by Michael Meuser
Bootstrapping is the way most of us get started in business. It means relying on our own savings, tools, equipment, trade and barter skills to get the business going.
I've read in some recent articles that encourage folks go into credit card debt or mortgage their homes to get their businesses started. I don't recommend this because this, like getting investors from the outside, puts a large burden on the new business - in many cases a burden that proves to be the undoing of the business when it comes time to repay.
To me, mortgaging your home for a business is an especially bad thing to do. You could very well lose your business trying to repay the loan and then lose your home because you no longer have the business income.
I think the time of seeing our homes as "investments" and treating them as Banks or ATM machines is past. Homes are homes plain and simple - a place where we live, raise our families and enjoy our lives. We should do nothing to jeopardize them. We should invest in our communities, our children and our businesses, but NOT our homes.
Here are a couple of ways that I have bootstrapped businesses. Before I went into the salvage business I was in another business (well actually several other businesses, but we'll keep it simple). About 30 years ago I had a successful woodworking business making high-end brass and ceramic inlayed old-growth redwood clocks, trivets, lamps and wine racks.
I bootstrapped the woodworking business by having a yard sale where I raised enough to purchase a good quality table saw. I then looked through the yellow pages and found several fencing contractors. I offered to cleanup after their jobs if they would let me keep any of the leftover wood that I wanted. All that I called were more than happy with that relationship.
I already knew, from looking at fencing material in lumber yards, that about 10-20% of the redwood of that grade was actually old-growth rather than second-growth. It was in there because it didn't have bullet straight grain and wasn't absolutely clear. I cared little about that. In fact, the odd grains and all made the wood more desirable for my products. In short order I had a steady supply of all the old growth I needed. I sold the leftover cedar I recovered to a fellow in the neighborhood who was making planters. So I got free old-growth redwood and my time and gas paid for.
With the saw, tools I already owned and material I was ready to begin. I could make the products with what I had but I knew that it would be more efficient if I had more and better tools so I made a list. After I totaled up my "wish list" I then figured out how much I would have to make in profit to get what I wanted, how many items I needed to sell over a certain time period and so on.
Bottom line is that within a few months I was able to purchase or trade for the equipment I really needed to do a better more efficient job without going into debt. With this new equipment I was then able to make even more product of higher quality and increase my profits further.
Bootstrapping my way into the woodworking business helped prepare me for and get interested in the recycling and salvage businesses. As I was looking for more woodworking equipment a friend said I should go to the local scrap yard. I'd never been to a scrap yard so I checked it out. I was amazed. Here was an old rusty planer and bandsaw - just what I needed. For the price of the scrap metal plus a little extra and some cleaning, oiling and motor upgrades I had the equipment I needed.
As I look back, I realize that this was a turning point for me. Going to that scrap yard changed my life. I had always been interested in reusing as much as I could. In my woodworking I used material that others would have thrown into a landfill. As I created my trivets, clocks and wine racks and sold them up and down the Redwood Coast my thoughts kept coming back to salvage and recycling.
It wasn't long before I sold my woodworking business to a neighbor. I took cash and a dodge pickup that I knew I'd need for my venture into recycling and salvage. Right off the bat I knew I'd need equipment to do the job right. First place I went was the local salvage yard. There I picked up what was left of a utility trailer and some steel pipe for a small crane for the pickup. I purchased a new 2000 pound winch (I wanted to be sure it would be safe) and took it and the pipe to a local welder and told him what I wanted. Instead of asking how much it would cost, I asked him what sort of equipment and tools he needed and if he'd be interested in a trade? He was very interested.
Back at the salvage yard I picked up the steel he wanted plus a little extra in the hopes that he'd also throw in a small beat up cutting torch set I saw on a shelf while I was there. When I returned he was more than happy with the steel and I knew that he thought he got the better of the bargain by trading a small welding job for a cutting torch set that he never used and some steel that he really needed. I thought I got a great deal too - I paid $12 for the steel.
This and some miscellaneous hand tools kept me in business for some time. Between the truck, trailer, torch and crane I could handle about anything by myself that came my way. With this rig I was able to do building deconstruction, metal and all sorts of other salvage and recycling.
After a time though, it wasn't enough. I had the opportunity to get into the electronic salvage business and I jumped on it (you can read more about it here). The first thing I needed was a larger truck.
The last time at the salvage yard I saw just the hood of a red truck poking out from behind the rubble. I looked closer and it was a beautiful old '47 GMC 2 ton flatbed truck. The bed was in terrible shape but the body was good. I bought it for $100. Turns out the engine was toast, but the transmission and two speed rear axle were excellent. I scored a chevy 6 cylinder engine that slipped right in and I was off and running.
But, during my first few trips doing the electronic salvage (I had to drive from the California foothills to Nevada and back quite often), I found that the old '47 wouldn't be up to the task after all. Fortunately now that it was running and running good it was worth much more than I paid and I sold it to a collected for $4,200. I saw it several times after that in various Mother Lode parades. I still wish I had that truck though.
The truck sale provided the cash I needed to get started on the electronic salvage. Part of the salvage (a part I really didn't want - but boy was I wrong) was hundreds of very large 2 volt batteries. Each one weighed 300 pounds. I thought about it a bit and figured they would be perfect for home power systems and there were plenty of folks in the foothills who lived off the grid. I placed two ads in the local free classified paper - one to sell battery sets for $500 each and one wanted ad for a large flat bed truck. I must be living right because a guy called with a 5 ton flatbed and he wanted to trade for four sets of batteries - done deal! The truck ran lousy but a set of batteries traded to a local backyard mechanic for repairs and all was well. And to think I tried everything I could think of to NOT have those batteries be a part of what I was bidding on.
Even the new big truck wasn't large enough for everything. When I found a buyer for the scrap leftover after I removed the gold laden material, I demanded that he first give me an $8,000 finder's fee. Pretty gutsy at the time, but it was the only way I could make it work. I used this money to get a forklift I needed for $4,000 and arrange to lease a yard in California and hire truckers with semis and flatbeds to haul the material from Nevada to California. There's more to the story and it will all be posted on my Mike's Recycling Tips page and on my blog.
One thing I haven't mentioned but I will mention here is that not having much money helps you to make very smart and sometimes gutsy decisions - basic building blocks of your business that down the road will put you on firm financial ground.
Mike Meuser
Michael Meuser entered into the salvage and recycling business in the early 1980s. He began with building deconstruction and scrap metals and then moved into electronics, computer and telecommunications scrap where he learned to recover gold and other precious metal. Michael tells his story and offers his advice at his website, RecyclingSecrets.com, and his blog, Recycling Secrets Blog. Also, you can follow Michael on Twitter.
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