Bootstrapping

Entrepreneurship
“Building a significant important
business starting with a low
amount of funds”
Howard J. Leonhardt,
November 2004
 Entrepreneurship
• “The explorers of the modern era
are the entrepreneurs; men and
women with vision; with the
courage to take risks, and faith
enough to brave the unknown”
Ronald Reagan
40th President of the United
States of America
 Entrepreneurship
• “Most of our new jobs are created by
entrepreneurs – independent business
people pursuing their dreams. Small
innovative companies that tap new
markets, with products born out of their
own ingenuity. Governments do not
produce economic growth, people do.”
Ronald Reagan
 Entrepreneurship
• “Economic success is a good thing. In
particular, it enables us to offer work to those
who need it: business is good for oneself, for
others and for society at large. If everyone
lived a monastic life and begged, the
economy would collapse and we would all die
of starvation! (LAUGHS) I am convinced
Buddha would say “So now, all go out to
work!” (LAUGHS)
The 14th Dalai Lama
 Entrepreneurship
• For thousands of years on earth a man or
woman born into an home of poverty was
destined to remain in poverty for life. Capitalism
and entrepreneurship was the tool that brought
opportunity for the average man or woman to
achieve great heights. Opportunity to break the
bondage of birth status. A system based on
merit and exchange of good for good brought a
greater good for people on earth than any other
invention.
 Basics of Bootstrapping
• Get operational quickly!
• This means find a customer fast!
• Sell that customer something that costs
you less to acquire or produce.
• Mind set – bring more cash in than goes
out.
• Be creative in utilizing resources to get
business cash flow rolling.
 Basics of Bootstrapping
• Look for quick – break-even, cash-generating
projects.
• Look for cash in advance sales opportunities.
• Provide over-the-top incredible fantastic
service to your first customers!
• Work from your home. Keep overhead low.
• Buy used equipment & office furniture.
• Do not hire any paid employees until profits
allow you to pay them, if possible.
• Use low to no paid help at first.
 Basics of Bootstrapping
• Keep the product and/or service concept simple!
• Focus on cash, not on profits, market share, or
anything else.
• Cash is a by-product of providing great service
and great value to customers, that costs you
less to provide them than what they pay you.
• Niche markets are usually the best start-up
opportunities. The margins are higher.
• Personal selling opportunities give small
businesses a chance against large competitors.
 Customer Focus is Essential!
• Focus on what your customer is receiving in value.
• Customer’s care nothing about how your office looks,
your business plan, your accounting system, or the
degrees your employees may hold. They care about
one thing – value they receive for the money they pay
you, compared to what they could get elsewhere.
• Treat customers as customers not sales targets.
• Spend as much of your day personally meeting with
customers as possible. Get off of your computer and
into your customer’s place.
• Opportunities for profits are discovered by identifying
solutions to customer’s problems, which is best done
through “DIRECT CONTACT” with the customer!
 Customer Focus
• People buy with emotion and justify with
fact!
• Put emotion and enthusiasm into your sales
pitch! Tell a compelling story.
• Focus your pitch on what the customer will
receive in value, the benefits not the features
of the product should be the emphasis.
• You have to provide the service your customer
wants and expects. That comes first.
• Create “total customer responsiveness” with
superior quality, superior service and fast
reaction.
 Supplier Relationships
are Very Important!
• Personalize your relationships with your
most important suppliers early. Gain their
trust! Focus on building these
relationships.
• Pay on time when you can. When you
cannot, provide an early warning and a
clear understandable explanation.
Develop a payment plan. Live up to
payment plan promises.
 Keep Things Simple!
• Keep your accounting system simple.
• Keep your advertisements simple and to the
point.
• Keep your product or service design model
simple.
• Focus on overcoming one simple problem that
your customer’s have with their existing
suppliers.
• Avoid unnecessary paperwork.
• Root out bureaucracy!
 Organizational Operations
 CREATE A LIST OF WHAT NEEDS
TO GET DONE.
 GET THOSE THINGS DONE.
 REPEAT.
 Avoid silly bureaucratic
procedures, demeaning
regulations and dispiriting
working conditions.
 Building the Team
• Bootstrappers cannot afford expensive personnel. Hire
people willing to accept a low base pay and stock
options.
• Hire people willing to work 12+ hours a day to get the
business launched.
• Hire passionate people that have persistence and will
not give up when the going gets tough.
• Hire entrepreneurial people that understand the basics
of business survival – a company needs to bring more
cash in than goes out to survive.
• Experience running a successful lemonade stand or a
similar small business is more important than a Harvard
PhD. Degree to the hiring bootstrapping entrepreneur.
• Hire people with a healthy positive attitude!
 Continuous Improvement
• Improve customer service everyday utilizing
feedback from the real world market.
• Improve your products a little bit everyday.
• Improve your organization.
• Improve your quality systems.
• Improve the image of your company.
• Improve speed to market for new products.
• Improve communication – in and out.
• Improve net profits!
 Managing Your Own Mind
is ½ The Battle
• Learn to take criticism.
• Learn to deal with rejection.
• Develop a thick skin. Critical attacks come with the
territory of leadership and initiative.
• Do not take things personally.
• Develop a sense of humor.
• Train your mind to avoid unnecessary suffering.
• Follow the principles of Positive Thinking.
• Seek out the best in people and situations.
• Be an optimist! Never ever ever – give up.
• Enjoy what you are doing!
 Example of Bootstrapping
• World Medical – Founded 1986, $3000
in capital.
• Step 1 – Identified underserved niche
market – supply cardiovascular supplies to
hospitals in Saudi Arabia.
• Step 2 – Asked potential customers
simple question “What do you need, what
are planning to buy in the next weeks”?
Received list.
 Example of Bootstrapping
• World Medical – Founded 1986, $3000
capital.
• Step 3 – Found way to supply some of the items
on the customer’s list of needs and requirements
at a small profit.
• Step 4 – Convinced customer to pay in advance.
• Step 5 – Convinced suppliers to provide credits
– net 60 days.
• Cash flow is king!
 Example of Bootstrapping
• World Medical, founded 1986, $3000 capital
 Worked out of house. Low overhead.
 Used old computer and fax machine.
 Provided 24 hour ultimate customer service.
 Focused on serving, at first, one customer very
very well. Built business one customer at a
time.
 Hired (low cost) people based on enthusiasm and
work ethic.
 Developed World Class, unpaid, Experienced
Advisory Board.
 Great team of people obsessed with providing
the best customer service possible!
 Example Bootstrapping
• Step 6 – Began private labeling to
establish World Medical brand.
• Step 7 – Used market feedback to
continuously improve products.
• Step 8 – Expanded catalog of products.
Lots of tries with new product entries.
Kept what sold in catalog. Dumped what
did not sell out of catalog.
• Step 9 – Started manufacturing products
with low regulatory hurdle.
 Example Bootstrapping
• World Medical, Founded 1986, $3000 capital.
• Step 10 – Developed high margin cutting edge
implantable products with high regulatory hurdle.
• Step 11 – Continuously improved flagship product
with constant feedback from the real world market.
Turned around improvements faster than all
competitors.
• Step 12 – Focused on highest quality possible.
• Step 13 – Customized products.
• Step 14 – Developed pipeline of products.
• Step 15 – Merged with another growing company in
same focus area.
 Examples of Bootstrapping
• World Medical, founded 1986, $3000 capital.
• Focused on developing foreign revenues early.
• Got paid for every clinical trial case in the USA.
• Did not hire expensive CROs, consultants,
lawyers or accountants.
• From 1986 to 1997 did not pay anyone base
salary higher than $36,000 including CEO. CFO
$27,000, VP R&D $24,000. Paid cash bonuses
from profits each year profits were achieved.
 Example Bootstrapping
• World Medical, founded 1986, $3000 capital.
• Merged company sold to Medtronic for $4.3 billion
(World Medical portion $62 to $120 mil.) – 1998.
• World Leading market share for implantable stent grafts
30 to 65%!
• 1987 FY $3.2 mil. in sales, $230,000 net profit, 4
employees.
• Profitable in 1986, 1987, 1988, 1989, 1991, 1998, 1999,
2000, 2001, 2002.
• 1998, $9.2 mil. sales, $1 mil. net profit., 230
employees
• 500 employees by 2000. $18 mil. in sales., $3 mil. profit.
• $44 million in annual sales in 2001, 27% net profit.
Lessons from Great Entrepreneurs
Richard Branson, Virgin Group
 Always be jotting down notes.
 Work from a simple daily to do list.
 Manage and motivate by example – be highly
energetic!
 Strive to always hold more than 50% ownership.
 Hire based on enthusiasm and energy not
experience.
 Marketing is important – very important.
Lessons from Great Entrepreneurs
• Bill Gates, Microsoft, Inc.
 Make sure you are the one’s making your
products obsolete not someone else.
Spend on R&D.
 Set priorities based on what customers are
asking for and what they need.
 Business is very simple. Profit. Loss.
Take the sales, subtract the costs, you
better get this big positive number.
Lessons from Great Entrepreneurs
• Steve Jobs, Apple, Inc. and Pixar
 Focus on getting your product to market as fast
as possible.
 With passionate people you have a company
with a lot of arguments – which is good.
 Hire people based on their past results or
willingness to work very very hard and to learn.
 Leaders should often say “That isn’t good
enough, you know we can do better”. Push
people beyond their comfort zones.
Lessons from Great Entrepreneurs
Michael Dell, Dell Computer, Inc.
 Have high expectations.
 Customize products to precisely meet customer
needs.
 Provide absolutely the best customer support in your
industry!
 Build customer loyalty by providing high
performance products with great service.
 Engage everyone in the company in a serving
customer’s mentality.
 Make everyone in the company a co-owner. Get
them to think like owners, since they are owners.
Lessons from Great Entrepreneurs
Bill Hewlett, Hewlett & Packard
 People are everything.
 At the beginning do what-ever it takes to get an order.
Getting an order means survival.
 Do what your customers want.
 Only hire the minimum amount of people that you really
really need, not more.
 The customer comes first. No customers = No profits = No
business to pay workers.
 Hire people that WORK HARD above all other
considerations.
 Provide profit sharing to employees.
 Show hard working people that you care.
 Locate near a great university.
Lessons from Great Entrepreneurs
• Walt Disney, founder of Walt Disney Co.
“In route by train back from New York Walt learned the
news that the bank loan necessary to keep his
company alive had fallen through. In his nervous
doodling he drew for the first time a little mouse. He
tossed and turned trying to fall asleep worrying
about how he was going to save his company and
pay his workers. He convinced himself somehow
that the little mouse he just drew was going to save
the company. When he arrived back in Los
Angeles - he pulled his team together and with a
sense of energetic enthusiasm and optimism
convinced his colleagues that “a mouse would save
the day”. It worked.
Lessons from Great Entrepreneurs
• Howard Schultz, Founder Starbucks
• “How did it happen? I willed it to happen. I took
my life in my hands, I learned from anyone I
could, grabbed what opportunity I could, and
molded my success step by step. Fear of failure
drove me at first, but as I tackled each
challenge, my anxiety was replaced with a
growing sense of optimism. Once you overcome
seemingly unsurmountable obstacles, other
hurdles seem less daunting. Most people can
achieve beyond their dreams if they insist upon
it.”
Lessons From Great Entrepreneurs
• Earl Bakken, founder of Medtronic, Inc.
Ready, fire, aim.
“During my long and instructive career in
business, health care, and technology, I’ve
come to believe the “secret” to long term
success fits neatly on the face of a button.
Pay special attention to the order of those
three little words. Its READY, FIRE, AIM.
Lessons from Great Entrepreneurs
• Bill George, former CEO Medtronic, Inc.
 Be your own person, authentic in every regard.
 Develop your own unique leadership style.
 Be aware of your weaknesses.
 Work with a sense of purpose. Instill this in others.
 Practice solid values.
 Lead with the heart!
 Establish long term connected relationships.
 Demonstrate self discipline.
 Be consistent.
 A balanced life makes you a better leader.
 Entrepreneurship is about Doing
Something Good for Society!
• “Entrepreneurship is applying ideas and action
to do good. To provide something needed of
value to society. Any rewards received are a by-
product of doing good.” HJL

• “Anyone who is indifferent to the well-being of

other people and to the causes of their future
happiness, can only be laying the ground for
their own misfortune”
The Dalai Lama