Bootstrapping

We’ll assume your dream is to eventually have a nice "Coffee House" in a special neighborhood of your city, and this will be the goal of our bootstrapping scenario.

Planning Your Dream

You know it will take a while to grow into your dream, so you begin your pre-venture planning by researching how you could initially just get into some form of the coffee business. You conclude that the best way to get started is to begin with a sidewalk coffee cart business (see scenario no. 1 in the Small Business Plan section).

Unfortunately, when you perform your "simple business planning," you discover it is going to cost a lot more money than you have, or can raise, to start up your coffee cart business. So, with poor credit and no money there is no way you can start up a coffee cart business.

This is where your dream gets tested—how bad do you really want that coffee shop business? Do you have what it takes to bootstrap your business?

“Bootstrapping” refers to the concept of taking a small trickle of income from any source, and using that money to pull your business up by the “bootstraps” to continuously build upon that trickle until you have your dream business operating.

If you’re unemployed, maybe you’re still drawing unemployment benefits and even this can help.

If you are unemployed and out of unemployment benefits, you may have to sell anything you can on eBay, or at garage sales, etc., to generate a little cash. Scavenge cans and bottles if you have to, but get that trickle of money started. Bootstrapping is hard, but it can be done.

As you can see, there is not much to develop a “plan” about during this phase, although, we'll assume you have already done a lot of planning on your Simple Business Plan for when you can buy your coffee cart. But for now, let’s look at “bootstrapping” your initial coffee cart business from nothing.

The Beginning

O.K., you have, hopefully, done your homework with the city where you live (when you were researching and developing planning information), and so you know where you can and cannot sell coffee on the street, as well as what type of license you will need.

Then, when you get a little cash saved up in your startup fund, you pay for your permit and/or license and get ready to start your business.

At this time you buy a small folding table at the thrift shop, a package of paper cups at the supermarket, and a bulk container of pre-made coffee from a gourmet coffee shop (not too close to where you are going to set up business), and you start selling coffee by the cup to passersby.

But, here are the rules for your new business:

• You do not deliberately break any laws.


• You do not become a nuisance by impeding the flow of traffic.


• You are professional in dealing with customers (remember, they are probably grumpy because they haven’t had their morning coffee yet—you are there to fulfill that need).


• You use only the highest quality coffee you can find (most large gourmet coffee shops sell their coffee in bulk for parties and events.)


• You keep your area, and yourself, extremely neat and clean. You are not looking for charity…you are starting a business, and you are a professional businessperson—an entrepreneur.


• You don’t compete with your source of coffee.


• You brand yourself as someone “special” in the coffee vendor world of your city.


• You are creative. If your city doesn’t allow your micro-business on their streets—you go to sporting events and set up in the parking lot. Or you go to soccer games and little league games…you set up outside a theater just as people are leaving.

  If you are asked to leave any of these locations, you go somewhere else and set up; you are mobile at this point. You could become the city’s “mystery” coffee person and give free coffee to anyone who accurately guesses your next location…and on and on.

  Anytime you are not working your regular job, you should be out selling coffee somewhere. The possibilities are unlimited.

• You covet cash—you make your "startup fund" grow.


• You do as much as you can to improve your credit…you will need to set up vendor accounts when you grow into your next phase, so your credit will need to be improved.


• Most importantly, in the words of Winston Churchill, you: “Never, never, never, give up.”

Sometimes you even sell a few pastries you pick up mainly for those regular customers who have requested them.

Maybe you are branding yourself with “mystery” coffee, and are selling “Mystery Coffee” mugs and T-shirts. Every little bit helps, but be sure to follow the vendor laws of your city.

You Are On Your Way

While you are building a small, but loyal, following of customers, you are searching for something more than just a folding table and someone else’s coffee, so you continue to shop for a used street vendor’s coffee cart (see scenario no. 1, in the Small Business Plan section). You watch all the ads, and you constantly scan the Internet.

You contact some restaurant supply people and ask them to let you know when a used coffee cart becomes available. With enough persistence, one day you find just what you were looking for and you take the money from your startup fund to make a deposit on a cart, without taking delivery, until it is paid for. Now you have a new impetus—maybe your dream is within reach after all.

With time, discipline, persistence, creativity, and innovation, you eventually gather enough money in your startup fund to complete the planning for your street vendor’s coffee cart business—and then actually implement it! You pay off that coffee cart you made the deposit on and take delivery. Now you’re off and running…you really are in business.

Your "End" Game

You are having great success with your cart business—everything is going according to your planning...you have come a long way from your early days of bootstrapping. So next, you begin working on your business plan for a permanent location with seating—a real "Coffee House."

You keep adding to your startup fund…then you finally sell your cart business, borrow a little more from family, friends and maybe the bank (you have proven yourself, and now your credit is quite good), and your Coffee House business becomes a reality.

With your actual Coffee House running according to plan, and having gone through the learning trials of a true entrepreneur, you want to build your successful Coffee House into something more.

You want to vertically integrate your business by becoming a major coffee roaster…then open more coffee shops in your city.

Next, you want to expand your business and “brand” it into other cities. So you develop a full-fledged formal business plan and present it to Venture Capitalists.

Your dream is coming true…you are truly an entrepreneur. And then, one day, you and your Venture Capitalist partners execute an IPO (Initial Public Offering) and you are an “overnight” millionaire. And "bootstrapping" made it all possible.

Is this a fantasy story? Absolutely not! This type of business startup happens every day of every year all over the world, for every conceivable type of business.

Of course not all bootstrapped businesses go all the way to an IPO, but bootstrapping a business is the truest form of entrepreneurial capitalism in action...and anyone can do it.

Is it hard work? It is absolutely the hardest there is, because it is so easy to become discouraged and quit. But this is where the girls and boys are separated from the women and men, and only the truest entrepreneurs will become successful through bootstrapping.

You Too Can Do It

If you have a dream and no money—don’t despair. Start by reading the Entrepreneurship module on this web site, and then follow that with the Starting a Small Business module, and so on. If your dream is strong enough, nothing can stop you. There is always bootstrapping.

Assuming you are now ready to begin working on starting your business—or have already started it—I want to mention one of the most important elements of making your business successful...bookkeeping!

In my experience, poor recordkeeping (especially financial) has contributed to more business failures than anything else. Maybe not directly, but most often as the underlying factor.

Therefore, I have developed an entire section on Small Business Accounting. This is not your accountants approach to bookkeeping or recordkeeping; the information presented in this section is based on actual experience from CEOs and entrepreneurs…controversial no doubt.

You can access Small Business Accounting here.