A little more than 31 years ago, in April 1988, I started the publishing business with a determination to use zero capital for the launch. This was both necessary and pragmatic. I in fact had no capital. And, while I could perhaps have scrounged or borrowed money from family and maybe a secured line of credit (or with heavy credit card interest obligations), at least one person told me: “You know, Mark, nine out of 10 new publishing businesses fail within the first year.”
That was enough to determine that the only way to go would be with no money.
The approach I took involved some creative interpretation of Canada’s unemployment insurance rules, coupled with some old-fashioned selling elbow grease. I had worked for two years as a moderately successful real estate agent, and arranged with my co-operative employer to be dismissed.
(Since real estate sales is a pure commission career and I certainly was doing quite well by the norms of the industry — though not getting rich — this was a stretch of the rules — especially since the federally (in Canada) administered unemployment insurance system requires you to be actively looking for work to qualify. But when I showed up for my interview, I just was ‘myself’ — nervous, nerdy, and seemingly utterly unsuited to a career sales job. I had also in my previous job worked in the communications department of the federal employment ministry and knew the government was preparing to implement a program allowing for UI payments while starting a business.)
The unemployment money provided some cash to keep a roof over my head, but I still needed to sell advertising to a non-existent publication without a sample. Here, I created an offer to potential advertisers and introduced the two-tiered “net” and “gross” pricing system we still use today. If you prepaid, you could have 20 per cent off. Enough advertisers took up the offer so that I had the cash to give the certified cheques to our first graphic designer and printer.
When I published the first issue of Ottawa Real Estate News, the four letter word hit the fan because the city (and its Realtors) had never seen a real news publication covering the industry. I thought I was goners after the first issue when the then real estate board president offered to resign because of recorded comments he made with me (and which I published). But the reaction from my early advertisers was different. “I’ve never seen such good response to my advertising,” one early client said. “How can I sign a contract?”
I was in business.
There were ups and downs and some near misses. The business certainly didn’t make me rich. It also accumulated debt — about $80,000 in bank and credit card debt and upwards of $150,000 in unsecured trade debt (mostly printing bills). At a few points, I thought we were done, but fortunately we found the will to continue and enough money to hold on.
My business and personal finances were sufficiently disconnected that the less-than-prosperous business (coupled with my marriage 25 years ago to a woman with her own resources and very strong financial/investment knowledge) meant my retirement account was growing even if the business didn’t really accumulate much in the way of capital.
Earlier this year, using saved personal resources and some helpful legal advice, we negotiated a creditor agreement with the printer to resolve the long-standing trade debt at 10 cents on the dollar (about the amount it would have cost for me to file for bankruptcy). I also paid the bank in full. The reconstituted business is now again debt free — and it will stay that way.
And so that explains how Ontario Construction News has come to be bootstrapped, much like the original business. And how that decision is, again, saving my skin.
While I tried to estimate conservatively and allow for modest sales expectations, the original business concept would have required significant cash and payroll expenses — which I pulled out of the picture with a revised plan. This is good, because the initial sales are significantly below expectations. Higher overhead and fixed costs would have created real strain and possibly urgent retrenchments. Instead, we can hold on, tweak and improve the concept, and build on the slowly growing base of truly satisfied clients. (And I can draw my modest salary, this time supplemented by Canada Pension Plan payments — resulting in enough money for Vivian and I to enjoy some overseas vacations.)
In my years in business, I’ve seen plenty of examples of people who failed to follow the bootstrapping rules. They mortgaged their homes or otherwise personally guaranteed six figure loans for their start-ups, only to see their businesses flame out in the first year. They stressed with the loss of personal security and resources and felt the pain of permanent defeat and even poverty.
Alternatively, especially in the high-tech world, new entrepreneurs sought out venture capital, only to discover they really didn’t own/control their business. Again, they spent their initial capital carelessly and soon found themselves with nothing but an empty shell and defeat.
Perhaps the bootstrapping approach has constrained my business’s growth and scale, but I’m thankful I followed the advice of a successful friend: “Never put your personal resources and viability at risk for a business start-up. Only invest what you can afford to lose.”
Three decades later, like in 1988, I have a fresh new business, lots of hope and optimism, but also enough money in my personal investment and retirement accounts to live comfortably. I’m glad to be a bootstrapper again.