How to launch my Startup - The art of Bootstrapping

You want to start up your company and you found your self in a situation where you don’t have enough money.

If you have this problem, you are not alone. I remember when I first start up my firm. Money is a luxury. Every single cents count. Life was very hard but it taught me the value of money and hard work.

Working on tight budget is not easy but not impossible either. The strategy is to work on the lowest cost possible or bootstrapping.

To save cost, you may want to operate from your house. Set aside a room or a corner of a house as your ‘office’. This will save you from paying high office rental, travelling cost, and at least you can brag in your company’s website that your company’s operation have a low carbon emission. The best thing is your ‘new office’ came with a kitchen and garden. Not bad for a start ups huh?

Depends on what you are working on, you just need a computer, desk, a printer/scanner, and Internet connection. These are the basic necessities for you to work.

You may work from the comfort of your home but don’t be too relax with the standard of your work. The work must be of high standard. If possible, the ‘home office’ must be separated from the other member of your family. The last thing that you need is you are having a Skype meeting with your clients while the other member of your family at the background. There must be some degree of ‘professionalism’ in your ‘home office’.

You also may want to rent an office address to put in your name card. The office address gives your business some credentials to the eyes of your potential clients. However, you may put in your personal number or email address to your name card.

If you want to meet your clients, meet them at their office. It gives a sense of personalized service to your client. Better still, you can see the conditions of their office and understand their business better. This will help you build up a better relationship with your clients.

For more serious meetings with multiple parties, you can rent a meeting room. There are lots of companies that offer address or meeting room for rent. There is no need for a formal office with mahogany conference table and art works as wall decorations. You don’t need an office, what you need is a place that can function like an office.

Still, you need money to finance your operations. In the early stage, you may need to use your own savings. If you are lucky enough, you can convince your immediate family and close friend to give you a soft loan. However, make sure you pay them as quickly as possible. Friends and family are your biggest cheerleaders and promoters. So if you don’t pay them back, you risk alienating your biggest supporters. You might lose their recommendations and business contacts.

If you have gold in your possession, it may be a good idea for you to go to the Ar Rahnu.  You may exchange your gold in return of cold hard cash. Some Ar Rahnu may give you cash up to 60 to 70 per cent of your gold value. This will give you some lifeline for 3 to 4 months for your business operations. Once you get the profit, redeem your gold for future needs.

Do you feel embarrassed to be seen in a pawnshop? I have doubts and feel embarrassed the first time I was there too. It was due to the old stigma of the conventional pawnshop. However, I can tell you that Ar Rahnu is a different kind of experience.  

In the early 1 year of your start up, your priority is more towards sustainability of your business: to build up your brand, reputation, and trust for your business. It will be suicidal if you put all your profit for lavish spending. I would recommend that you divide your profit into separate funds:

1.     Operations

2.     Reserves

3.     Investments

4.     Take home

“Operations” is to fund your daily and monthly business expenses. “Reserves” is to pay for any unforeseen circumstances. It is very safe to build up your reserve to sustain at least 6 months of your business monthly expenses. Assuming that you cannot sell anything, you can sustain for 6 months without any business. 6 months is the very minimum. Looking at the current volatile economy, 12 months is a safer bet.

I would recommend putting the reserves in a dividend bearing accounts. If the money needs to sit somewhere, might as well as put somewhere that it works harder for you. Perhaps you can put in a medium risk portfolio like Tabung Haji accounts, fixed deposits, or you can even buy gold bars. The idea for “Reserves” account is for you to set aside some money for emergencies. The account must be liquid enough for you to cash in but at the same time give you reasonable return. Out of the three examples I gave, fixed deposit is the last choice that I would recommend. The return is low and unattractive.

As for “Investments”, you may want to put in a higher risk portfolio like shares, bonds, commodities, currencies, and any other investments. Unit trust may not be a bad idea if you don’t have time to monitor your own investments. Most unit trust agents are now more like a wealth consultants. Sit down with them and work out your financial plan.

Lastly, don’t forget why you open up your own startup business. Reward your self by taking home a portion of the profit. Reward your self, may not be lavishly rewarded but you need to eat, buy clothes, watch movies, go for vacation, and live like a normal person. All works and no play make Jack a dull boy.

As to how much percentage for each fund, I leave it to you to decide. The percentage depends on your business needs. However, in the early life of your business, you should allocate more to operations and reserves to build up the strong foundation for your business.

Before I sign off, I would like to wish all of you a happy holiday and a happy new year. Enjoy your self with your loved ones.