Brief Review of Seth Godin’s The
Bootstrapper’s Bible
for Entrepreneurialist Culture,
I rarely recommend books written on the subject of Entrepreneurship because they often contain advice or information or theories that I disagree with.
However, I recommend that you take a couple of hours and read the 103 pages in Mr. Godin's book, the Bootstrapper's Bible. You can download it for free (Mr. Godin permits this) at: http://www.changethis.com/8.BootstrappersBible.
If you find it as useful as I think you will, you can buy a copy for future reference at: http://www.amazon.com/exec/obidos/tg/detail/-/B00005R2F8/002-6277967-3036856. (It's $2.86 USD.)
Seth has it right:
a) ideas are (relatively) cheap and abundant; it's execution that counts;
b) don't take partners if you can help it;
c) the three most important things in entrepreneurship are: SALES, SALES, SALES (i.e., cashflow is KING*);
d) be open to change and new opportunities;
e) hire smart people;
f) the best place to find startup capital is often from future customers (these are called deposits) and supplier credit;
g) find a product or service that people want to buy and already know how to buy—your main problem is then just to get them to switch to you***;
h) marketing requires consistency and frequency;
i) keep your costs (including your personal lifestyle-related costs) low;
j) try not to provide personal guarantees on debt;
k) find a mentor.
If there is one area where I think he could have done a better job is distinguishing the need for a BIG idea to start a new business (which is most often not true and, in fact, can be a bootstrap startup killer) from the need for creativity on a day to day basis—to generate capital, to get sales, etc.
As we have already seen, Peter Patafie brought incredible creativity to a humdrum industry like the Moving and Packing Supplies business to generate sales, capture a huge percentage of the local marketplace and then to go on to create an entirely new market of refurbished, secondhand packing boxes sold as a retail product. (I wrote this up on: http://www.dramatispersonae.org/ThreeLawsOfPowerSelling.htm).
Remember that creativity counts—it’s the great story you tell a potential client or customer that immediately ‘intricates’ them and gets you a F2F meeting that leads to a sale… Selling is telling (http://www.dramatispersonae.org/DifferentiatedValueAndBootstrapping.htm) and being creative is important.
Anyway, read Seth's book; it's simple, direct, fun to read and really useful.
Dr. Bruce M. Firestone, B.Eng.(Civil), M.Eng.-Sci., PhD.
* Seth actually goes a bit
further than just saying Cash is King. He states that sales should be a part of
your core competency—you should not
delegate this activity or outsource it. He makes the point that it is your
highest value-added activity**—who makes more money: the laborer putting
together a running shoe in a third world factory or the shop selling it in
L.A.? In many companies, the people with the highest level of job security and,
often, the highest earners as well, are the sales team. This reflects: a) the
importance of selling to the continuing existence of your business and b) the
need to keep the highest value-added part of the business for yourself. When I
was with the NHL’s Ottawa Senators, we outsourced things like arena management,
concession operation, security, cleaning, parking lot operations, snow removal,
garbage collection, television production, radio coverage and many other things
as well. What we didn’t outsource was limited to: i) hockey
operations (all activities with
respect to putting the best possible team on the ice) and ii) managing key
relationships with sponsors, season ticket holders and suite lessees (today, we
would call this CRM, customer relationship management, and there is a host of
excellent software products on the market that are designed to help you do that).
Bill Wirtz, owner of the Chicago Blackhawks, told me in 1991 that the key to
successfully running a NHL team was: “to have 15,000 season ticket holders and
(in
** Here is a calculator used
by a typical promotions company to calculate pricing for a client or customer: Gross Profit Margin Price
Calculator for a Typical Promotions Product Company. For this sample
company, if they buy a promo product from a supplier in
You can play with the price
calculator yourself—if you have a product that you are buying (or for that
matter manufacturing yourself) for, say, $300 and you need a GPM of 40% to
survive, then you have to sell it for $500. If you are running a management consulting
business and your consultants cost you $60 per hour and you need a 60% GPM to
survive, that means you need to bill your clients $150 per hour for them. These
are pretty typical numbers for manufacturing businesses and service businesses.
But in any event, you can see that the selling end of your business consumes a
lot of resources and is likely to generate the highest single value-added piece
of the pie.
*** Recently, I had a
conversation with one of my super bright engineer-entrepreneur students who had
‘run out of ideas’. It’s not that he had really ran out of ideas, it’s just that
he always starts with a cool piece of technology that he can design or create
and then he looks for a market for it and the markets for his tech ideas are
always too esoteric, too small, too hard to develop, too hard to explain to
potential clients, too whatever… So I told him, you are going about this the
wrong way. The successful tech startups don’t start with a technology, they
start with a market that they can cater to more efficiently or effectively than
the current providers can. So I told Bill (not his real name): “I want you to
take my copy of the Yellow Pages home with you tonight. Keep it next to your
bed. Every day and every night, I want you to read the index. The YP index has just about every market known to
humans in it. Find one that is in your mind a BIG PIECE OF MEAT THAT YOU THINK
YOU COULD TAKE A BIG BITE OUT OF. Look, Bill, you’re young and smart. Why aim
yourself at a small market that can only produce small results for you. Find a
market that you’re interested in; make sure it’s big enough. Then think about
how you would go about carving a piece of it for yourself. Then think about how
you would do that—part of your approach might involve a neat piece of tech that
you bring to the industry. Some of what you do might be to bring a new way of
doing the same old things that might not involve new technology, per se, but could be innovative anyway
(it could be some kind of a new technique, a way of re-engineering things or a new approach that might not have been tried
before).” A bootstrap startup is way more likely to succeed if the market
already exists and all you have to do is get people to switch to you. This is what
Mr. Godin is getting at. After you are a thriving business, you can take more
risks and try to pioneer new markets and ‘boldly go where no one has gone
before’. Just don’t do it right out of the gate.
http://www.dramatispersonae.org/EntrepreneurialistCultureFrontPage.htm
http://www.dramatispersonae.org/