Page 31 - The Bootstrapper Bible

ChangeThis A business model that relies on a huge number of customers or partners is far less flexible than one you can adjust as you go. Subway sandwich shops, for example, have more than 13,000 locations, each individually operated. If Subway decided that the future lay in barbe- cued beef, it would take a lot of persuasion to get each of these entrepreneurs to go out and buy the necessary equipment. Theyʼre pretty much stuck with what theyʼve got. Compare this to a local restaurant with one or two locations. If everyone suddenly wants fresh oat bran muffins, theyʼll appear on the menu in a day or two. The ice cream business, which youʼre by now no doubt bored with, is totally adjustable. In the winter you can switch to hot chocolate. If business heats up, (sorry for the pun) buy more trucks… THERE SHOULD BE AN EXIT STRATEGY (OPTIONAL). If you can build a business and then sell 5 it, you get to extract the equity you built. If you canʼt sell it, all you get is the annual profit. There can be a big difference. About eight months after going public, Yahoo!, for ex- ample, had equity worth about a billion dollars, but it made only $2 in profit last year. That 500,000,000-to-1 ratio is huge, and itʼs unusual, and it doesnʼt last forever, but if your goal is a retirement villa in Cancun, the exit strategy it allows is very nice indeed. Selling ice cream sandwiches offers no exit strategy at all until you reach a certain scale. When youʼre small, the business is just you. A competitor can buy trucks more cheaply than buying your business. But once you hire employees and build a brand and create trade se- crets and systems, then youʼve built a business. One of my favorite bootstrap businesses is the Stereo Advantage in Buffalo, New York. I was one of its first customers as a teenager in the 1970s, and since then Iʼve seen it grow from a tiny one-room shop to a business with hundreds of employees, more than 4,000 commercial accounts, a service business, a catalog business, and a huge share of the stereo, home the- | iss. 6.01 | i | U | X | + | This manifesto is powered by ChangeThis. VIEW our entire manifesto collection. h 31/103 f