Bootstrapper

Adapted from the Bootstrapper's Bible

Understanding the mechanics of a business model is essential before
you start your business. Business models should have the following
five attributes:

1. THEY SHOULD BE PROFITABLE.
2. THEY SHOULD BE PROTECTABLE.
3. THEY SHOULD BE SELF-PRIMING.
4. THEY SHOULD BE ADJUSTABLE.
5. THERE SHOULD BE AN EXIT STRATEGY (OPTIONAL).
   

Freelancer vs. Entrepreneur:

• A freelancer sells her talents. While she may have a few employees, basically sheʼs doing a job without a boss, not running a business. Layout artists, writers, consultants, film editors, landscapers, architects, translators, and musicians are all freelancers. There is no exit strategy. There is no huge pot of gold. Just the pleasure and satisfaction of making your own hours and being your own boss.
• An entrepreneur is trying to build something bigger than herself. She takes calculated risks and focuses on growth. An entrepreneur is willing to receive little pay, work long hours, and take on great risk in exchange for the freedom to make something big, something that has real market value.
  

Four questions that related to the value chain:
1. WHO’S GOING TO BUY YOUR PRODUCT OR SERVICE? - Define the audience.
2. HOW MUCH ARE THEY GOING TO PAY FOR IT? - Do a value analysis to figure out what itʼs worth compared to alternatives.
3. WHERE WILL THEY FIND IT? - Determine how much of the distribution of the product you control, and what value is added by the retailers or reps you use.
4. WHAT’S THE COST OF MAKING ONE SALE? - Divide the cost of sales by the number of products youʼre going to make. Youʼve just figured out whether theyʼre worth selling.

Itʼs so much easier to sell something that people are already buying. Which leads to the second question: “What will it take to get people to switch from what they already use to what I sell?” Believe it or not, the answer is almost always not money. Usually, you need to make a product that is significantly easier or more effective. Easier to buy. Easier to use. Easier to teach other people how to use. More effective at solving the problem.A combination of more convenience, better service, aggressive pricing, and better results will make you irresistible to some people.
It wonʼt work for everyone. Some folks may never switch. But thatʼs okay. You donʼt need
everyone. Just enough to keep you busy and the cash flowing!

REDO THE MISSION STATEMENT AND THE BUSINESS PLAN EVERY THREE MONTHS
Success brings more success, and you learn as you go. I guarantee that in six months, youʼll
know so much more than you do now that youʼll realize your first business plan was naive.

Learn as you go. Change as you go. Building a business from scratch is like walking through
a maze with many, many doors. Once you open one, 100 new doors present themselves. As
you move your way through the maze, you need to stop and check your location. Look at a
map. If youʼre in the wrong place, move. But if youʼve discovered a new place, thereʼs nothing
wrong with exploiting it.

The best way to find peers is to devote several hours a week to doing favors for people.
Favors with no intent of being repaid. Do some favors for strangers and some for friends.
Whatʼs a favor? Sending someone a relevant newspaper clipping or e-mail message. Even
better, referring business to another company that can handle it better than you. Find opportunities to brag on other companies and other people you know. Youʼll be meeting sometime with someone who might need to work with them.


A 50/50 split is almost never fair…
Remember, the number one thing you have to invest is your time. And itʼs almost impossible
to guarantee that a partner is going to invest her time in the same way or with the same
impact as you.
Here are five principles to consider when you sit down and start talking about shared ownership:

1. PLAN FOR SUCCESS.
2. IDEAS AREN’T WORTH MUCH.
   Never give someone a big chunk of a business just because he had a great idea. There are
   plenty of good ideas around—free. The exception to this rule is if this person with the idea
   has a patent or a reputation that will dramatically expand the value of your business.
3. ALWAYS LEAVE BOTH SIDES AN OUT.
4. MATCH COMPENSATION WITH PERFORMANCE. An approach thatʼs worked for a lot of bootstrappers is a performance-based split. Imagine that two partners start a business. They each own 5 percent with 90 percent in a mutually owned pool. Every six months, the 90 percent is allocated by a predetermined formula for hours invested in the business or sales made, or products developed. Two years later, all 90 percent is allocated, and the partner who made the biggest contribution clearly ends up with the biggest share.
5. NEVER, CONFUSE PROFIT PARTICIPATION WITH GOVERNANCE. The biggest problem with a 50/50 split is that no one is in charge. Someone has to be in charge. So divide control of the company differently than profit participation. Make sure that, especially in the early days, one person makes decisions. If you canʼt trust your partner enough to cede this to him, or vice versa, time to find another partner or try another business.

THE FOUR MOST IMPORTANT RULES OF ADVERTISING
1. SPEND REGULARLY ON ADVERTISING.
Yes, advertising is scary. It seems like a crap shoot. You pay your money and nothing happens.
You pay your money again and nothing happens. Then, after a while, it starts to pay.
But most bootstrappers get impatient and give up too soon.
2. PERSISTENCE IS THE SECRET TO SUCCESS.
Marketers focus on two different things: reach and frequency. Reach is a measurement of
how many different people see your ad. Frequency is a measurement of how often these
people see your ad.

RULE 8: GET MENTORED.
1. PICK THE RIGHT PERSON.
2. MAKE IT EASY FOR THE MENTOR TO SAY YES AND EASY TO SAY NO.
Youʼre asking for a favor here. A big one. For that reason, you canʼt feel defeated if the mentor
doesnʼt have the time or the interest to help you. If that happens, overcome your natural
bootstrapper desire to persist, and graciously move on.
Never ask your mentor for more than advice. Donʼt ask for money. Donʼt ask for free output (like a designed ad or a written proposal).

RULE 9: OBSERVE THOSE LITTLE BIRDS THAT CLEAN THE TEETH OF VERY BIG HIPPOS
Find bigger, richer, more stable organizations. Partner with them. It gives you credibility and access and sometimes, cash flow.
Most big-company founders hate what their companies have become. They rail against the slowness, the bureaucracy, the inability to get anything done anymore. What they need is someone like you. Someone who can take on a specific task and turn company assets into
gold.
Youʼll be amazed at how easily you can license a brand name or do deals for ad space or take over projects for a big company. Occasionally, the company will pay you up front, just to maximize the chance of success.