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Bootstrapping Your Company to Success
Bootstrapping Your Company to Success
By: William Cate
Published August 1998
[http://home.earthlink.net/~beowulfinvestments/] [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
Often, service-oriented businesses can bootstrap themselves to
success. Bootstrapping is a policy of reinvesting all the money a company
earns into the growth of that company. The owner may not draw a salary for
awhile. It's a process that can take 3 or 4 years. At the end of that time,
the owner has a debt-free business and recovers his recovers their unpaid
time from the profits the business now earns.
Over the years, I've developed about a dozen businesses using a
bootstapping strategy. Here's an example. My wife is a veterinarian. In
1980, she was asked to vaccinate several dogs at the owner's home. She
spent $25 and bought the vaccines. She did the housecall. She took the
money she made and invested it into more supplies. She did more housecalls. In 1985, she had enough housecall clients to buy a building and convert it into a veterinary hospital. The practice continued to grow. Today, she co-owns one of the largest veterinary hospitals in the San Francisco Bay
Area. From 1980-1983, she didn't draw a salary.
I think anyone who intends to build a multinational corporation
needs to bootstrap a business to success. It teaches them the importance of
wisely reinvesting profits into the growth of a company. Without this
lesson, public company officers believe they have a right to live off the
risk capital of their investors. Too many public companies lose money
because management insists upon excessive salaries.
You won't get rich by paying yourself an excessive salary. Your
excessive salary often leads to the bankruptcy of the company. You'll get
rich by making your company a success. Once it succeeds, you can sell your
stock in a merger at Market Capitalization. If you use my strategy, you'll
walk away in 5-7 years with $80 million.
There are sacrifices in building any company. If you expect your
investors to make those sacrifices, your company will fail. If you won't
work 12 hour days for several years for a middle-class income, don't take
your company public. In fact, don't start a company. Get a job in middle
management with a major firm in your industry.
Remember that success comes from sacrifice. It comes from making
the right decisions. It comes from keeping risks low while you keep rewards
high. The rewards must go to your company, not to your personal bank
account.
If you don't follow these bootstrapping rules, you won't create a
successful public company. The "live off the investor strategy" often
creates an SEC nightmare. If the SEC acts, it will make your attorney rich.
You didn't take your company public to make your attorney rich.
To contact the author: Visit the Beowulf Investments website: [http://home.earthlink.net/~beowulfinvestments/] Or, visit the Global Village Investment Club Website:
[http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
About the Author
He has been the Managing Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/] since 1981 and is the Executive Director of the Global Village Investment Club [http://home.earthlink.net/~beowulfinvestments/globalvillageinvestmentclubwelcome/]
Written by: William Cate
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