6 Tips to Avoid for Bootstrapping Firms

Written for The Closet Entrepreneur by Down to Business Editor, Richard Stefan Deeran…

American society values the can-do spirit of start-up companies and as an entrepreneur, you have probably received your fair share of praise for your efforts to generate wealth. But just because you are a bootstrapper doesn’t mean you can expect special treatment from your customers, colleagues, investors and employees. Here are a few tips to help bootstrappers avoid the pitfalls, which send eager employees out the door.

1-Do Not Forget That Talent Is Your Real Competitive Advantage

You have thought long and hard about your unique selling proposition and invested in a marketing strategy to prove your new product or service fixes a problem in a new way or beats your competitors on price, quality or service. But no matter what your start-up sells, established competitors could conceivably muscle you out of the market. If you can’t win a patent for your product, your success may ultimately depend on outworking and outmaneuvering everyone in your way. This means your true competitive advantage is ultimately the talent you can attract and keep. Don’t take the attitude that your employees are lucky to work for you since your new product is such a winner; make sure your employees know how grateful you are that they are willing to go to battle for you. Invest in employee training, create a tolerable work environment, pay for a few perks and compensate your employees as well as you can.

2-Properly Incentivize Employees

If you are a bootstrapping start-up, chances are everyone is working for less pay and benefits than they would receive at a more established company. Your employees are willing to make a sacrifice in compensation now with the expectation that their hard work will be rewarded once the company grows. Small business owners should provide clear, concrete cash incentives to keep salaried employees who are ready to put in those extra hours. “We will take care of you once Potential Investor X or Prospective Client Y” is on board won’t cut it. Neither will selling how great the “experience” of working for a start-up is. Prestige and work experiences are important but ultimately people work to make money. Either provide equity or regular performance bonuses or your best employees will be out the door in less than a year.

3-Respect the Work-Life Balance of Your Employees

As the owner of your dream company, you will inevitably burn the candle at both ends. Much has already been written about the need for small business owners to create a balance between their work demands and family life. But as a bootstrapper, you must also respect the work-life balance of your salaried employees. Most small firms don’t have an official vacation, time-off or sick-day policy, and the expectation is generally that salaried employees will have less time off at a start-up than their peers at established companies. Nevertheless, do not snap at employees who ask for the occasional day off by complaining about how you have had to sacrifice free days. Your salaried employees are probably already working for more hours than they are getting paid to do and the company is ultimately your dream, not theirs, especially if they don’t have any equity. Respect your employees’ needs and they will have an easier time stomaching those late nights.

4-Don’t Diss Your First Customers

Small business owners cannot get too comfortable and ignore or even put-down their first customers. When sales are going well, it is natural to put your best resources towards catching bigger fish. However it is surprisingly common for amateur small business owners to tell their employees to ignore the phone calls of smaller clients when everyone is working on winning a big contract. Even if your smaller customers never find out that you don’t really value their business as much as you once did, your internal morale will take a major hit. Furthermore, your employees won’t have much faith in company leadership if the owners have to start chasing those devalued smaller customers again after the big contract falls through.

5-Protect Your Cash Flow by Any Means Necessary

Cash flow is king, especially now that credit is drying up. Today’s customers may not even be in business three months from now. Nothing hinders company growth or saps morale and energy than when everyone is wasting time on accounts payable calls. As much as possible, small business owners should require that first time customers pay up front and establish a credit record with your business before you start sending invoices off into the ether. Be upfront and kindly explain that as a small business, you’ve had to establish the policy because other customers were late with their payments. If you use tact, many customers will understand.

6-Don’t Sell Hype

An entrepreneur has to sell the vision of their company to their friends, family, colleagues, customers and even themselves. Endless optimism for your new firm will be contagious and may help seal a few deals. While it is essential to keep a positive attitude to overcome the challenges of a start-up, don’t become blind to reality and start selling hype. There is a subtle difference between promoting your company and selling hype and you need to learn it. You will look like a joke to your customers and employees if Potential Investor X or Prospective Client Y is still in “just about to sign” status eight months after you started bragging about them.

About The Author…

Down to Business is a no-holds-barred interview show and website experience that cuts through all the jargon to give fresh insight into the world of business. Serial entrepreneur and business personality Pat Croce hosts, profiling an entertaining mix of industry leaders and innovators. Check it out at www.DowntoBusiness.com.

The Closet Entrepreneur

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