Bootstrapping principle #1: Cash flow over capital
© .craig
As mentioned in my previous post, bootstrappers know there are more important things than outside capital investment when it comes to building a company: cash flow for example.
My own interactive blog network startup PostRanger.com will soon be concentrating on generating positive cash flow. (If you'd like to find out more about some of the cheapest rates on the Internet, drop me a line.)
Entrepreneur Andrew S. Field launched his own on line printing service using cash flow from an existing conventional printing business. (Read more here.)
Cash flow edges out capital for startup because:
• The business must be operating to generate it. Bootstrapping guru Greg Gianforte explains in his "Bootstrapping your business" how bootstrappers must focus on selling first. The beauty of cash flow over outside investment is that it means this has already taken place.
• Cash flow links growth directly to the business model. A business plan can predict how an entrepreneurial model might work, but cash flow proves it beyond the shadow of a doubt. Stop trying to predict the results to lure investors. Sell your product, create cash flow and grow your business from there.
• It puts customers not investors in charge. With this kind of funding those who buy your product or service become your only focus. Trying to please investors and customers will divide your efforts.
• Replaces finite with more long term source of funding. That chunk of funding, no matter how large it is, will run out some day, cash flow from a successful bootstrapped business will not, as long as the market for your product or service endures.
• Increases time to profitability. In this post, William H. Payne, Kauffman Foundation entrepreneur, suggests bootstrapping can actually "extend the runway" for entrepreneurs delaying the need to raise outside funds.
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November 10th, 2008 at 6:54 am
Hi,
If you liked this post, please join me at my new blog “How to bootstrap your business” by following the link at the top of this comment.