Also known as self-capitalization, this is how most start-ups actually capitalize themselves. Sources of bootstrap capital include: soft capital (Mom/Dad/Rich Uncle Buck), home equity loans, supplier credit, consulting, credit cards, retainers, deposits, progress payments, receivables factoring, partners, sponsorships, guarantors, pre-sales, launch clients and more. Bootstrap capital allows the ownership to keep control of their own enterprises and not lose them to VCs and other debt or equity holders.
“Two former students decide to start a home building business. They have no capital so they: 1. find a friendly landowner who allows them to set up shop in a field and pre-sell homes with no money up front to the landowner (who gets paid when the homes sell); 2. they pre-sell 10 homes and take deposits of $20,000 per home so now they have $200,000 in their bank account; 3. they get 90 and 120 day terms from their suppliers so that the suppliers also get paid when the homes sell; 4. they take their 10 Agreements of Purchase and Sale and pledge those to the Bank for a LOC (effectively borrowing their clients' credit scores). After two years, they have $800,000 in the Bank and own 100% of the business. This example demonstrates five sources of bootstrap capital: supplier credit, pre-sales, launch clients, deposits and guarantors.”
by ProfBruce October 31, 2009
Get the Bootstrap Capitalmug. It is the aim of great manufacturing companies (starting with Motorola in the 1980s) to remove substantially all error from both their fabrication and business processes—their goal is to achieve 6 sigma; that is, an error or defect rate that is equal to or less than: (1 – 99.99966%). Looked at another way, this implies that only one in every 294,118 things that a six sigma company does is defective and has to be either discarded or done again.
Now most service businesses can not possibly come close to matching a fabrication company but they should be able to achieve a 3 sigma state. Unfortunately, many service firms are in effect 1 sigma enterprises: that is, they have a level of proficiency with an error rate that is, basically, equivalent to two out of every three things they do are wrong (actually, it is 2 in 2.899 but at that point who cares, it’s pathetic.)
Now most service businesses can not possibly come close to matching a fabrication company but they should be able to achieve a 3 sigma state. Unfortunately, many service firms are in effect 1 sigma enterprises: that is, they have a level of proficiency with an error rate that is, basically, equivalent to two out of every three things they do are wrong (actually, it is 2 in 2.899 but at that point who cares, it’s pathetic.)
If you did nothing other than focus on getting your error rate down, which means doing things right the first time, practically every time, you could significantly increase your productivity and bottom line even if sales (top line revenues) didn't budge. A service business should aim to be at least 3 sigma not 1 sigma enterprise.
One way to help you get there is to start measuring things to see what your error rate is in the first place. You can not hope to improve unless you know your original state. The Hawthorne Effect suggests that as soon as you start to measure a thing, people will alter their behavior to improve their scores often resulting in significant increases in production and productivity.
One way to help you get there is to start measuring things to see what your error rate is in the first place. You can not hope to improve unless you know your original state. The Hawthorne Effect suggests that as soon as you start to measure a thing, people will alter their behavior to improve their scores often resulting in significant increases in production and productivity.
by ProfBruce April 21, 2011
Get the 1 sigmamug. Where consumers band together online to influence, collectively, the price of a good or service, a form of social shopping and reverse pricing.
A website or mobile app that reduces the prices of its products or services for every like or tweet that potential customers generate as a group is using a form of social commerce. Or when consumers get their friends to buy a sufficient number of ecommerce coupons, they are engaged in social commerce. In effect, consumers are banding together online to influence the price at which they are willing to buy and companies are paying their customers to do their marketing for them.
by ProfBruce May 07, 2011
Get the Social Commercemug. When brands agree to cross-promote each other. In effect, each brand becomes a separate sales channel for all the others in the group.
When a driver of a high end sedan gets out of the car wearing an expensive watch and a bespoke suit, now that is co-branding. Each of the three brands have agreed to promote each other in RL (Real Life), on television, in print, online, in social media and on the mobile web.
by ProfBruce May 14, 2011
Get the co-brandingmug. A strategic investor is someone who has a strategic reason for investing in your enterprise; that is, they have an over-arching interest in your success. You can find strategic investors by looking through your supply chain and your value chain. Even your competitors can be a source of strategic start-up capital if they are looking to you as a new co-opetitor.
Say you are bootstrapping a new home builder. A trade creditor (supplier) might extend credit to you for building materials and supplies or a client might give you a sizable down payment on a home purchase; in essence, each of them become a strategic investor in your business. Or say you are starting an athletic wear clothing business, department stores might give you a cash advance in return for exclusivity or a sports drink company might sponsor your line of clothing in return for co-branding opportunities.
by ProfBruce April 20, 2011
Get the strategic investormug. The three most important things in entrepreneurship are: sell, sell, sell. Good salespeople are always closing deals. They never forget to bring the contracts with them, never forget to ask for the deal and never forget to get their client's signature. They also understand that the true purpose of marketing is not really to sell anything but to build a brand and the true purpose of a brand is to build trust and the true purpose of building trust is to give the salesperson a greater opportunity to close the deal. After all, people like to buy from people they like and trust.
Here is an exchange between actor Nicky Katt in character as Greg Weinstein in the 2000 film, Boiler Room, with Giovanni Ribisi playing Seth Davis:
Greg: Now, now, listen to me. Even though you're not actually selling stock yet, I want you to remember the code we have here, okay? Did you see Glengarry Glen Ross?
Seth: Yeah.
Greg: Okay, do you remember 'ABC'?
Seth: Yeah. 'Always be closing.'
Greg: That's right. 'Always be closing.' 'Telling's not selling.' That's the attitude you wanna have, okay.
Greg: Now, now, listen to me. Even though you're not actually selling stock yet, I want you to remember the code we have here, okay? Did you see Glengarry Glen Ross?
Seth: Yeah.
Greg: Okay, do you remember 'ABC'?
Seth: Yeah. 'Always be closing.'
Greg: That's right. 'Always be closing.' 'Telling's not selling.' That's the attitude you wanna have, okay.
by ProfBruce April 21, 2011
Get the always be closingmug.