Bootstrapping is Not about Shoes
By Jeff Bowe
“I know I really need your help, but we don’t have any money. After I sell some more clients, then I’ll have the money to hire you.” If this isn’t the classic chicken or egg story, I don’t know what is. We hear it all the time, as do all marketing, advertising, and PR firms who call on emerging businesses.
There is probably no gentle way to put it-starting a business the right way comes down to capitalization. Capitalization is a big word for how much cash you put into your business bank account when you opened the door. When a company is underfunded from day one, all other problems are secondary. Starting a company requires cash reserves. Bootstrapping is promoting and developing a business by yourself, without the resources you need, and cash is always a primary resource.
When you look at the high mortality rate in new business, the vast majority of failures are due to not having and not planning for the cash necessary to grow the business. Without that cash, it will be a slow and painful process of growing one sale at a time. The owner or owners will sell as many hours a week as possible, and hopefully bank part of each sale to invest in future growth. If the owners cannot sell, then the second problem in the company right behind undercapitalization is lack of sales knowledge-which can be solved by capitalization. If the owners cannot get clients to beat a path to their door, then some core market analysis needs to be done to be sure that the company is taking the right product to the right target market at the right price-the four p’s of marketing: price, product, place and promotion.
Let’s say it is too late and you are short of cash and short of sales. How do you get out of this cash and sales problem? You simply must get good at selling. Marketing is great and is a part of the growth process and you do have to create buzz in the market so that the market wants to buy. But at the end of the day, if people are not writing you checks, you have a sales problem and not a marketing problem. Sales is getting people to write you a check, today. When you are short of cash, you don’t have time to build strategic alliances and centers of influence and engage in branding campaigns. You need clients.
To get clients, spend your limited time talking with only the best prospects who are most likely to turn into clients. Stay away from long sales cycles and prospects who are unlikely to buy right now because you need cash right now. Owners need to treat a business like a business and be focused on sales and cash until the company can afford to pay the owners a big salary-which will be after it can afford to hire a sales team. Keep all the cash in the business and forget charitable contributions or giving to the community more than you can afford to give-there will be plenty of time for that after sales and net income have stabilized. Plus, stop getting distracted by expanding into new products. Stay focused on your most profitable core business, grow that business every day, put new great ideas that will suck up limited cash on the back burner, and get the core business profitable. Focus means focus-one idea, one business, one success. Then, hire one sales rep, and start the process over again.
We work with emerging businesses without cash and we are the only company in Indianapolis willing to put our money where our mouth is. If cash is an issue in growing your sales team, call us. We can solve that problem.
Jeff Bowe, Principal of ACTUM Group is a sales trainer and sales coach who focuses on helping sales people improve their skills and increase their income, while increasing corporate profit as well. For more information on Jeff, click here Jeff can be contacted at firstname.lastname@example.org or 317-577-3750.