Simon Boot discusses bootstrapping for startups by focusing on reducing costs and increasing cash flow during the startup phase. He emphasizes avoiding fixed costs like rent by working remotely when possible. Equipment and supplies should be borrowed, rented, or bought used/cheap if necessary. Outsource work and use freelancers to avoid employee costs. Defer expenses that are not immediately needed. Barter goods and services with other businesses. Always negotiate prices and payment terms. The goal is to extend the startup's limited funds by minimizing the "burn rate" until the business reaches profitability and positive cash flow. These bootstrapping techniques should be considered when preparing a business plan and budget.

1. Bootstrapping
for Start-ups
Beg, borrow and barter your way into
business
Simon Boot
Student Enterprise Development
Manager

2. Who am I?
Simon Boot
Student Enterprise Development Manager at LMU
My background:
• Lawyer
• Business Developer
• Pop-up Coffee
• Tasmanian Leaders Program

3. A quick exercise
A 6 month period
List all possible expenses you might encounter

4. A quick exercise
Think about the all the expenses you might
encounter during the start-up phase of your
business
Where
How
Marketing
Others?

5. A quick exercise
Think about the all the expenses you might
encounter during the start-up phase of your
business, eg:
Where Office rent, retail space, fit out & decorating,
office furniture
How Staff & skills, machinery, tools & equipment,
materials & inventory, computers, printer, software,
telephones
Marketing Brand & graphic design, website & hosting,
signage & advertising, content (website/social media)
Others? Insurance, subscriptions, meetings, general
supplies, travel & transport … what else …?

6. Funding your business
Businesses need money. Two options:
• External funding
Equity & borrowing
• Internal funding
Making do with your own (limited) funds,
aka BOOTSTRAPPING

7. It’s all about Cash
Lifeblood.
Great business, but no cash = no business.
As a start-up:
Your limited funds vs Burn Rate

8. Costs: Burn rate
Burn Rate - another term for what you spend.
Monthly figure.
Everyone has a Burn Rate (rent, travel, food).
For business, how fast it will eat through its
available cash.
If the funds are exhausted, the business will either
have to:
- start making money,
- find additional funding, or
- close down.

9. Costs: Burn rate
A basic example
You are operating a small business from your
bedroom. You have £2,400 in cash.
Your fixed monthly expenses total £1,000:
- Rent, bills, food, £600
- Sundries £190
- Website hosting, £10
Your Burn Rate is therefore £800 per month.
So, Cash / Burn Rate (2400 / 800) means that with no
sales you can survive for 3 months.

10. Costs: Burn rate
Why do we need to know?
If the funds are exhausted, the business will either
have to:
- start making money,
- find additional funding, or
- close down.
Forecasting

11. Bootstrapping
Your cash is #1.
So, taking actions to:
• INCOME Reduce the time until you have cash
inflow
** Cash flow vs profit
• EXPENSES Reduce the cost of getting to that
point
** Cut costs to the absolute minimum ** In

12. Income
Relentless focus on revenue.
Out of direct control. Need to:
- Grow sales
- Get cash coming in

13. Drive sales
Customer service
- You’re an unknown, outperform
- Focus on customer service, exceed
expectations
(refer, recommend – army of marketers)
Marketing
- Social media: cheap, blog heavy sector
Profitability
- Focus on your most profitable products

14. Get it coming in
Moonlighting
Receivables – cash flow is a huge issue,
especially for start-ups.
** see cash-flow vs profit example
Cash on delivery - don’t let customers buy on
credit.
If you have to extend credit
- Agree terms (7, 14 days)
- Actively pursue payment
Deposits for larger orders.
Legal terms (payment, transfer of title)

15. Title retention clause (short)
For wholesalers (not relevant for retail)
Title to {the Goods} shall remain vested in {the
Seller} and shall not pass to {the Buyer} until the
purchase price for {the Goods} has been paid in
full and received by {the Seller}.

16. Liquidity (profit vs cash flow)
An example
You have just launched a 'label' and are going into
business manufacturing clothes. You have decided to
Bootstrap your business using the £5000 pounds you have
saved!
Recently you took your first order for 200 pieces. Yay.
The Unit Cost to produce each piece is £20, comprising:
- £10 in materials, and
- £10 in labour
The (Wholesale) Sale Price per piece is £40.

17. Cash flow vs Profit
An example, cont …
Your profit from the order is:
Income: 200 x 40 = £8000
Expenses: 200 x 20 = £4000
Profit: £4000 Yay!
But they don’t pay you for 60 days. And your supplier wants
payment upfront. And you have to pay your manufacturing staff.
Cash: £5000
Less expenses: £4000 (200 * (25 + 15))
Leaves remaining cash: £1,000 … BUT also fixed monthly
expenses.
Be aware of cash flow & liquidity. Deposit.
What if they don’t pay (or go belly-up)? Terms.

18. Costs
This is within your control.
Costs will end your business, not lack of
sales.
As long as you have cash, you are in
business.
S l o w i n g our Burn Rate
But you are more than experienced that you

19. Avoid, defer, reduce
Be nimble – avoid overheads
Bare essentials needed to generate income.
Mindset:
Do I need this - is it essential?
Yes. Do I need to pay right now?
Yes. How can I reduce this expense? – be
creative.
Some examples.

20. Avoid rent
Huge overhead.
Work from home or coffee shops for as long as
possible. “Buying five lattes a day is cheap rent.”
Use a virtual space – Accelerator! Access to an
address and meeting rooms.
Smartphones & “the cloud” (storage and software)
makes it easier than ever.

21. Equipment and supplies
Borrow or rent equipment instead of buying.
Consider buying used equipment.
Bargain hunt – garage sales, estate sales,
bankruptcy auctions or unfinished furniture stores.
** coffee cups
Freecycle www.freecycle.org/group/UK/london
Neehoy www.neehoy.com
Buy cheap? You only need the tools or equipment
to last until your business is making money.
Always buy on credit.

22. Job materials & inventory
Don’t carry stock – illiquid. Buy materials when
needed.
For expensive materials or a large order, consider
having the customer buy them upfront, or pay a
Deposit.

23. Staffing
Avoid employees – overhead, admin.
Outsource, use freelancers (outsource online, bid
for job)
- www.odesk.com, www.elance.com,
- www.peopleperhour.com, www.freelancer.com
Use interns – win/win
Sweat equity (a) employ for equity, or (b) you do
the work instead of paying someone else.
NB may take longer + know your strengths (only
those tasks you can complete to required quality).
BUT don’t compromise Core Business.

24. Defer costs and expenses
Buy on credit – either use their Terms, or a credit
card (buy pay on-time)
Some must be paid before you start business -
license, insurance premiums.
But, many can be deferred until your business is
operating at a cash profit, eg, purchasing:
- a new computer
- materials for future jobs
- equipment you won't need right away

25. Free software
• Office software • Graphics software
openoffice.org gimp.org
docs.google.com • Survey tools
• CRM surveymonkey.com
zoho.com • Social media management
• Calendar hootsuite.com
calendar.google.com • Email marketing
• Online forms mailchimp.com
wufoo.com • Invoicing
• VOIP (Telephone) www.invoiceberry.com
skype.com • Website builder
• Online backup weebly.com
dropbox.com

26. Barter, bargain & beg
Barter It’s been working for thousands of years.
Work with people who like what you do.
Time or goods (pay gross, spend retail)
Bargain If you don’t ask, you don’t receive.
- ”Is that your best price?”
- If it costs £3, tell them you only have £2.
- Is there a discount if I pay cash? (for credit
cards)
Beg Ask ànyone who will listen.
Leverage your networks: Facebook, LinkedIn**

27. Recap
A series of questions to ask yourself:
• Is this essential?
Income creating. Be • Can I find it cheaper?
creative. • Can I borrow it?
• Do I need it right now? • Can I barter for it?
• Can I get it for free? • Can I get someone
• Can someone else get else to pay for this?
it/give it to me for • Can I bargain a better
free? deal?
** NB considerations of quality, reliability, customer
support etc. Never compromise core product, brand.
Finally, it’s not forever – it’s a temporary phase. The goal
is a cash-flow positive, profitable business.

28. For your Business Plan
Bootstrapping is a really practical exercise.
You live it day to day.
But ask these questions when preparing the
budget for your Business Case.
- Realistic and robust
- Awareness
- Burn Rate vs Projections (be aware)
- How much funding (Fiona)?

29. An exercise, continued …
Revisit your list
Look at the costs you listed and ask for each:
- Is it essential to the start-up phase of your
business?
- Could you avoid the cost? How?
- Could you defer the cost?
- Could you reduce the cost? Barter for it? Get it
for free?

30. Questions?