Rype :: Book, Do, Charge, Collect.

I received an email from an online accounting system the other day…one I have been following for sometime now (winweb.co.uk).

It was a short newsletter that talked about bootstrapping! Now this was a term I wasn’t that familiar with, the concept definitely but I didn’t know someone had coined a term for it.

Now as defined by these guys, “bootstrapping” means you start your business without external financial help or investment in other words you grow organically with the money you earn reinvesting it into your business in order to grow.

I thought about this and having had the benefit of 18 months working in a boutique private equity firm, it pulled me back to reality and reminded me that this is how most people start their businesses. They start with a great idea and just work away growing when and where they can afford it.

This works and is a great approach as it really gets you focused, ensures you keep running the operation at a minimum cost, and forces you to be innovative in your approach to marketing, sales & relationships. It also allows you to maintain in control of your business by not having to give away the company to raise cash (and this is very important).

On the flipside however in the long term its means you are consistently under capitalised and as such presents the problems of managing growth and seizing opportunities. 

So where is the middle ground on this?

Can you “bootstrap” your business while ensuring you have enough capital to work to the plan you have?

It’s a frustration for every small business owner I am sure, me included. You want to market in the right channels but this costs more than you have to spend, without marketing you can’t tell your potential customers about your business etc… and the cycle starts.

The result of this I believe has a significant impact on the success & development of so many good ideas.  Having spent 10 years selling to small and medium businesses (so these are the ones that get off the ground) so many are under capitalised and therefore lack the ability to grow as they would probably like, it also means that the business owner is trapped doing the work (i.e. can’t afford to hire the right person to manage it) rather than planning where the business should be going and how it is going to get there.

It’s a hard slog down the road for a small business but the best bit is that there are huge numbers of people walking beside you. It pays to keep up with thoughts and ideas from businesses like WinWeb as it reminds you of this. I also think these guys are doing a great job with their blog to provide advice and ideas to other small businesses (including their customers).

So a great term to define what we all do every day and some knowledge that it’s a road well travelled.  So now for signing up another customer…