New to the business start-up game, Paul Frischer and partner Doug Gold's bootstrapping experience was more dramatic. In 1993, the childhood buddies launched Chicago-based Music Recyclery.
At the time, Frischer and Gold, both now 30, figured they'd combine their love of music with the hot demand for specialty coffee drinks and open Discover Café, which would sell coffee, pastries and used CDs. When the partners put together a business plan outlining what they'd need to get the cafe off the ground, their education in the art of bootstrapping began.
After projecting equipment and inventory costs, which included everything from industrial coffee makers, refrigerators and stoves to coffee and desserts, they came up with $120,000. With combined savings of $8,000 between them, the partners figured they "only" had to raise $112,000. After several months of pounding the pavement and asking friends and family for money, they raised $80,000, which was just enough to open their music cafe in November 1991.
Unfortunately, the cafe barely turned a profit. After three months in business, Frischer and Gold came to a telling conclusion: Selling used CDs was more profitable than selling coffee and pastries. So they headed the business in a new direction.
The partners decided to test-sell used CDs at outdoor festivals and street fairs--and they hit the jackpot: They sold so many CDs, they were able to open their first Music Recyclery, a store devoted to selling used CDs, albums and eight-track tapes, in October 1993. Today, they run six Music Recyclery locations, and have sold Discover Café. This year, Frischer and Gold project sales of $2 million, a slight increase over last year's $1.7 million in revenue.
It sounds like an entrepreneurial fantasy, yet getting to this point required disciplined bootstrapping. For Frischer and Gold, diligent money management was a constant, if not exhausting, process for the two years they were in the red. "Bootstrapping is all about creativity, persistence, hard work and clear thinking," Frischer says. "Once we realized we weren't making enough [at the cafe] to clear a profit, we battened down the hatches and learned to be truly adaptive. We worked 14- and 16-hour days and often slept in the cafe. We were constantly reassessing everything we did. When something didn't work, we tried something new. We were obsessive about boosting our cash flow."
The partners constantly looked for ways to pare expenses. "In our second year, we asked our landlord if we could [postpone paying] him the rent for the summer," Frischer adds. "He went along with it, and as soon as we had the cash a few months later, we paid him."
The partners also negotiated extended terms for practically everything they bought, including utilities. Says Frischer, "There's great truth in the saying `Ask and you shall receive.' "