Boardgames, Bootstrapping and BHAGs

I love boardgames.  My favorite is Acquire.  In Acquire, the objective is to maximize profit by buying shares of stock in a portfolio of up to seven companies.  Don't spend the money on shares if you can't get ROI.  Players compete against each other to win the cash bonuses that go to the person with the most and second most shares of a company.  Players create and grow the companies by placing adjacent tiles on a alpha-numeric grid.  As the companies grow, the shares grow in value.  When two companies "collide" on the board, the larger takes over the smaller and players can cash out their stock.  Managing cash flow is key--running out of cash guarantees a poor result.  Chasing an "arms races" for majority share of a slowly growing company is another great way to lose.  Over several years, I've come to prefer a strategy of avoiding tying my capital up in the large but eventually very valuable companies.  I've watched too many players--myself included--tie up all of their capital in assets that show great promise but never deliver.  Or they go after the company that is so obviously the most promising that they dash themselves against each other in a hyper-competitive market.

Playing the game in the way I do resonates with my nature.  I'm pretty risk averse and like certainty.  I like to limit my investment and limit risk.  In Acquire, this means I go after small companies that have a shorter cash-out horizon.  In social entrepreneurship, it means that Guy Kawasaki's bootstrapping article resonates strongly.  Cash flow is King, Queen and Prince.  Valuing smaller deals with shorter cash conversion cycles is better than big deals with longer horizons.  Limiting capital investment increases ROI (and limits the downside risk.) The farm I visited in Michigan followed this bootstrapping plan.  They farmed part-time for four years until the demand for their product led one of them to quit her job and go full-time into farming.  After another four years, he also quit his job and they took on their first debt to finance an expansion. 

In Acquire terms, Prof Z has been pushing me to go after the big company--to take the risk and make a larger investment for a larger potential reward in financial and social terms.  This goes against my nature, but his advice resonates with me in two ways:

1. Unlike in a board game, at some point this venture will have to pay its way.  I got bills to pay...
2. Compared to staying small, the marginal potential reward of going big is proportionally much greater than the marginal effort required. 

I think branding, sales and distribution are the most critical success factors early in the game.  Establishing initial high margin distribution channels and customer relationships is the first challenge.  This can be accomplished via bootstrapping.  It can probably be accomplished on a part-time basis.  With a brand and customer relationships established, the table becomes set to go big, to make the investment in energy efficiency, to tackle production methods that are more complex but more sustainable (aquaponics instead of simply hydroponics) to grow a more diversified set of crops.  To grow enough food in Pittsburgh to put the city on the map as a center of urban agriculture.  To a achieve the BHAG.

The question that links the bootstraps to the BHAG is this: how long is and what are the criteria for the test period that will provide the go/no-go decision on pursuing the BHAG?  I figure that I can only be a farmer for two years max: after that, the business needs to be big enough so that I can transition to a more strategic business/distribution role.  Furthermore, my wife and I plan to have kids in the next few years: we have to make decisions on whose career will provide health insurance and who will be the primary caretaker (we could go either way at this point.)  (I think the best case for divorcing our health insurance system from employers is arguing that it will facilitate entrepreneurship, by the way.)

Here's my back of the envelope schedule to link the bootstrap and BHAG phases.

1. Grow a very small amount of hydroponic lettuce this summer - no greenhouse, no fish, no heating.  Get our product and BHAG vision in front of customers and partners.
2. Shut down the operations this winter.  Find a used greenhouse and put it up.  Utilize a heating system that has low fixed costs but higher variable costs (natural gas heater instead of geothermal)
3. Graduate in Dec 2013.  On January 1st, make the leap.  Start hydroponic lettuce production.  If we couldn't find a used greenhouse, delay production until warmer weather. 
4. In the fall of 2014, make the decision on whether to go big.  Continue current production under the greenhouse, but assemble the pieces of the BHAG: geothermal heating, nicer greenhouses, pursue a partnership with Penn St. to perfect aquaponic farming in this climate.  Assemble funding.
5. Put up the additional 3-4 greenhouses in early 2015.  Wait until warm weather to start production.  Install the geothermal during summer/fall when heating isn't required so that cash flow from the spring/summer can finance as much of the investment as possible.  2015-2016 is the first winter of full-out winter lettuce production
6. Spend the summer of 2016 pursuing aquaponics/different vegetables.  Scale up from there.