Here’s a case-study we’ve looked at before, but it’s a great example of bootstrapping a business:

In just a few years, John Fanuzzi built a national business in the U.S. employing dozens of workers. He did it with no capital and used basic cash-flow techniques to accomplish his dream.

John moved from Philadelphia to Montana in 1980 with everything he owned in the back of a pickup, including his two children of five and two years of age. He was a single father and had a lot on his plate.

He’d done a bit of project managing in the past and was a skilled carpenter. His business idea was to build a company in the unlikely field of massage tables.

Fanuzzi was in this situation because he had injured his back and a doctor said it couldn’t be treated. He was cured, however, by a single visit to a massage therapist. Who says alternative treatments don’t work?

The therapist had told him that it was impossible for him to source a portable massage table for the patients who couldn’t come to him. John was so grateful for his cure, he replied without thinking, “No problem, I’ll make you one.”

He began building it in his driveway, having spent $100 on materials and costs. It was so successful, the news got out and soon orders came flooding in. The problem was, John didn’t have enough to fork out $100 for each table while it was being made. He bridged the gap by asking for a deposit of $100 for each table, then charged $185 for the completed item. Classic bootstrapping methodology. Fanuzzi was in an ideal situation. He had no overheads and lots of customers.

After the move to Montana, he persuaded local teenagers to assemble his products for piece-rate wages and even shipped them on Greyhound buses.

Later, in the 1990s, Golden Ratio Woodworks, based in Emigrant, Montana, became an established and going concern. He was doing $200,000 of business a year. His debts were almost zero and customers paid in cash.

Then it took off in more sophisticated areas of the U.S, like California and the East coast, where buyers thought it “kinda folksy” to order from Montana.

The key to his success, as it is with all bootstrappers, is the management of cash-flow.

Bootstrapping is a way of starting a business with virtually no money. The best book on the subject is Greg Gianforte’s, Bootstrapping Your Business. I’ll review the book later in this post.

For all bootstrapping situations, the key indicator in your business is the relationship between revenue and costs. Costs, of course, should be your principal concern simply because they are the one element you can control.

I remember a Danish real estate business owner I knew on the Costa del Sol. His dream was to have a fleet of white Rolls Royces with his company name emblazoned on the sides and driven by salesmen in white suits. Apart from the costs of the operation, would anyone actually buy anything from a man in a white suit driving a white Rolls Royce? Think of the profits he must be making.

Gianforte reminds us that a business is not a West End production or a Broadway show. It’s not a government agency either, with its hands in the deepest of pockets. A business is a fragile entity with a single pot marked “Income” around which circle a whole forestful of predators. These include dark spirits confusingly dressed in white suits: your friendly local lawyers and accountants, the Inland Revenue (so helpful with mountains of detailed information on how to empty your pot), competitors who’d steal your shoelaces to garrotte you with. I may be exaggerating, but you get the picture.

My previous business was an educational publishing house. We produced books and distance-learning courses which were sold to the public at a high price while the British Government paid 80pc of our customers’ costs. It was relatively easy to keep revenues ahead of costs in such a marketplace.

One evening we heard that the Government had scrapped the entire scheme without notice because it believed that some £100 million ($180m) of its £2 billion ($3.6bn) investment had been fraudulently obtained. Most of the sector collapsed.

You can see the attraction of bootstrapping a business. You have nothing but your time to lose.

Bootstrapping a business is also much more fun. You have to be adventurous — though never with money — and there’s a great freebooting air about the place. You don’t have to worry about keeping up the payments on the white Rollers … or the men in white suits, who could well be coming to get you in the end.

Bootstrapping Your Business : Start and Grow a Successful Company With Almost No Money is a newish book by Greg Gianforte, CEO of RightNow Technologies and writer of a Thought Leader column over at SiliconValleyWatcher.com.

Greg’s contrarian suggestion is that you should strongly consider starting your new business without Venture Capital assistance. He points out that Dell, HP and Microsoft all began without VC funding. His own business followed the same path.

The sheer effort involved in raising money, and the complexity of contractual arrangements, deplete your time and energy which should be concentrated on selling value to customers. That income is the only thing that counts in any business, large or small.

Be realistic, he writes, support your idea, not another’s cash flow. Run your business, not an income stream for someone else. Excellent advice, no doubt, but can it be done?

Yes, and he can prove it : “At RightNow, we doubled our revenue and employees every 90 days for two years before we took any outside money, and even then the employees retained more than 75% ownership after raising $32m.”

Money reduces essential discipline. If you have the money, you’ll spend it, regardless of whether you have a clear idea of your business model or not. Moreover : “Raising VC money determines your exit strategy. You will either sell the business or take it public. What if you end up with a very profitable, modest sized business that you want to just run? That is no longer an option once you raise VC money.”

So raising money before you have developed your business model and proved its worth is putting the cart before the horse. It’s the worst time to raise money from a valuation perspective.

It’s never easy starting any business. Why then, says our author, shackle yourself at the outset? This is not a fashionable view, but it makes sense.

Switching back now to the UK after a series of reports from our US finance correspondent, we’re going to consider how to start a business in the UK. The first part will appear tomorrow and the series will continue through next week.

Britain is generally regards as one of the most enterprising countries in the world, with relatively light regulation for business startups. As if to emphasize that, the UK currently has 4.3 million small businesses. An astonishing 500,000 people each year attempt to go it alone.

We will look at ways of getting started and the means of building a successful business.

Although the basic facts will refer to British conditions, the principles will apply to any country that allows freedom of enterprise.

Next: How to Start a Business: 1. Bootstrapping.

Here’s the last post in this series by our U.S. finance correspondent:

By now you’ve probably already heard that Social Security is in a little bit of trouble. There’s probably no need to panic, but you should understand that the younger you are, the more different it will probably be. Who knows exactly what will happen?

Hopefully, you’ve also taken the time to figure out what you’ll do to pay for things in retirement. Because Social Security may not be there, here are a few alternatives:

1. Win the lottery
2. Inherit from your rich aunt who only loves you
3. Marry rich
4. Save a little money for yourself

Of all these options, marrying rich is probably the best choice. However, if you want to play the odds (and stay on your current spouse’s good side), you should probably start saving money.

Nobody is going to do it for you. All it takes is for you to make the decision to start saving and investing. This is not rocket science, so keep it simple. Here’s the secret formula:

1. Figure out how much you’ll need to save
2. Save that much
3. Invest it adequately — you don’t have to knock the cover off the ball
4. Enjoy the present — don’t stress to much about the future

Now, you have to do it yourself, but you don’t have to do it by yourself. What’s the difference? You have to actually decide to take action, and take the money out of your budget each month. However, you can get help on steps 1, 3, and 4 (you might even get help on step 2 from your employer!). The Web is full of financial calculators and financial advice — some of it is even good advice. You can also get help from financial advisors and folks who’ve been down the road before you.

You should be careful about who you listen to, because there is some bad advice out there. I heard a great way to help weed out bad economists (but I can’t remember who said it), and I think it’s relevant to financial advice as well. She said something along the lines of: The more famous a person is, and the more certain they seem to be, the more likely it is that they’re wrong. Avoid anybody who makes broad general statements on what you always or never need, and watch out for financial hype.