entrepeneurship

The Pros And Cons of Bootstrapping Your Business

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business planLast week I had a lunch conversation with a friend about an interior design firm she wants to start soon.  She doesn’t want to be held financially accountable to anyone, and she has decided to fund the business with both her savings and income from her day job at a furniture design shop.

This led us into a longer discussion about when and why it might be a better idea to bootstrap your business.  Let’s look at the pros and cons:

Pros

More Freedom – Usually, when you invite monetary support from venture capitalists, angels, and even loans from friends and family, you lose some or even most control over how the business is run. This is because the people giving you money are expecting you to use it a certain way and properly repay them someday.  Many people instead use their savings or moonlighting to start and run the business until it is making a profit.  Of course, no one will tell you how to run the business because you are using your own money.  With this said…

More Money:  When you are bootstrapping, you don’t owe money to anyone.  You have nothing to share with anyone else so that you will have more take-home profit.

More Pride: When you are bootstrapping, you tend to feel a sense of pride in your business, and thus, you will work harder to make it successful.

Learn Resourcefulness: Using your own money forces you not to waste it on things your business probably doesn’t need.  You quickly learn how to be creative with the resources you have access to and how to react to new situations.  Resourcefulness is an excellent skill that more of us need to have these days.

Cons

More Stress: Bootstrapping can be very stressful.  Many entrepreneurs either work at one full-time job or several part-time jobs in addition to running their dream business.  This can take a toll on both your professional and personal lives.  Working a day job while moonlighting literally becomes a 24-hour, seven days a week job.

More Trouble?: On the subject of moonlighting, check with your current employer about their moonlighting policies for employees. Don’t get terminated from the job that is financing your business on account of your business!

Slower Business Growth: Unless you’re independently wealthy, in many cases, your business will grow much slower because you are working with a limited budget and resources.  You might have to work from home and not be able to hire employees for a while.  Again, this is why you need to be resourceful.

Access to Networks: One of the better things about getting external funding is that many investors can also act as mentors and are willing to give you access to their network of other people who might want to do business with you.   Many bootstrappers don’t have that kind of access unless they are willing to find mentors that can barter resources instead of money.

More Risk: When you are using your own money, it is riskier.  Many bootstrappers go a year or more without making a profit.  Whereas, when you have investors, the risks (and successes) are shared.

Most entrepreneurs have mixed feelings about bootstrapping.  This is not for everybody. Personally, I think bootstrapping makes sense, depending on the type of business you are running.  I have never used external money to fund any of my business ventures.  I am a bit of a control freak when it comes to my affairs. Instead, I barter resources from trusted individuals, and that has worked out best for me.

I am also very resourceful.  All of my businesses are online for a reason.  I decided early on that renting a physical office would be too much for my budget.  I think it only makes sense to have an office if you have the type of business where you have to meet with clients regularly.  Technology like video conferencing and e-commerce has made a big difference in how I run my businesses and make a profit.

Another example of smart bootstrapping is another friend of mine who is about to open a restaurant in Los Angeles.  For the last 13 years, he has always wanted to run his own restaurant, but he was not able to get the funding he thought he needed to get the idea off the ground.  He originally had two investors eight years ago, but they were not able to agree on how to use the money.  So he decided to take a detour to his dream by starting a part-time catering business.  He kept his day job as a sous chef at another restaurant, while catering on the weekends.

This worked out for him in many ways.  He was able to save money from his regular day job to help finance his catering at the beginning.  He made sure to learn everything about running a restaurant from his day job, where he eventually became a manager.  The catering business allowed him to experiment with new foods he wanted to cook for new clients.  He was also able to network with many clients who were powerful in the entertainment business, and who also gave him referrals.  During this time, he was able to test out, develop, and finalized a menu, scope out potential restaurant locations and create a business plan for his restaurant.

Fast forward eight years, and now he is about to open his Asian fusion restaurant in West Hollywood later this year.  I am so proud of him, and I plan to go out to Los Angeles to celebrate the restaurant opening.

The lesson here is if you are going to bootstrap your business, make sure you think it through and have a plan of action, which should include a pro forma financial statement (very important), a strategic plan and a business plan.

Highlights From The 2014 ATE PI Conference

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STEM careers

Last week I was invited to present web design/development instructional prototypes at this year’s ATE PI, an annual conference held in Washington DC that looks at ways to improve STEM education and workforce development in community colleges nationwide.  My presentation was sponsored by the National Science Foundation.

I presented two websites I created from scratch, or hand-coded – Global Exchange Reality Tours and Women Talking to educators and policymakers from around the country.  The point of the presentation was to showcase new ways to teach web design and development skills in an innovative classroom setting that will attract more students.  I received a lot of great feedback on the prototypes.

Web development is one of the fastest growing fields today.  However, there are not enough students pursuing these ICT careers. I have discussed many times here the need to address the fact that the United States beginning to lag behind in the global economy because of the lack of American STEM workers.

In my home state of Massachusetts, its Department of Education released a new report yesterday, Degrees of Urgency, that also warns that the Commonwealth is not graduating enough students in these skilled fields to fulfill growing demands in the economy.

Community colleges are best suited to train future leaders in these fields because they are already set up to provide vocational training.  Also, community colleges are more affordable and accessible to more people than four-year colleges.  In addition, these schools attract a more diverse student body, from young people fresh out of high school, to veterans returning to civilian life, to single parents going back to school, to working professionals looking to enhance their skills.  I went to my local community college last year to take some programming skills.

I also had a chance to talk with other STEM employers at the conference about their hiring frustrations. Terry Iverson, president and CEO of the machinery distributor Iverson and Company, dispelled the common belief that there are no more manufacturing jobs in America.  In fact, he said there are many U.S. based jobs, but many people don’t want them because of social stigma.

Chandra Brown, deputy assistant secretary for manufacturing at the U.S. Department of Commerce, spoke to the conference about her concern about the lack of women and minorities in these fields.  She noted that workforce diversity improves dividends for many STEM employers.

“We need to tap into a resource we haven’t tapped into yet,” she said.

Keith Masback, CEO of the United States Geospatial Intelligence Foundation, precision technology is the future and can see job growth.

There were other people from around the country presenting STEM educational tools too that I would like to point out:

I finally got to meet the guys behind STEM Guitar, a program that uses guitar building to teach STEM subjects.

Bay Area Video Coalition (BAVC)  provides digital media and programming training to underrepresented groups in the San Francisco area.

Concerns of Small Business Owners During The Mid-term Elections

Entrepreneurship

Small business is the fuel in the engine of the American economy.  The vast majority of Americans work for small firms with 50 or less employees.  One would think that the concerns of small business owners would be a priority in Washington.

A new survey says otherwise.  Only seven percent of small business owners approve of what Congress is doing, and 26 percent of them don’t feel either political party represent their best interests.

As a small business owner myself, I have to agree with this sentiment.  Politicians these days are more concerned about deepening their pockets from Wall Street than providing support to Main Street.  Because of this disparity, many believe this is causing the growing income inequality nationwide.

Wage hikes is an issue I have to think about regularly running my own company Global Wire Associates, as well as many of my entrepreneur friends.  Yes, most reasonable employers believe in a living wage, but can’t afford the added health care costs that come with this, so they are not able to grow and maintain their businesses and pay employees the way they would like to in many situations.

Then there is the issue of immigration reform.  A large number of employees at U.S. tech firms are foreign-born but attended American universities.  This is partially due to the lack of Americans pursuing careers in information and communications technology (ICT).  Approximately 90 percent of my past and present employees are foreign-born.  I would love to hire more qualified American and especially women and minority employees, but they can be far and few in between.

The whole process of getting work visas for foreign-born workers is difficult.  The U.S. only randomly selects and admits 65,000 foreign workers annually for six years.  U.S. Immigration Services has already capped out on H-1B visas for fiscal year 2015.

One would say that the solution to this is to invest in better STEM education for American students.  I agree with this, but there also needs to be a mindset change towards STEM careers.  ICT careers are not just for geeks and nerds; it’s also for people who want to be a part of the future global economy.

However, the immigration battle is really raging in the retail/fast food industries, which largely employ immigrants in low-skilled, minimum wage jobs.  This same survey says that small business owners are divided on the issue.  Forty-two percent of owners would vote for a candidate that supports a wage hike, while 38 percent would not.  Health care, immigration and employment rules are top issues for small business, but where is Washington?

These numbers are not only uninspiring for current small business owners, but also for people thinking about starting a business in the future.  A lot of concerns here, but it seems like no one is listening.   

Where I Get Business News

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News image

I have been an entrepreneur for most of my professional career, first as a freelance journalist and then as the founder of my media firm Global Wire Associates.  I started GWA as the sole employee writing on my first blog in 2005. Today I employ a team of 10 people and service hundreds of clients in over 60 countries.  In the last two years alone, my revenue has grown since I launched a digital imprint and a creative studio. I didn’t go to business school.  Much of what I know about running my businesses comes from good intuition, taking risks and learning from my mistakes.

I also learn from reading a lot of publications that provide insight and resources on business trends.

Here is where I get my business news:

Inc. – This is a great magazine for both new and experienced entrepreneurs.  I like that most of the articles are written by real entrepreneurs who share their experiences and best practices.  Also, as a web designer, I really appreciate the responsive design of the website.

Fast Company – This is right up my alley – business, technology and design.  This magazine is great because it focuses on how business trends impact the future.  It also does great interviews with visionaries like Ivan Chermayeff, co-founder of the legendary graphic design firm Chermayeff & Geismar & Haviv, the people behind iconic logos like NBC’s rainbow peacock and the MBTA’s T symbol.

Black Enterprise – What I appreciate about this black-owned magazine is that it mostly features pictures of black entrepreneurs on its cover, and not just entertainers and athletes like other black publications.  It’s good to have more stories and images of African-Americans doing positive, entrepreneurial activities.

Your Business – I get up on Sunday mornings to watch this show on MSNBC.  It’s cool to learn about how many small businesses around the country started from humble beginnings and are now thriving.  I also like their board of directors’ advice and elevator speech segments.

Smashing Magazine– This is the premier website to go to for professional web designers and developers.  Most of its content is inside baseball, but many of the entrepreneurial tips can be universally understood.

Wall Street Journal– Well, of course, this is the premier business newspaper of record.  I really like the small business section.

Devex – This is a clearinghouse of news and business opportunities for international development contractors.  This has been very useful in expanding my reach internationally.

The Economist – I read this mainly for international business trends.  I particularly like their blogs and their quirky take on the news, like the rise of the tea industry.

Financial Times – Also a must for international business news. And who doesn’t like to read a pink newspaper!

Other outlets I check out regularly:

AllAfrica

Talking Business

African Business

Are there other outlets I should be checking out? Let me know in the comments below or email.

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