Momentum

The Art of Bootstrapping

Every Monday afternoon Momentum teams gather at Grand Valley State University’s Center for Entrepreneurship & Innovation to discuss the relevance of Guy Kawasaki’s book The Art of the Start and meet with area start up gurus. This week’s Art of the Start discussion was facilitated by Momentum Mentor John Malnor, Vice President of Growth Initiatives at Steelcase.

Bootstrapping isn’t always pretty, but it should always be smart. Today’s start-ups know that bootstrapping is essential to staying lean and flexible. Another critical point for start-ups is smart cash flow. After all, you can’t bootstrap on negative cash flow for too long. Many startups fail because they can’t manage their cash flow. Effective bootstrapping can help make positive cash flow a reality.

Tips for Start-Ups:

Bootstrapping doesn’t mean cheap. Cut back on the things that don’t matter. Consider the few things that are critical to your success. Never pay for anything unless you absolutely need it – then pay the right amount and get good stuff.

As a young start up try to avoid signing long term contractual obligations – like leases. Use a shared or co-working space instead.

Don’t overlook value of contracting out. It may be more expensive – but if you hit a snag in funding you can easily turn off that cost.

Bootstrapping is a philosophy. Keep the mentality long after you become successful. Don’t fall so in love with yourself and your company that you become over indulgent.

Work your cash flow. Sometimes it makes sense to turn down big orders. You may walk away from certain sales being less profitable, but you won’t kill yourself with negative cash flow.

Keep the upfront capital needs low. Take lots of small orders that pay quickly. Always try to keep short sales cycles.

Recurring revenue streams are always nice.