Bootstrap Business - Getting by as an early stage company

How do needs change for an early stage company as you mature and how can you meet those needs during tough times?

When we launched LeisureLogix, nearly 3 years ago, we were fortunate again to have the Solutionz infrastructure, including a five thousand-square-foot office, phone/computer systems, and administrative support in place, so we didn’t have to go out of pocket as a new business for that.

We were able to get folks to forgo a salary for a time. Eventually we had to take on the burden of a regular payroll, including benefits. To do that we really had to get outside funding, as our own personal resources were dwindling pretty quickly and clearly not going to get us to the finish line. So the final step was finding an investor who would believe in our vision enough to provide sufficient capital resources to pay for those things we couldn’t defer, barter for, or afford on our own out of the resources we had in hand.

During the time it took to secure outside funding, my husband and I had tapped into all of our resources—savings, insurance policies, taking out a second mortgage, and establishing a line of credit on our consulting business. And yes, even our credit cards provided some of the funding. In the end, there was precious little more that we could leverage personally other than the Solutionz office building, which we held onto as long as we could, but eventually had to sell.
Fortunately, the commercial Real Estate market was strong, so we sold for a solid profit.
What we learned during this phase was that it is no accident that banks and financial institutions own the largest buildings in every major city in America. We had no idea then what the consequence of being highly leveraged could be and that all over the country other families and businesses were over-extending themselves right along with us.

We were still a long way from having a revenue stream that would replace what we invested, so were lucky in early 2007 to find a local investor who took the lead on funding the business and moving forward. As a result of his investment, we were able to get caught up on all of our financial obligations and get the product completed and ready for launch.

The scariest part of establishing a new business is that moment when you shift from being able to meet your own needs with what you have and knowing that in order to be able to get to the next level and achieve your original dream, you have to attract external money. That is a precipice that closely resembles stepping out ofa boat and walking on water. There is nothing that prepares you for the things that come in giving up what you perceive to be control of your own destiny.

Stepping out definitely requires faith.

This is an excerpt from Chicke Fitzgerald's new book Bootstrap Business, coming out August 2009.