strategy that works
Pick the right business: Look for a business that is not capital intensive, find one that can pay you immediately, one that sells easily and is not capital intensive. Capital intensive businesses will certainly require some sort of funding so if you intend to bootstrap successfully you might want to avoid such businesses
You have decided you will do it, and found your business idea. Now it is time to find the pain, ask questions about what hurts, you do not want to have what you think is a solution but does not solve the exact critical problems of your market. While carrying out this research you can tell client you are finding a value preposition, it gives a chance to do it on your own dime rather than waste your own money.
Simple business plan nothing fancy: Straight forward business plan that guides your perspective. I discussed elaborately on this in one of my articles i posted recently "why conventional marketing strategies fail". Simplicity is the ultimate sophistication.
Earn some consulting revenue: Having money while you are working on your business system can help you through the early process, especially if you are a family man. It must not be necessarily consulting but having a side income is important. To help you pay the bills.
Start building the product or a prototype: While you are finding the pain and what exactly your customers need it is essential that you have a prototype at this point, this can help with the research, if people can see a working product they will be more prone to helping you with the right information during the research phase.
Leverage relationships: All the little moments pile up, through recommendations and set you up for actual success while you grow. Bill Gates mum served at a board of a volunteer group along with with an IBM employee who told her IBM needed and operating system for their computers, Bill and co-founder Allen bought the first desktop operating system(DOS) for $50000 and sold it to IBM that is how Microsoft started, as a leverage of a relationship. Do not underestimate the need for networking and small connections.
Find the fox: Find someone that will champion you and give you advise on running your business and help drive your business, a client that will demand efficient and innovative systems
Look for service opportunities: where ever there is a product, there is the chance that people will need a service. It will be easy to customize your service to the needs of an organisation during the early days, this will act both as a source of revenue and reference for future sales.
Find the priority of a problem and solve it, solving a problem that is prioritized improves the value of your service and gives you credibility as you forge ahead in your business.
Go for the low hanging fruit: Easy things you can get with minimum cost, one of the benefits of bootstrapping is smart thinking, breaking away form the conventional system of doing things.
Do not care about REVENUE: in your first sale do not care about revenue, i know it goes against all convention but your first sale is a referral to your second sale and gives credibility that your system actually works. It will improve your revenue and profit with future sales
Competition: the last but not the least is competition, this is what you and every other company has to deal with, by keeping cost and sales low during the bootstrapping phase helps to weather the un challenging competitors and they eventually fall off.
Other Aspects
keep cost variable and low fixed cost
Leverage Suppliers
Predictability, a successful business model is the secret source
Product
Reference Account
Right people
Exponential growth.
No comments:
Post a Comment