Sometimes, they are American engineers who have started the business. Sometimes, they are foreigners who have come to the US with a mandate to launch a product that has been a success in their own country.

“How should I launch my product in the US or North America, particularly if I don't have enough of a budget for a traditional and expensive product launch?”

Our company's qualifications for addressing this question are that our management team has founded four companies and advised several dozen early stage companies, most of whom have had inadequate resources for launch. And most of our clients have benefited from our suggestions, so we hope that you, as reader, will also find them useful.

For more information on Eclicktick Corporation, please visit our web site www.eclicktick.com. You will find there a wealth of material on high tech strategy, growing or turning around a high tech business, increasing your sales, putting together a management team, or issues in implementing a technology strategy.

Eclicktick provides consulting, interim management, business development assistance, runs planning retreats, marketing and financial assistance. In some cases, we will even help distribute your product.

The essence of bootstrapping is building a self-financing business. And in the hostile funding environment of 2001, bootstrapping is, for most companies, the only option available.

Building a bootstrapping strategy means a ruthless focus upon acquiring customers quickly and getting paid quickly. If you accept long sales cycles, then the chances are you are already dead. You just haven't realized it.

There are lot's of expenditures that companies make that really don't contribute to a bootstrapping strategy. The first rule of bootstrapping is:

So, for example, don't spend money on letterhead or four-color brochures if you don't need to. A better investment is to purchase Adobe Acrobat and produce electronic brochures. Buy a color printer for those rare occasions you actually send something via traditional mail.

Perhaps the biggest mistake that new ventures make is to spend too much money on marketing, sales and product development without testing and research.

We recently worked with a software company that had received a marketing proposal from a dubious marketing firm. The marketing firm wanted a monthly retainer with no cancellation option. It had made no estimates of the total cost of its proposed strategy. In fact, other than a vague reference to “branding”, no strategy was actually specified. Even worse, a branding strategy was totally inappropriate for this startup. It was a late entrant to a market with a major competitor that could outspend it easily.

If you are running a software or high tech firm, probably the most important insight is that you don't know everything up front. The process of interacting with customers, distribution channels and media takes time. It doesn't happen perfectly.

What iteration means is that you should focus early on getting to market and generating customer relationships. Now notice that we say customer relationships not product sales. A key bootstrapping strategy involves building relationships that will allow you to learn about how to improve your product. Even if your long-term vision is for a standard piece of software or hardware, custom relationships can often generate fast cash flow, learning and insights, customers' requests for critical features and relationships that will transcend your current generation of technology.

Our general belief is that most under-funded high tech firms will die unless they find a short sales cycle for their products. So, a critical part of survival is not being seduced by the well-known prospect.

The rules of thumb here are straightforward. Focus your selling efforts on clients (1) that don't need to be educated about the product category, (2) that have a funded project to buy something similar to your product or service, and (3) where you understand the needs, the sales process and risks.

Let's face it. We are all human. We would like to have a well-known firm using our product or service. But you have to be ruthless. Large well known firms have lots of resources, but typically lack urgency. They tend to be risk averse. So you have been ruthless in your self-assessment.

If you are selling mission critical or high visibility products and services, you will not generally succeed in closing. Large firms evaluate suppliers not just on their technology, but also on the financial stability of the supplier. So, unless you have something very proprietary and a value proposition that is ten times better than the competition, the chances are good that you are wasting your time on big firms. They have long and expensive selling processes. You don't have the time or resources.

If you do decide to sell to a large firm because you do have an unusually good value proposition, try to get a pilot project first. Large firms are often reluctant to do pilot projects surprisingly, but you will have more chance of success and more chance of understanding what it takes to make your product succeed in their environment.

If your product is mission critical or high visibility, find a large firm to joint venture with. Normally, joint venturing with a large consulting firm or systems integrator is difficult for small firms, but if there is a project, the rules change. Even a large systems integrator can be interested in you, if there is a project with a brand name client.

Once your product is developed, the most expensive part of your business is typically marketing and selling. It is not unusual for marketing and selling costs to be greater than 100% of revenues in the early stage of launch. And even with a profitable business, sales and marketing costs can easily run 40% of sales.

There are two parts to this proposition. The first is that you have to make sure when you are launching your product that you are not using expensive and scarce resources to do low value activities.

A typical under-funded startup will often use its most expensive people, e.g. the CEO, VP Sales/Sales Manager, VP Marketing, VP Business development to do sales calls. While there is some rationale for this approach in new markets, for the majority of startups, it makes more sense to examine the whole cycle of prospect identification, qualification, initial approach, close, installation, technical support and customer contact and outsource major pieces of the process.

A better approach is to build a model of your business that allows you to figure out how many prospects you need to approach to generate sales. In most businesses, it quickly becomes obvious that you need to approach a large number of customers to qualify enough with needs for your product that you can close enough revenues to reach breakeven.

Now there are two sides of the breakeven calculation. One side is the relationship between prospects/qualified prospects/closed customers. The other side is the cost and revenue associated with each customer.

As a general rule, you should be using lower priced approaches for qualification and saving your best people for customer closing activities. For example, telemarketing to identify decision makers or projects in an organization should cost around $25-30 per hour. A good sales rep is going to cost $125-250 per hour. It makes little sense to use your most expensive people on prospects that have not been qualified.

Another key aspect of engineering your sales process is automating it. For most small companies, using the Internet and the corporate web site is the most important aspect of automation.

Your web site is critical because it is, in effect, your “super brochure”. It defines the company, its quality, its accessibility, and provides a high level of information to customers. And it is a whole lot faster than mailing out information packages by traditional mail. It can be used for automated demos or for phone based sales calls where sales presentations and demos are done over the web, at a whole lot less cost than a sales visit.

It used to be easy. There were the Yellow Pages and the odd industry or trade association directory. Today, there seem to be an unending list of places to be listed in.

There are lots of different approaches and their relative importance will, of course, vary depending upon your industry and competitive position. But some of the most obvious ones that you need to pay attention to include the following:

Issuing press releases, preferably ones with some meat or human interest that will interest a journalist enough to write a story about you.

Creating a professional looking web site. And if you are a foreign-based firm, do have the web site reviewed by a native language speaker. Grammatical and spelling mistake are inexpensive to catch and fix. Not catching them, makes you look unprofessional. If a local buyer can see that you are a foreign firm from the content, style and language of your site, you have failed in your task.

The observant reader will notice that in Rule 7, we did not suggest the use of advertising to let prospects and customers know that you exist. We saved marketing for a different bootstrapping rule.

In the glory days of the Internet, newspaper articles were filled with stories of dotcom companies spending huge amounts on advertising at the Super Bowl. These stories demonstrated the immaturity of the management teams running these over-funded startups and their lack of understanding of how to do marketing cost effectively. It also probably reflected the heady times and the expectation that funding was not going to be an issue.

Of course, advertising and marketing communications continue to remain critical activities. But for the bootstrapping company, budgets are low and expensive image and brand advertising will not likely be the first marketing expenditure.

Let's go back to basics for the moment. What is the purpose of an advertisement? Well, generally speaking for a new company or product, the purpose of an ad is to help a customer solve a problem by selecting a product. Often, the advertising creates “pull” by drawing the customer into a retailer or causes the customer to approach a distributor.

Now, if you have a limited budget, it is important to remember that image advertising or the kinds of advertising that establish the positioning of your product (e.g. Mercedes vs. Chevrolet) take big budgets and frequent repetition. In other words, they are out of reach for the bootstrapping startup.

But there is another kind of advertising you can do. It's called direct response marketing. You can use advertisements or direct mail pieces designed to get your prospects to visit your web site, request information, respond to a seminar invitation, or purchase a product.

People often forget that even when a piece of direct response marketing does not produce a response, it may still educate your audience about your product.

But the real attraction of direct response marketing is that yields can be measured. You know what is being effective. The most effective practitioners of direct response marketing always do split runs (they try two different versions of their message, or try the same message on two different segments, etc.) and are constantly refining what does and does not work.

Sophisticated direct response marketers also know that Bootstrapping Rule 2 is critical. Don't blow your marketing budget on one activity. Test first. Don't buy a mailing list and mail to everybody on it. Buy a sample of the list and test it. Then, if it has been successful, buy more of the list. But measure and test and every stage.

Teaming, where you and other firms share marketing and sales expenses to reach a target audience. This approach is known by many names, e.g. syndication, consulting consortia, joint ventures, strategic alliances, sub-contracting, systems integration.

Most small companies generally, and foreign firms particularly, forget how big and diverse the US market is. Most sophisticated managers will laugh at business plans that assume a company just needs to get 1% of the US market. That level of analysis demonstrates that you have not understood the US market.

The first thing to remember is that the US is not really one market. Yes, relative to Europe the differences are smaller, but the US is so competitive that achieving national scale and high market share is a demanding exercise.

In most markets in the US, there are regional differences. The market is also highly segmented with different vendors having different positionings. Unlike smaller international markets, the US can often sustain multiple aggressive competitors. So when you launch your product after having been successful in a smaller country, you will be astounded at the higher level of competition in the US.

It is for such reasons that new market entrants are often forced to enter with a highly segmented strategy. The Japanese succeeded in cars by first targeting the low end of the US market, the small economy car that the larger and more successful US manufacturers really did not care about. Fortuitously for the Japanese, the Energy Crisis and Oil Embargo of the 1970s changed the appetite and perception of Americans for smaller cars. And the constantly improving Japanese quality eventually allowed them to move upscale into mass market mid-size cards with products like the Toyota Camry or Honda Accord, and eventually enabled them to launch luxury products like the Acura or Lexus.

Now segmenting the US market is not easy for the bootstrapping firm. There are typically three ways of identifying an attractive segment where you have a chance of success:

Market research is always a good idea. It should be done early in the product development cycle because the more you understand about what you are developing, the more chance of successful product launch you have. Part of market research is also understanding who your competitors are, what they do well and what they do badly.

Test marketing. If you have already developed your product, then the challenge is finding out who is most interested in your product, what benefit message has the most impact, and who will write you checks most quickly and buy your product. And as you acquire customers, you will learn who are the most profitable, when you take into account customer service, repeat purchase and multi-period profitability issues.

Blind luck. Particularly in industrial or B2B markets, sometimes you just get lucky. A customer buys your product. You now have a reference site. Other people in the industry are influenced to buy your product. All of a sudden you have presence and credibility. You learn about their needs and improve your product. All of a sudden you have a reputation and brand. It's great when it happens and as the saying goes: “Fortune favors the prepared mind.”

So be prepared for accidental success and don't ignore it when it happens. One company we are familiar with, a software business, missed the fact for 8 months that clients were trying to hire their services as consultants. They were so firmly convinced that they were in the software business, that they had difficulty conceiving that they could make money in other ways. It was only when they were beginning to run out of money that they started to look around at other opportunities.

For a bootstrapping company, we are great believers in “check-book market research”. If the customer won't pay for it, don't build it.

Now sometimes you have to speculate and build a product without having a customer advance order, but nine times out of ten, it is a mistake. If you don't have a customer involved in specifying the product, you will have less success.

Even if you have raised a lot of money and you have the resources to build a product without an advance customer, it is still a good idea to get a customer to be involved.

If there is one trend in technology, it is that over time, more and more choices are available. Only a foolish company will reinvent the wheel. For practically every high tech company, the rule of thumb must be: invest only in creating what you have to. Buy or license everything else. In fact, there is nothing wrong is licensing an entire product for your first generation to get to market quickly.

Under some circumstances, technology is a basis for competitive advantage. But we would argue that brand and reputation, relationships and support, providing solutions, creating customer satisfaction, and owning relationships can be even more important.

If building your own solution is going to delay your market entry, eat up all your capital and leave you with a product and no marketing or sales capabilities, why not consider the option of making money off someone else's solution first? Once you understand its pluses and minuses, then you will be better placed to build or add your own solution.

Knowledge based businesses are difficult to make successful. There always seem to be a shortage of good people and an endless supply of entry-level staff.

Great people cost 50% or 100% more than mediocre people, but they can frequently be ten times more productive. And great managers, not only can wear more than one hat (which saves you money), they do what is important.

Doing what is important is the single most critical issue in a high tech firm. Not having to fix the problems and inappropriate projects selected by bad or mediocre people is another benefit to having good people.

A bootstrapping company should not be a lifestyle choice. If you run the business so that you can be happy, you are not building a business, you are creating a lifestyle. Once you are profitable, you can consider the option of a lifestyle business.

If your firm is doing any of the above, all you need to do is pretend to be your customer. Put yourself in his or her shoes and ask: “How would I like to be treated?” In most cases, you will find that the changes to your business become obvious.

Now, it can happen. There are markets where the need is large and just offering a product is enough to get sales. But capitalism is astoundingly efficient and if you are being successful, then the chances are very good that someone will come after you with a competitive product.

Making a distribution relationship successful is not an automatic task. You have to educate, support, visit, develop a relationship with distributor sales reps, motivate them with sales and bonus programs, coordinate with their marketing people -- the list is endless. It takes resources, commitment and a plan.

Bear in mind, that even if you have established criteria for what it takes to stay a distributor, you can still lose good distributors to competitors with more active support programs.

One category of distributors is the commissioned sales representative. Such reps offer a low cost way of increasing market coverage quickly. But bear in mind, that you have to support a sales representative, because like a distributor, he is going to pay attention to the products that move quickly. You are always competing for a share of his attention.

Pricing may be the single most important area that is badly managed by high tech firms. Pricing is complicated because it has the following characteristics;

Pricing can signal what kinds of customers you want to do business with. If you say that you products cost $500,000 it sends a very different message than if you say your product costs a $1 per transaction. Remember Xerox built a great business by changing its pricing model to a price per copy business, rather than focusing on the cost of the equipment.

Pricing models affect the perceived risk of doing business with you. For example, if you have an annual contract model with maintenance, you will go through a far more difficult evaluative process than if you provide your product on a monthly basis. If you can avoid a capital budgeting process, you have a greater chance of a rapid sale. In the retail business, AOL talks about a monthly fee of $22.95 rather than an annual fee in the $250 range.

Dropping your price will typically shorten sales cycles. If you are a bootstrapping company, then shorter sales cycles are critical to survival.

Different market segments will have different pricing and risk tolerances. If you can maintain different pricing models, you can obtain more revenues more quickly.

Pricing models can be single period in focus or multiple period in focus. The deeper your pockets and the higher the switching costs, the more attractive a multi-period installed based upgrade strategy will become.

For some product categories and stages of market development, viral marketing approaches can be exceptionally effective. Giving away product can make a great deal of sense, as long as there is an upgrade strategy or revenue model.

Less expensive products can often end run corporate buying standards and shorten sales cycles by slipping in through departmental budgets and expenses accounts. You can also use pull advertising, test programs and sampling to create demand within a company where there is a purchasing bottleneck.

Features-based pricing can allow you to shorten sales cycles by getting trial on the lower end product without damaging the pricing of higher value added solutions.

It may seem obvious by this point in the White Paper, but you can actually model your ability to bootstrap your business. It's a spreadsheet exercise. You will have to look at the following variables:

Prospecting

Number of prospects approached

Cost per prospect

Number qualified

Time to close

Potential revenue per closed prospect by time period

Modeling your business can be done on several levels. There is the straightforward operating cash flow model. But just as importantly, there are now tools for knowledge intensive ventures that allow you to model the full customer acquisition, closing and service cycle (see for example, www.primarymatters.com).

Modeling of your operation can significantly reduce the cost of serving customers, but more importantly, it can often affect your choice of segmentation, product offering and infrastructure strategies for selling and supporting your prospects and customers. These modeling exercises have very high payback and can significantly reduce the cost of expanding your business.

Bootstrapping your company requires intelligence, a ruthless focus upon shortening sales cycles, measurement and a focus upon hiring and retaining good people. In world of technology oversupply, new ventures must focus on gaining customer experience quickly and at low cost. Customer relationships will make the difference between launch success and failure for those high value proposition products that have the most chance of success.