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Thrive with your boots on Featured

10:58am EDT March 28, 2003
For lots of entrepreneurs, the biggest hurdle to launching their own business is a shortage of cash.

And there's little doubt that a lack of the green stuff has killed more than a few fledgling ventures before they've had a chance to get off the ground.

At an MIT Enterprise Forum, Bill Claire showcased how he and his partner, Karen Puchalsky, bootstrapped their software company and IT services provider Innovate E-Commerce with less than $10,000 in start-up capital in 1997 into an Inc 500 company with nearly $4 million in sales and more than 40 employees.

Claire warns, however, that bootstrapping isn't for the faint of heart.

"It's the most difficult, painful, and potentially the most financially ruinous thing you could do," he says.

Here are some of the strategies the partners used to bootstrap Innovate E-Commerce:

* Pick the right partner. Choosing a business partner with complementary skills can help cover your needs. If your skill is in sales and marketing, for instance, you might do well with a partner who has strong administrative skills.

* Find prime customers. A few marquee customers with strong credit histories can solidify your success, while just a couple that turn out to be slow-pay or no-pay can wreak havoc with your finances.

* Bill frequently. Give customers a discount for paying early. Bill monthly, twice a month, even weekly, to accelerate payments and increase cash flow. Getting clients to pay part of the bill up front can give you cash to fund your operations, and getting into the customer's billing system early makes subsequent billings and payments more expedient.

* Use smart marketing. Claire says articles placed in trade journals can produce better results than expensive ads. And don't squander funds on fancy brochures and sales materials. Innovate E-Commerce produced inexpensive sales and promotional materials that could be printed cheaply on a laser printer and replaced when necessary.

* Hire and compensate employees wisely. Avoid hiring friends unless they have the skills the job requires. And, keep people costs in line. Claire suggests offering company stock in lieu of a base salary and tying compensation to revenue-producing activities.

* Work with good advisers. Innovate E-Commerce identified professionals with strong credentials who were launching their own practices. While they had substantial skill, they were able to charge less for their services than a large accounting or law firm might. How to reach: Innovate E-Commerce Inc., www.innovateec.com