Amar
Bhide, the Glaubinger Professor of Business at Columbia University, has
studied the practices of scores of successful entrepreneurs. In his 1992 HBR
article "Bootstrap Finance," he recommends the following
principles and practices:
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 Get operational
quickly. There's nothing
ignoble about starting with a copycat idea or product. Big ideas can
consumer enormous amounts of time and money before they start to generate
real money.
Look for quick,
break-even, cash-generating products.
Take baby steps towards blockbuster products (if that's even what you want!)
"A business that is making money, elegantly or not, builds credibility
in the eyes of suppliers, customers, and employees, as well as
self-confidence in the entrepreneur."
Consider
high-value products or services that you can sell directly.
Convincing customers to give up familiar products or services is very
challenging, especially if you don't have a large budget for marketing or
advertising. Consider goods that you can sell directly, which lowers costs
of sales. Or try to partner up with more established outlets to reach
customers (for example, if you are making sweaters, think about persuading a
major catalog to carry your products).
Don't chase
high-priced talent. While
you need top-notch employees, you probably don't have the means to
compensate veterans. Don't settle for lesser-caliber talent -- but look
instead for diamonds in the rough. Compensate for your startup status by
offering advancement and opportunity for growth.
Keep growth in
check. Beware new
customers whose demands force you to undertake significant new costs. Beware
sales that force you to lay out significant money without an unassailable
guarantee that you will be made whole. Beware of growth that forces you to
add more fiscal strain on your company than you can reasonably expect to
meet over time.
Focus on cash,
not profits, market share, or anything else.
No metrics matter if you can't pay your bills.
Cultivate banks
before the business becomes creditworthy.
Many banks won't lend to you unless you prove that you merit the loan --
which might be difficult without investment capital in the first place. Yet
you can place yourself in a position to qualify. Be sure to keep good
records, have solid balance sheets, and make a point of making contact with
potential bankers, if only to ask for advice. This lays the groundwork for
securing a loan down the road.
-- From the book "The
Startup Garden: How Growing a Business Grows You" by Tom Ehrenfeld (McGraw
Hill, 2002)
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