The term “Bootstrapping” given by
Efron(1979) hearkens back the idea of someone ‘pulling themselves by their
bootstraps’. The term refers back to 19th century high-top boots
that are pulled on by tugging at ankle straps----------generally means doing
something without outside help.
Bootstrapping
is a buzzword specially used with the concept of Entrepreneurship in its purest
form. It is the transformation of human capital into financial capital. The
entrepreneurship academic research still not fully recognizes the effect of
bootstrapping on entrepreneurial behavior and organizational success through
formal research. There are four kinds of Bootstrapping options—
Ø
Bootstrapping
Product Development
Ø
Bootstrapping
Business Development
Ø
Bootstrapping
to minimize the need for (outside) capital financing.
Ø
Bootstrapping
to minimize the need for capital.
It is the penultimate stage when other
there is no alternatives left.
Bootstrapping allows us to keep control
of our equity, while venture capital is designed for investors to gradually
take control of more and more of our company’s equity. Bootstrapping is also
appropriate for business that doesn’t necessarily have to be going after large
market opportunities. For Instance, Frank Levinson, Jerry Rawls Sridhar Vembu
(who is taking on Google, Microsoft and Salesforce.com with no venture
capital). So, we can say bootstrapped entrepreneurship acts as a true weapon of
mass reconstruction.
As a Internet marketing Medium Bootstrapping
plays an important role specially when social media becomes more important.
With the continued pressure of a down economy, marketing executives are not
only expanding marketing but also to ensure business growth from those budgets. . The marketing channels are usually distinct entities;
data related to each channel is also distinct, and often not integrated. While
fully integrated marketing channels that track customers across channels from
"first touch" to sale may be the Holy Grail of marketing analytics,
the reality is that many organizations do not have systems in place that can
serve up data this way. Since common customer identifiers are not
available across disparate marketing channels, analytics at this level of
detail is not realistic. Spend justification relies on illustrating
relationships between marketing spend and revenue. This relationship need not
be defined at the customer level, but instead could be defined across some
common time interval such as days, weeks, months, quarters or even years.
Naturally, the more granular the time period, business variability related to
marketing spends will be better understood. The example below illustrates this
relationship for an online retailer that wished to justify increased sales
through an expanded marketing program budget. This retailer used a
multi-channel marketing program that includes Facebook, Google Ad Words and
Search Engine Optimization (SEO) to promote their products. The chart
below shows daily spends on Facebook to ad clicks that lead to website
visits. The strong relationship between these two factors indicates that
Facebook spend is leading to website visits (naturally with a pay-per-click
campaign).
There are only two basic
methods employed by nascent entrepreneurs:
1) Gaining control of
resources
2) Efficiently utilizing
resources (e.g., minimizing expenses). Taken together, these two methods form
the basis for an overall strategy. A bootstrapping entrepreneur’s very survival
may well depend on his or her ability to be highly adaptable and operate on a
shoestring budget
A
Short-List of Practical Suggestions for Bootstrapping Business Start-Ups
1)
Start-up entrepreneurs with little capital should be advised to strongly
consider a business model that entails compensation prior to the delivery of a
product or service (e.g., consulting, mail order, or niche oriented Internet
businesses that do not require a glitzy Web site).
2) An
emphasis on pre-launch preparations, perhaps several years in advance may be
wise.
3) More
education and training are needed for would-be entrepreneurs such that they are
more familiar with traditional sources of capital and non-traditional sources.
Bootstrapping should be a course unto itself in university level
entrepreneurship programs.
4) Stockpile
non-perishable business assets over a long period of time. Businesses that have
resulted from a hobby often start out with many of the necessary tools,
contacts, sources, and skills on the part of the owner to be well equipped from
their inception.
5) Conduct
enormous amounts of research: library research, bookstore research, Internet
research, and especially field research (the non-scholarly translation of field
research: network, network, network, with prospective suppliers, customers,
advisory board members, and other potential friends of the business).
6) Consider
an agency or brokerage-type business: connect a party who needs to sell, with a
party who needs to buy.
7) Get
quotes. Provide a vendor with a general idea of a needed end result for a manufactured
product (or a service) and ask for design specifications, pricing, projected
delivery schedules and terms (be sincere as a prospective customer).
8) Negotiate
terms carefully. Negotiate terms for purchases from vendors and sales to
customers. When possible, arrange the purchase-sales sequence in a way, that
customers finance the purchase of inventory through prepayment terms.
9) Choose
a location wisely. Consider the “image” needs of the business, but also seek
economic development dollars (or stakeholders) and co-location opportunities in
neighbors with synergistic potential. Do not choose a location because it is
close to home and convenient for the owner. It must be convenient for the
customer, for the logistical needs of the business, and in a nurturing
environment.
10) Advertise
a product that could be produced, if response to the ad justifies its
production.
11) Develop
business communications and media skills. Be worthy of media attention (i.e.,
be newsworthy) due to a unique product, company history, team, or even
aspiration.
12) Be
generous. People are willing to follow a leader who understands their needs,
and fulfills those needs.
13) Sell
in volume at wholesale, rather than one unit at a time (Mamis, 1992).
Finally
we can say that, there’s no course book of bootstrapping techniques, but there
to be
The approach has much to
teach--and even companies that have progressed beyond their bootstrap days would do well to relearn
some of the proven tactics”
References:
·
The
Smart Manager(Mar-Apr—10): Sramana Mitra: Vision 2020
·
Bootstrapping
Business start –Ups: A Review Of Current Business Practices
·
How
to Bootstrap Marketing By Spence Fry
·
Bootstrapping
a Marketing Program with Analytics by Anthony Chamberas
·
http://www.investopedia.com/terms/b/bootstrapping.asp#ixzz25Zl2isOk