Many business owners have had to tighten their belts in the past few years and bootstrapping has become a hot topic. In fact, a Google search of the phrase “business bootstrap” showed more than 3 million entries.
For those of you who didn’t grow up hearing about people “pulling themselves up by their bootstraps,” the term dates back to the late 1800s when men’s boots had leather loops at the tops to make pulling them on easier. As a business concept, it means using ingenuity to conserve money when finances get tight.
It would be ideal to start your business well capitalized, with plenty of cash reserves, but most business owners aren’t that lucky. In fact, some of the greatest business success stories are those that started with very little cash but a lot more creativity. Few of our most successful clients started with much money.
Nearly every business has occasional cash flow issues. You could be forced to bootstrap when money gets tight because of things out of your control, like a recession, an industry slow-down, or losing a big customer. You might have to be extra frugal and conserve your cash for six months or it could be a long-term situation, but it’s doable with a bit of ingenuity.
We’ve done our share of bootstrapping over the years and have observed what clients have done to cut costs when necessary. The following are ideas for conserving cash that we’ve seen or experienced, and that might work for you.
Since staffing is typically one of the greatest business expenses, you could get creative with employees. You might need to restructure hours and salaries, or you could offer alternative payment methods, such as performance-based compensation or commissions. If you don’t need a full-time person and can’t afford to pay much, you might be able to share an employee with another company.
Student interns are available at low rates through local colleges and offer another option. We’ve used eight students in our consulting firm and have found that they appreciated the work, were eager to learn, and made good employees. Outsourcing is another option. Many qualified retirees, stay-at-home moms, and unemployed people are willing to work at competitive rates. Sites like Elance.com, Odesk.com and Guru.com let you to shop for people and rates, and you may be able to obtain references and see work samples.
Equipment and furniture can be a major expense, so consider buying used things. It’s amazing what you can find for sale and used items are often great shape. A like-new used file cabinet will file every bit as well as a new one, so don’t let your ego get in the way of exploring this avenue. Some things are still advertised in newspaper want ads, and Craig’s List, eBay and local auctions are great resources. And companies closing their doors might be glad to sell you some of their equipment or inventory at a reduced rate.
Good old fashioned bartering has helped a lot of people obtain goods or services they otherwise couldn’t afford. The person who has what you need might also be helped by a bartering arrangement, so don’t be afraid to ask. A word of caution, though — bartering can have tax consequences, so be sure to keep good records for your tax preparer.
You can get creative with office space to conserve funds. If finances are tight and it’s feasible, you might want to work from home for a while. Technology has made this easier, with “cloud” companies like Google and Dropbox.com offering virtual storage space for your files that let you access them from any place having Internet connectivity. You might consider sharing office space and staff with another company or rent space in a suite offering private offices and a shared conference room.
Laddie and Judy Blaskowski are partners in BusinessTruths Consulting, Inc.