Innovation Blog Entrepreneurship in the Age of No Money: Guy Kawasaki’s 12 Principles of Bootstrapping By Shlomo Maital Nov.

1, 2008 Can you become an entrepreneur and start your business, and fulfill your dream, in an age when the world is tumbling down the slippery slope of recession, when banks refuse to lend to huge stable long-time customers (let alone small businesses), when the VC pipeline is dry because those who invest in VC’s have stopped…? The answer is yes, of course. This is precisely the best time of all to start a business and become independent, because so few people are even thinking of doing this, and because it is very hard to find a promising job with learning potential, as companies downsize and lay workers off. But how? Bootstrap! Self-fund your business by financing it with cash flow and with your own savings. It may take you longer, but you will retain control and there are huge advantages to that. Here are the 12 rules of bootstrapping, by Guy Kawasaki, legendary Apple co-founder and successful venture capitalist. Follow them carefully and, above all, do not give up your dream just because the world is temporarily screwed up. Kawasaki says:
I could build a case that too much money is worse than too little for most organizations—not that I wouldn't like to run a Super Bowl commercial someday. Until that day comes, the key to success is bootstrapping. The term comes from the German legend of Baron Münchhausen pulling himself out of the sea by pulling on his own bootstraps. Here is the art of bootstrapping. ♥ Focus on cash flow, not profitability. The theory is that profits are the key to survival. If you could pay the bills with theories, this would be fine. The reality is that you pay bills with cash, so focus on cash flow.

But this would be. and hungry people. and recurring revenue. short payment terms. they can install ten systems. not form. ♥ Pick your battles.000 satellite radio systems. it's queen and prince too for a bootstrapper. as we say in Silicon Valley.. It sure seems reasonable that we can get a mere 1% of car owners to install our satellite radio systems. ♥ Forget the ”proven“ team. If you know you are going to bootstrap. shooting. Cash is not only king. ♥ Forecast from the bottom up. and knowing the time of day. Most entrepreneurs do a top-down forecast: “There are 150 million cars in America. So our first year sales will be 10 facilities x 10 systems x 240 days = 24. The function is computing. That's 1. Bootstrappers understaff knowing that all hell might break loose. ♥ Focus on function.. ”Perfect“ is the enemy of ”good enough.♥ Build around boostrapping. It means passing up the big sale that take twelve months to close. a “high quality problem. ♥ Ship. These functions do not require the expensive form . short sales cycles. best case. I can feel the comments coming in already: How can you recommend shipping stuff that isn't perfect? Blah blah blah. Manage by cash flow. Hire young.” The bottom-up forecast goes like this: “We can open up ten installation facilities in the first year. ♥ Start as a service business. for any business. Guess which number is more likely to happen. Proven teams are over-rated-especially when most people define proven teams as people who worked for a billion dollar company for the past ten years. and collect.“ When your product or service is ”good enough. skating. cheap. They don't fight on all fronts because they cannot afford to fight on all fronts. not P&L – you probably should do this anyway.5 million systems in the first year.“ get it out because cash flows when you start shipping. On an average day.000 is a long way from the conservative 1.” Trust me. 24. deliver. but not necessarily a fully functional instruction set. you should start a business with a small up-front capital requirement. getting from point A to point B. then test. every venture capitalist fantasizes about an entrepreneur calling up and asking for additional capital because sales are . People with fast chips. ♥ Understaff. Many entrepreneurs staff up for what could happen. Bootstrappers pick their battles.5 million systems in the top-down approach.

♥ Go direct. Also trust me when I tell you that fantasies are fantasies because they seldom happen. And the deepest rabbit hole for a bootstrapper is a simple calculation: Amount of cash divided by cash burn per month because this will tell you how much longer you can live. The optimal number of mouths (or hands) between a bootstrapper and her customer is zero. The blue pill meant waking up wondering if you had a bad dream. Instead position against the leader. “The leading cause of failure of startups is death. Don't have the money to explain your story starting from scratch? Then don't try. ♥ Take the “red pill. The red pill led to learning the whole truth. And as my friend Craig Johnson likes to say. They take the red pill--everyday--to find out how deep the rabbit hole really is. Bootstrappers don't have the luxury to take the blue pill.exploding.” This refers to the choice that Neo made in The Matrix. you're still in the game. Guy Kawasaki . and death happens when you run out of money.” As long as you have money. ♥ Position against the leader.

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