Unshackle Bootstrapping

Lack of finance, education and support makes it impossible

Most bootstrappers do not want to be bootstrappers. They have no choice. About 60% of the Indian work force are bootstrappers or self employed.

Bootstrapping is often the last resort. Lack of education and no access to opportunities force people to turn to bootstrapping. Almost all informal jobs are bootstrapped.

As per Ideas Of India:

Of the working population, over half are categorised as self-employed – almost 60% in rural areas and about 40% in urban areas,… For males, the category of ‘own account worker’ dominates the composition of the self-employed, while most self-employed women are ‘helpers in household enterprises’. Source

Low earnings and underemployment are two characteristics of self employment or bootstrapping. Only 20% of the self employed men have passed 12th grade. For women it is below 10%. Overall, only 3% have a formal training. Self employed or bootstrapped businesses also do not have access to formal finance and administrative support.

What does it mean?

Bootstrapping limits growth due to key three things.

One, bootstrapping results in low quality entrepreneurship.

Birpal has been coming to Shahpurjat for the past 40 years. He sells falsa berry and jamuns for three months.

No new opportunity has come to him in forty years. Lack of training, formal money and support has forced him to this job. He has to walk for hours to sell the perishing items.

Two, bootstrapping limits the size and scope of employment.

Most bootstrappers can not hire other workers. They work from their household premises. About 75% of self employed are own account establishments. As a result their productivity is half of bootstrappers, who hire at least one worker. Scale adds more value.

Maushmi, who worked as a house-help, started her own momo stall. Priya helped her kickstart the business.

A loss making momo chain Wow Momo is able to expand, while Maushami will have to toil alone. She will face the same issues like any small scale food establishment does: lack of credit, facilities, crackdown by authorities, onslaught of online businesses and apathy.

Three, no ease of doing business.

Every formal business has to adhere to complex legal and administrative rules. There are constant roadblocks. Getting a GST certificate is not easy. Municipal licenses and trade licenses do not come without hefty bribes. Local police bothers local businesses with arcane laws. Banks ask for endless paperwork to offer loans. Governments take arbitrary policy decisions such zoning laws.

I started Shack Coffee Co. four years ago. Due to lack of credit, sky high rentals, punishing zoning laws, and high handedness of authorities has harmed the growth. Unless Shack becomes a small to medium enterprise ( turnover of INR 10 crore to INR 100 crore), it will not be able to compete with loss making bigger brands such as Blue Tokai, which has access to venture capital of more than INR 1000 crore.

Bootstrappers are shackled

Smaller businesses, who do not have access to such funds or administrative support, will lose in the long run. Even the better off bootstrappers or self employed businesses, who are formal in nature are shackled.

Bootstrappers or self employed, who are better than the majority of the bootstrappers are also struggling. They make 25% of self employed people. The scale is often smaller than formal bigger businesses.

Shahpurjat is a hub for such businesses. These businesses sell clothing, services, and food. Source of finance is savings from their families and friends. They operate in a low quality premises as it is many times costlier to operate from commercial spaces of the city. A tiny number has access to formal finance and legal and administrative help.

They do not hire professionals to run their businesses such as marketers, designers, or formally trained technicians. As a result, these operate like mom and pop shops. The owners are usually well off, but the hired workers get a subsistence level salaries and facilities. One bad season or health emergency wipes out the future prospects of such businesses. Is there a way out?

Let’s Unshackle

As per Farzana Afridi, professor of economics at Indian Statistical Institute three things are key for the more empowered bootstrappers. They are vocational training together with access to credit and legal support . It will not just enhance the quality of self-employment, but also give a boost to entrepreneurial activity in the country.

While building Shack Coffee Co., I have been using a simple framework to grow.

One, is to use the fundamentals of marketing.
We have grown through strong word of mouth and feedback from the customers. We are a customer centric business.

Two, work with the finance professionals to get the formal credit.
It meant learning to sort out payments, building systems and book keeping.

Three, engage with the lawyers for the future work.
I have always benefitted from working with the lawyers.

Unshackle Marketing

Let’s start with unshackling one thing at a time. First is marketing.

Understanding marketing can be one of the superpowers of bootstrappers. Marketing is not spending money on online ads, publicity, expensive videos, discounts and AI to increase sales. It starts with understanding the needs and wants of the customers, finding the right customers, setting the right objectives and then offering the right product.

The first step is to start looking at your business from the eyes of your customers. It is called Market Orientation. I would love to help fellow bootstrappers. Join me for a free workshop on Market Orientation.

Details: Link