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RESULTS

In this section the empirical results regarding bootstrapping measures in small businesses will be presented. By way of introduction we describe the use of financial bootstrapping measures. On the basis of this description groups of bootstrapping measures are identified from a factor analysis. Finally, clusters of bootstrappers are identified on the basis of the factor scores in the factor analysis.

The use of financial bootstrapping measures

While undertaking the interviews we realized that the different financial bootstrapping measures identified actually could be separated into two main groups of measures. On the one hand we can identify measures with the aim of reducing the need for capital requirements in the business, and on the other hand measures used in order to meet the need for capital. From the explorative interviews, undertaken at the initial stage of the study, 32 different financial bootstrapping measures were identified. Out of these 32 measures, 19 aim at minimizing the need for capital requirements, while 13 aim at meeting the need for capital requirements without using long-term capital from the bank or a new owner. In the descriptive analysis presented in this section all variables are transformed into dichotomous scaled variables (0 = No use and 1 = Use). On the basis of the answers to the questionnaire, the five bootstrapping measures most often used for capital minimization were found to be the following: buy used equipment instead of new, use routines in order to speed up invoicing, borrow equipment from other businesses for shorter periods, use interest on overdue payment from customers, and hire personnel for shorter periods instead of permanently employing personnel (see Table 2). Furthermore, only a few businesses share employees (8 per cent) or equipment (8 per cent) with other businesses, in order to reduce fixed commitments.

TABLE 2
Use of bootstrapping measures for capital minimization

Measure Number Per cent
     
Buy used equipment instead of new 205 78
Use routines in order to speed up invoicing 115 44
Borrow equipment from other businesses for shorter periods 110 42
Use interest on overdue payment from customers 107 41
Hire personnel for shorter periods instead of employing permanently 105 40
Use routines in order to minimize capital invested in stock 101 39
Co–ordinate purchases with other businesses 95 36
Lease equipment instead of buying 87 33
Cease business relations with customers frequently paying late 84 32
Offer same conditions to all customers 78 30
Practise barter instead of buying/selling goods 54 21
Offer customers discounts if paying cash 43 16
Buy on consignment from suppliers 39 15
Deliberately choose customers who pay quickly 37 14
Share premises with others 37 14
Employ relative and/or friend at non–market salary 37 14
Run the business completely in the home 30 11
Share equipment with other businesses 22 8
Share employees with other businesses 21 8

Moreover, from Table 3 can be seen that the five bootstrapping measures most often used to meet the need for capital without using external long-term capital from the bank or a new owner were found to be the following: seek out best conditions possible with supplier/s, withhold managerīs payment for shorter/longer periods, deliberately delay payment to supplier/s, obtain payment in advance from customers and use the managerīs private credit card for business expenses. Furthermore, it should be noted that as many as 24 per cent of the business managers have to some extent received loans from relatives and/or friends.

TABLE 3
Use of bootstrapping measures to meet need for capital

Measure Number Per cent
     
Seek out best conditions possible with supplier/s 193 74
Withhold managerīs payment for shorter/longer periods 118 45
Deliberately delay payment to supplier/s 115 44
Obtain payment in advance from customers 86 33
Use of managerīs private credit card for business expenses 78 30
Obtain capital via managerīs assignments in other businesses 73 28
Obtain loan from relatives/friends 64 24
Deliberately delay payment of value–added tax 36 14
Obtain subsidy from County Administrative Board 24 9
Obtain subsidy from County Labour Board 20 8
Obtain subsidy from Swedish National Board for Industrial &
Technical Development
16 6
Raise capital from a factoring company 9 3
Obtain subsidy from the foundation “Innovationscentrum” 0 0

 

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