Secrets of Bootstrapping

This story appears in the September 2002 issue of Startups. Subscribe »

(YoungBiz.com) - Chances are, you've heard the phrase "A penny saved is a penny earned." In the business world, nothing is closer to the truth.

It's called bootstrapping, and it's more than just an old English idiom. It's the only way most businesses can make it through that rough-and-tough start-up phase.

Whether you choose to finance your business yourself, get a loan or combine the two, you'll need to give ol' Abe Lincoln the pinch. That said, check out the methods these 'treps used to shave bucks off their start-up costs.

Reach For the Stars--One at a Time
Joe Shambro, an audiophile-turned-entrepreneur from Granite City, Illinois, understands the importance of keeping a lid on costs to get a biz up and running. When he was just 17, he founded Shambro Recording (now known as Grey Street Recording), an audio recording and production services company that commands up to $500 for a half-hour recording session.

"When I started [recording] professionally, I took what I had as a hobbyist--my microphones, processing equipment, digital and analog recorders--and worked with them until I could afford better equipment," said the now 20-year-old entrepreneur. "I bought all my initial equipment either used or on a budget. To keep costs low, I made it a point to learn what specific bands and local performance venues already had in the way of equipment."

This allowed Shambro to minimize the cost of rentals, interface with the existing equipment flawlessly, and produce a quality recording with minimal hassle and expense. He reinvested earnings into his company and now owns more than $6,000 worth of audio equipment.

Dare to Be Different
One of the toughest challenges to overcome when you're starting a new biz is to get your name out there. It's called marketing, and it's a battle you'll wage throughout the life of your business. One of the easiest ways to grab attention without spending extra cash is to dare to be different.

"You can't be afraid to be different when you're starting a business--you need to be creative," says Alicia Dacoba, a ventriloquist from Paw Paw, Michigan. Dacoba started ventriloquism at the age of 9 and took it to new heights when she introduced a ventrilopig and talking horse in her acts.

Dacoba, who started small with a $13 puppet from Montgomery Ward, quickly learned the importance of creativity. She often performed for free as well as for charities and alerted the local newspaper in order to gain free publicity when she could.

Dacoba, now 24, has turned her business, "Alicia and her Live Talkin' Critters," into a full-time venture. She's been featured everywhere from The Tonight Show with Jay Leno to the BBC while traveling the U.S. with her beloved pets. "Sometimes you have to go off the tracks--it's part of being an entrepreneur!"

Crawl Before You Walk
Many of the multibillion-dollar powerhouses you see today came from the kind of humble beginnings Shambro and Dacoba exemplify. Dedicate yourself to becoming a frugal minimalist, and you'll be well on your way. Here are five tips to help you get started:

Tip #1: Start your business out of your home.
Rent is one of the biggest expenses for any business. If you can, start your biz in your home office, basement or garage (think Bill Gates).

Tip #2: Think before you buy.
While it's tempting to run out and buy new office supplies for your new business, use what you have around the house first. And consider renting or buying used equipment when you can. Don't justify initial over-spending with "long-run" thinking. If you do, there won't ever be a long run!

Tip #3: Learn to barter.
Barter everything you possibly can. Think outside the box--like the editor who trades her proofreading services in exchange for an ad for her business in a local trade publication.

Tip #4: Start small.
You don't need a huge start-up marketing campaign with the local NBC affiliate. Start small, and ever-so-slowly work your way up. That's the way most lasting corporations are built. Keep in mind that a moderate expenditure for an established business can be an outrageous one for a start-up.

Tip #5: Be creative.
One of the keys to keeping start-up costs low is to find affordable and creative ways of doing what you need to get done, rather than just spending cash to hire someone else. For example, save money by making your own fliers and business cards, instead of getting them professionally designed and printed. All you need is a PC, a few sheets of business card stock from your local office supply store and a little creativity.

In your business' start-up phase, you're going to need everything from an office down to a ballpoint pen. The trick is to come up with creative and inexpensive ways to get the job done. Remember, especially in the beginning, the pennies you save are sometimes more important than the pennies you make.

Get your biz started on the right foot--for the right pricetag--with these cost-cutting strategies.