Tuesday, 28 June 2016

StartUp Funding! Tips, Ideas for Bootstrappers

Written by Robyn T. Braley


If you are reading Brandit for the first time, we are in the midst of a series packed full of practical ideas about how to Bootstrap a company into existence. 


If you are about to start a business and have limited capital, you are in the right place for tips and ideas.


Many Bootstrappers are thrust unexpectedly into starting their own business. The timing is not always of their own choosing. Some were downsized and left with few other options.

The key is to have passion and enthusiasm for what you are about to do. With little money to work with, knowledge, ingenuity and persistence will be your primary resources. Add a healthy dose of motivation, and you are good to go!

At some point, Bootstrappers need capital. Without sounding cliché, it takes money to make money. However, before scheduling a meeting with your banker, let’s explore a variety of options for leveraging your resources.


Preparation

Before You Start

Write a 1 page profile explaining your business. Make it easy to read and break out key information into bullet points.

 

As a Bootstrapper, you probably don't have a website. A business profile will make it easy for everyone you meet to understand what you are planning to do. It will also make a statement that you are a professional and serious about what you are about to do.

Before you start making calls, practice your elevator speech. Write it down. Say it over and over until you can give it smoothly without stumbling and until you no longer sound rehearsed!

Also, check out email protocols for business. You are making a first impression, and a positive first impression is all in the details. A sloppy email message may not communicate a positive image.

Create a professional LinkedIn profile. After you call a banker, advisor or prospective customer, as soon as you get off the phone the first thing the other person may do is check out your LinkedIn profile. Take time to do it well, and do it right. There are excellent resources online. 


Knowldege

Seeking Advice

Start asking for advice! Identify 3-4 successful business people in your circles. You don’t know anyone? Contact your Chamber of Commerce or a Rotary or Kiwanis club in your community. Their members often view mentoring as an act of community service.

Be transparent and up front about what you are looking for. You need startup business advice.

Fast track your business by asking for advice
Try to mix up the size and types of businesses you approach. The owner of a 1 person dog walking business will have different experience and advice than a 5 employee retail operation or a 50 employee service company.  

Top 10 Questions
Write down 10 questions you would like to ask. Ask the question, then be silent and listen to what they say.

You will be surprised how much valuable information they will give you. After each interview, go online and drill deeper to learn more about the business terms or strategies they discussed.

Make sure to ask about failures. This question may yield some of the most useful information. 
I periodically tweet, "If you’ve never made a mistake, you are not truly in business." It always gets retweeted.
Someday I will mount up the courage to write a post about all the dumb decisions I made while developing Unimark Creative.

Send a thank you note. You'll be remembered

Find Accounting Advice
What is the number 1 reason Bootstrappers fail? It often due to poor management of the limited financial resources they have to work with during startup.

I strongly advise Bootstrappers to find a bookkeeper or accountant near the beginning. Start by asking them for an hour of their time. 

Even though you may not have earned your first dollar, lira, rupee, yuan renminbi franc, yen, guilder or peso, an accountant will give you advice about where to start in the area of financial management.  

Why is this important? You want to form good habits right off the top. Making the right decisions early on will save time, money and stress as you grow. 

As you grow you will need to learn how to manage cash flow, develop tax strategies or understand when to incorporate, if at all.

You must learn how payroll systems work so you can pay yourself and your first employee on time. Accountants may also provide counsel about financing options. A bookkeeper may be the first service you contract and pay.

Ingenuity

Trade or Contra

FF space JJ space, FF space...
When I started my business, I had no income and a family to feed. So, I traded marketing services for my first computer, printer and fax machine.

Yes! A fax machine. Wikipedia definition. In the age of texting and mass emails it is difficult to understand what an amazing and revolutionary communications device it was.

I endured a scolding from my mother-in-law who told me in no uncertain terms I did not need a computer. I could make do with my portable typewriter. True story!

The computer was key to my start up as a marketer. Writing was and is a key to our core offerings. 

We faxed invoices which meant we were paid sooner. I would also print 100 or so blank marketing flyers, write in names and numbers, and fax them to a prospect list. It worked and was a first contact with our first customers. THEN, we discovered automated faxing! 

Great Chinese Food

I first learned the concept of barter while in broadcasting many years ago. Radio would trade advertising for news cruisers, accommodation for visiting out-of-town executives, prize packages for “lucky listeners” or anything else businesses were willing to trade.

My weight issue began during those years due to the long list of restaurants which traded meals for advertising. The purpose was to entertain clients at lunch.

Bring another order of dumplings!
Periodically our sales manager, Al Anaka, would announce that a particular eatery was feeling unloved. He would ask us to take friends and family to the restaurant in order to build up the account.

Don’t tell Al, but the sales team would periodically meet on a Friday to wind down the week, share war stories, and enjoy amazing Northern Peking Chinese food.

Some salaries of on-air personalities were partially paid in contra or trade dollars. The sales team would have to leverage goods or services. 

This person would need a new boat propeller, someone else would need a new suit, and another person would need ski boots. Some personalities even received the use of a contra car as part of their contract.

You Can do it Too

Identify the service(s) or products you need like a logo, a website or a desk for your new company. Do online research or ask within your network for referrals to service or product providers who might be interested in helping you.

·         Marketing
o   Website design
o   Graphic design
o   Photography
o   Video
·         Office renovation
·         Office equipment
·         Accounting, legal, consulting services.  
·         Vehicles
·         Almost anything that is not illegal

Contact the prospective partner by email, phone or letter to gauge their interest in exploring trade options. Obviously, they must need what you have to trade and it must be a Win-Win relationship. 

Don’t be shy. Keep in mind they may have started their business from scratch and can relate to your journey. They can only say no.

Word of caution

If the idea of working together is of interest to both parties…
§  Write a formal agreement
§  Outline the terms, conditions, timelines and expectations
§  Treat the relationship as if the transaction was for cash

Guerrilla Transactions

Along with trade, there may be other options for procuring what you need.

Ø  Barter - do you own a bike, a music system, a years’ worth of homemade fudge, a cat or a fridge that can be bartered?
Ø  Client-financing - Will they accept small payments over a period of time? What about part cash and part trade?
Ø  Investment - Is there a reasonable expectation of future cash business from you as a future customer?  

Deep Discounts

My millennial children are horrified when I tell this, but I have bought file cabinets, office chairs, camera stands, power cords, business books and other useful items at garage sales or bankruptcy auctions.

My oldest daughter was deeply disturbed when I turned up at her house with a $5 waffle iron. She is still coming to grips with the fact it still works and she likes it. She makes amazing waffles.

As a side bar, garage sales are a great way to hone negotiation skills. My youngest daughter has a sales related job in broadcasting. She got her start as a 3 year old bargaining for toys at garage sales. Freckled-faced-cuteness usually meant she got it for nothing.

Formal Financing

As you begin to grow, you will need cash financing. Before launching out, do your own research to learn about loan options and banking language. Funding options

Remember our advice about finding an accountant? Now is when their services start to pay off. They will advise you about where to get funding, how much you will realistically need and how to structure investment agreements or loan contracts. 

They will also provide advice about how to negotiate favorable interest rates. My son-in-law never signs a mortgage or back loan without asking, "Is that the best you can do?"

Persistence


Banks or other Financial Services

All banks are not equal. Some specialize in small business. Others may be plugged into government incentive programs designed to help high risk startups.

Do your homework. Not all banks are equal.
Gerry Lebsack was a friend who was a fearless entrepreneur. For him, the art of the deal was a form of entertainment. He leveraged that drive into owning several companies a high personal net worth. 

Shortly after flunking out of university, he started a pest control company out of the trunk of his car. After a Bootstrap start, Gerry grew Alberta Pest Control into the major service provider in our city and offices in four other cities. 

Soon after starting his first company, he decided to branch into owning rental property. Without exploring financing options, he made a down payment on his first house. 


Follow the Bouncing Ball

Thinking it would be a slam dunk, he went to his business banker for a mortgage. Gerry was flat out rejected. He was devastated.

As he was about to get into his car, he noticed a competing bank across the street. Gerry walked into the bank without an appointment and walked out with the mortgage for his first rental property. 

Sadly, Gerry passed away from cancer a few years ago. But, regardless of his business success, he negotiated everything until the day he died. 

Remember, he could afford to pay top rates for - well, almost anything. Not Gerry. 

For example, he would choose not book a hotel when travelling to warm places. Regardless of the hour, he would go from hotel to hotel until he got the best deal possible. It was often a presidential suite for the cost of the lowest priced room. 

Needless to say, his wife and mother would stay in their rental car until the negotiating was finished and he emerged from the lobby with a smile on his face and a room entry card in his pocket. 

Friends and Family

Friends and family may provide a sympathetic source for help. For one thing, they may be open to deferring payments until your business begins to generate revenue. 

Sis may not be a friendly banker
However, a loan may also come with free consulting advice and opinions that may not necessarily be helpful. There is always the risk of private matters being laid open to scrutiny because family is involved.

Above all, make sure you put all details of the agreement into writing. Be fully transparent and regularly communicate about your progress whether good or bad. Family loans gone sour are guaranteed to add a frosty edge to family gatherings.

Crowdfunding

Crowdfunding is a child of the social media age. There are primarily two types.

·         Reward-based
·         Equity-based

The first involves contributing to a project now in return for a finished product later. Some people contribute simply because they want to help someone they know. 

Others may think the project or cause is interesting. Because of social media, contributors may be strangers living in different parts of the world.

Crowdfunding has become a highly successful way to fund record albums, books, videos and various projects. Some progressive banks offer structured programs for startups based on crowdfunding.  

Equity crowdfunding is as it sounds. Investors contribute with the expectation of a royalty or interest payment. At some point, they will want their full investment back.

Investor Funding

Investors are usually interested high-returns. While they may recognize an element of risk, say in drilling oil wells, they may also see the chance of a magnificent payoff.

Sometimes they will ask for part ownership of the company. This is where you really need accounting and perhaps legal advice to protect your interests.

Government Grants

Last but not least, your type of business or your personal status may qualify you for a Government grant. This is not free money. 

Government grants can be a pain, take forever to be processed and involve stacks of paperwork bound in red tape. Funding categories usually offer some benefit to the public through technology development, environmental or health research, the promise of job creation, the arts or other activities.

However, there can also be other benefits. Some departments may help facilitate exporting, include your business in conferences, provide training or include your company in directories that receive wide exposure. 


Leading Question

Have you Bootstrapped a company into existence? What are 3 things you feel every Bootstrapper should know? We'd love to hear your feedback!

Robyn T. Braley is a writer, speaker and media guest. He is the President of UniMark Creative which focuses on website design, video production, media services (editorial and advertising), and graphic design. 

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