5 Proven Bootstrapping Strategies
May 07, 2014 at 3:00 PM
By W. Michael Short, Managing Editor
In April I was invited to participate on a panel at Emerging Talk 2014 focusing on Startup Funding Sources. Emerging Talk is Central New York’s premier entrepreneurial expo sponsored by Syracuse University and the NYS Center of Excellence in Environmental & Energy Systems, among others.
Specifically, I was asked to share my experiences with founding my startup consulting firm, Short Enterprises, and offer perspectives on the opportunities and pitfalls associated with startup bootstrapping.
Some background… Since 2011, my firm has assisted clients in procuring roughly $5 million in grants, development incentives, and equivalents in pursuit of projects addressing key social, environmental, and community challenges. In essence, the firm is a social enterprise focused on “the business of doing good.”
Noteworthy efforts have included authoring the City of Syracuse's Community Literacy Action Plan, developing and implementing strategies to reclaim and revitalize abandoned inner-city properties, and spearheading the largest privately pursued green infrastructure projects in Onondaga County under the nationally acclaimed Save the Rain Program with over a million dollars in committed funding.
While successful in pursuing funding for our clients, we have had to grow the firm without the assistance of any such grants, development incentives, venture capital, etc.
How did we do this? Simply put, we had to bootstrap.
What exactly is bootstrapping?
Bootstrapping is the process of using internal cash flow – from paying clients – to fund the growth of a company. The following are five basic lessons learned from our experience with bootstrapping our consulting firm, some of which were discussed while participating at Emerging Talk 2014.
(1) Figure out your skills and find a niche:
First you need to figure out what you are selling and if anyone will buy it. For us, grant writing served as the key marketable in-demand skill that we built the business around. As the company has grown, so too has the array of services that we provide such as strategic communications and public relations support services. The key is to provide services that are complimentary in nature. For example, if a client is pursuing a large real-estate development tax incentive, chances are they will also need assistance with communications strategy, which will assist them in making the case for public funding being used to support a private development project. Botched PR can put an entire project at risk.
(2) Start selling almost immediately in order to survive:
Cash flow is crucial for successful bootstrapping. Without the assistance of outside funding such as venture capital, generating cash flow from paying clients has to be your major focus. With that being said, remember that working with high quality clients can be just as crucial as generating cash flow. Don’t sacrifice on client quality simply to shore up cash flow. Low quality clients will make unreasonable demands, give you a hard time when it’s time for them to pay you, refuse to understand the process, and hound you with endless complaints – all while benefiting from your services. Simply put, if you'll forgive a crude phrase, they’ll pee on your leg and tell you it’s raining. All of this underscores the importance of working with high quality clients, which will help ensure successful outcomes and success stories. Putting in place an effective screening system for prospects is key in order to weed out low quality prospects.
(3) Minimize Overhead:
Utilize strategic partnerships with other startups and 3rd party contracting to keep your overhead down. This will allow you to keep your prices lower and more competitive. The more competitive your pricing, the easier it will be to find new clients, which will help you grow.
(4) Maximize Existing Resources:
Be as efficient as possible. Leverage existing resources and networks to expand your footprint and grow your business. You’ll be surprised how much you are capable of doing with so little.
(5) Reinvest Everything:
As we have discussed, reinvesting your cash flow into your startup is central to successful bootstrapping. Understandably, this can be a painful process and you might wonder if you’ll ever be able to pay yourself a salary. The time will come, eventually. Stay strong and push through these challenges. You’ll thank yourself later.What about you? What has your experience been like? What lessons have you learned? Share your thoughts and feedback in the comments section below.
I’ll leave you with this...
The journey of bootstrapping your startup can be a long and arduous one. That being said, it can also be incredibly rewarding and force you to make the hard decisions early on that will ensure the long-term sustainability and viability of your business.
At Short Enterprises, we believe that opportunities are all around…Embrace them.
W. MICHAEL SHORT, MANAGING EDITOR
W. Michael Short is an entrepreneur and the founder of Short Enterprises, an interdisciplinary development consulting firm, based in Central New York and recognized as Best of Syracuse 2013 and one of Syracuse's Finest 2014. Short is a graduate of the S.I. Newhouse School of Public Communications and the Maxwell School of Citizenship & Public Affairs and completed a Graduate Fellowship at Syracuse University's Martin J. Whitman School of Management with funding support from the Kaufman Foundation, Gifford Foundation, & Imagining America.