In Bootstrapping I and Bootstrapping II I discussed the first six steps to effective bootstrapping by Guy Kawasaki. As a private equity attorney I help clients raise capital for their businesses from time to time, but my obligation is not just to help them raise cash, it is also to help businesses develop positive cash flow by getting products to market efficiently and effectively. Many business start-ups ignore the power of bootstrapping to create a lean business model. Here are Kawasaki's final four steps:7. Pick a few battles. Bootstrappers pick their battles. They don’t fight on all fronts because they cannot afford to. If you are starting a new church, do you really need a $100,000 multimedia audiovisual system? Or just a great message from the pulpit? If you’re creating a content Web site based on the advertising model, do you have to write your own customer ad-serving software? I don’t think so.
8. Understaff. Many entrepreneurs staff up for what could happen, best case, even though they say they are being conservative. “Our conservative (albeit top-down) forecast for first-year satellite radio sales is 1.5 million units. We’d better create a 24/7 customer support center to handle this.” Guess what? You sell 15,000, but you do have 200 people hired, trained, and sitting in a 50,000-square-foot telemarketing center. Bootstrappers understaff knowing that all hell might break loose. But this would be, as we say in Silicon Valley, a high quality problem.
9. Go direct. The optimal number of mouths (or hands) between a bootstrapper and her customer is zero. Sure, stores provide great customer reach, and wholesalers provide distribution. But God invented e-commerce so that you could sell direct and reap greater margins. And God was doubly smart because She knew that by going direct, you’d also learn more about your customer’s needs. Stores and wholesalers fill demand, they don’t create it. If you create enough demand, you can always get other organizations to fill it later. If you don’t create demand, all the distribution in the world will get you nothing.
10. Position against the leader. Suppose that you don’t have the money to explain your story starting from scratch. Then don’t try. Instead, position against the leader. Toyota introduced the Lexus lines of cars by positioning them as being as good as a Mercedes but half the price. Toyota didn’t have to explain what as good as a Mercedes meant. How much do you think that saved it? “Poor man’s Bose noise-canceling headphones” would work, too.
