Entrepreneurship, Second Edition

14.6. Organizational Resources and Capabilities

Efforts to finance growth internally go hand in hand with controls. By improving its cash flow, your growing company can better avert a cash crisis and avoid being at the mercy of reluctant or expensive lenders or investors. You may even be able to self-finance some of its future growth, reducing reliance on more expensive sources of funding. The key lesson is this: Abootstrap mentality does not apply just to starting a company; it is a lasting orientation that maximizes returns through resource parsimony.

A bootstrap mentality does not end once the company is launched and successful;it is a lasting orientation toward maximizing value from resource parsimony.

14.6.1. Obtaining Financial Resources for the Growing Company

Shortening operating cash cycles and increasing margins are vital for conserving cash. They essentially represent costless financing. The rapidly growing organization, however, will likely need to tap additional sources to finance its growth. Not only will you need financing to support accelerating sales, but also new policies, such as granting customer payment terms or taking on bulk orders, as well as investments in new products or services, will create a drain on cash.

Despite its success and future prospects, however, a company early in its growth cycle may have only certain options available. For example, a bank ...