It used to be called Plan B

We started discussing our Nuclear Option today. Every startup should have a good Nuclear Option. It used to be called a Plan B but in honor of our 109th U.S. congress we changed the name to the Nuclear Option.

Lately our sales and marketing efforts are just not paying off. Our new sales guy is starting tomorrow so we are hopeful, but our marketing department is in an absolute shambles and cash flow has slowed to a trickle. We are working on some high profile projects with decent receivables, but right now the cash just isn't there.

It is essential for our survival that we maintain a steady pipeline of new business. A typical sales cycle is three to six months so it's tough to have an immediate impact on cash flow. And a bad sales person (which we've had a bloody string of) can have a twelve month effect on the pipeline. To secure our future we need at least ten new leads and one quote every day. Every day, every week, every month.

Don't fret however, we're still positive. We have a great set of products that continue to get better. We have top-tier reference accounts and the best sales guy we've every seen starting tomorrow. If we can just eke out the next few months, we might just make it. After 15 years and four startups it's not in our nature to give up. So we press on, and on and on. And we're ready with the Nuclear Option. I'll keep you posted...

Don't talk, work

We fired our sales director in part to make our marketing guy happy. Now that he is happy we expect more productive work from him. So our CEO gave him the simple task of converting his random collection of tips and help documents to FAQs. FAQs being the accepted standard for conveying this information to our customers. Of course he balked. He asked what was wrong with his original work and why this needs to be done. The guy is way to sensitive. Everything has to be discussed and analyzed and explained ad nauseam. You now have a boss so please, pretty please just do what you're told for god's sake.

You don't want your CEO having to explain decisions to subordinates. If your people can't take direction and do what they're told, they are undermining the system of management that is crucial to a startup.

There is a time for discussion and there's also a time for putting your head down and getting the job done. It's the CEO's job to make the decisions, delegate the work and facilitate the execution of the plan. It's everyone else's job to do the work. And right about now we need more work and less bloody discussion.

Think of something

One of our patent applications has recently been rejected. The patent has been in process for several years and was rejected due to its obviousness in the face of three other patents. We're going back and forth with the examiner on this issue and I don't believe they understand the nature of our invention.

Are patents worth the effort for a startup? The procedure for a patent includes hiring a lawyer, giving them all of your available cash, describing the invention and waiting. After some number of years you will get a response from the patent office.

One alternative to a patent is a trade secret. A trade secret may be a better way to protect your inventions and your IP. To get a trade secret, just invent something and don't tell anyone about it.

Once the patent is out there, your idea is out there. Your competition can analyze your invention and make a device that does the same thing using a slightly different method. Whereas, a trade secret is never in the public domain and will not give your valuable insights to the competition. On the other hand, venture capitalists and marketing types love patents.

I am going to send one more update to the patent office to facilitate their understanding of the invention. If this update fails, it's over.

Excuses don't bring revenue

We fired our sales director today. She took it pretty hard. She said we would never survive without her; we would never figure out her system (part of the reason she was fired); and there is no way we will close any business in the next two quarters. Great.

She complained about not getting advance warning. Our CEO said he has been telling her for months to make calls. She said the marketing materials and collateral need more work before calls can be made. Here we go again, making more bloody excuses and blaming someone or something else. If you can't take responsibility and admit your failures you can't possibly succeed in a startup. When other sales people have been successfully selling a product for over 8 years it CAN be sold. We've had more people with more excuses in this company over the years. Sometimes the excuses are good too. However, excuses DON'T bring revenue; find a way to succeed.

She also went on to say that she hoped we changed our minds and she would be willing to lower her compensation or work as a commission-only contractor. That's one way to finally force her to make the calls. Give her a contractors role and don't pay her on any sales from existing customers; not going to happen.

The new guy starts in a couple of weeks. In the meantime, we'll try to juggle our existing opportunities to help make payroll.

Looks like we have to be nice

Our offer to a new sales candidate was accepted; he starts in two weeks. We had to move quick to get rid of our current sales director and negotiate her final commission payment. She is claiming (or will claim) that we owe her for sales generated from house accounts. Of course we disagree as we developed these accounts long before she showed up. We'll try to negotiate a compromise. We can give her access to her email and phone to facilitate a new position. In exchange, we want a favorable agreement on the commissions. Either way, it should be an interesting meeting; she is going to be blind-sided by this.

In other news...

We have to add two new directors to our board in order to appoint our new CEO. This shouldn't be a problem once we give all our available cash to our lawyer.

One of our founders recently quit due to mounting family pressure and the prospect of a steady, competitive paycheck. It wasn't the most amicable of exits as he wasn't comfortable just telling us he got another job he had to snoop around in the company accounting records looking for dirt. Of course he found some. He was under the impression that all of the founders, regardless of their position, were making the same salary. Once he found the confidential financial documents that stated otherwise, he pretended to be upset. He called a meeting with me and the finance guy and started with the words "I'm DONE". After which there wasn't much to say. Unfortunately, he took a sizeable block of shares with him. We were concerned that he could block some director level decisions. He was a great programmer, but not so great with decision making.

As it turns out the three remaining founders and our ersatz marketing guy have 50.3% of the company. Looks like we have to be nice to our marketing guy. Great.

It gets old

Enough with memory lane for now...

Today we had a small dilemma, we were preparing an offer to a new sales director, who we think is a very strong candidate. If you remember, we are looking for someone who makes calls and ONLY makes calls. We don't need another sales person working on marketing materials or engineering or design or pricing strategy or channel development or anything but making the bloody calls. Believe me, we've had them all and they don't work.

And who really knows about this new candidate, I've liked most of our candidates over the years. They all start out great, but given enough time and misplaced energy they inevitably spin themselves out of a job and cause lost revenue along the way. Cripes it gets old. Our current sales director for example, was great at first; talking all kinds of cool sales theory and strategy, et cetera, et cetera. None of which means a thing if you don't MAKE THE CALLS. This new candidate seems more focused on making calls than any of his predecessors. So we have high hopes.

Anyway, back to the dilemma. Our current sales director is right in the middle of a complicated sale. Not a new prospect mind you, but an existing customer who wants to replace another vendors equipment with our new equipment. A nice up-sell for us. Do we jeopardize this sale by replacing the sales person mid stream?

The thing about having a decisive CEO is that we can actually make decisions. Novel concept. I'll keep you posted.

Try explaining that one

More from the archives. Sometime in late 1997.

"By our first trade show we didn't have a finished product although we were close. We also had some potential customers on the hook. One of which had loaned us some equipment for testing purposes.

On the eve of the trade show (literally) we were still writing code and building the hardware. In fact, I had setup a mobile software lab to write and debug code during the 8 hour drive to the show. So we packed up all our gear including the equipment on loan to us from our customer, brilliant move by the way, and drove all night. We arrived at the show an hour before the start. During the drive, I had managed to debug enough of the code to get a marginally working demo and by some absolute miracle we were able build the booth with a minute to spare.

So here we were at our first trade show, face to face with our old company, now hated rivals, and all of our potential customers. The demo sort of worked and we had a reasonably good presentation. All in all the show was a success, but it certainly had it's moments. To name a few:

• Our demo would intermittently crash, always in the middle of an important customer demo, I would have to non-chalantly power cycle the hardware without the customer noticing.
• We had a blowout with our former employer, who had no idea that we were in business so soon and in competition with them. That was actually fun.
  
• Last but not least our car got stolen with all of ours and our customer's gear. Try explaining that one to your first customer.

Even with these headaches, the show was a success and helped launch our new products. Our first ever products as newly minted entrepreneurs."

Beg, borrow and steal

Today was a bit of a yawn fest so I'll take this opportunity and go back into the archives for some history.

"We started this company eight years ago to build equipment for the telecommunications industry. We had identified a need in the marketplace and set out to fill that need with innovative software and hardware products. The startup team consisted of a product architect, an ace computer programmer and a business guy. Shortly after startup we brought on a young engineering genius who had more knowledge and ability at twenty two than people twice his age. To this day he continues to impress and amaze people with his skills and knowledge.

As a company we had great technical ability, however we were weak on the business side. In all fairness to our business guy, the technical team had ten or more years experience and we had a genius engineer. The business guy had none of these attributes. He was taking classes at a mid-level business school but quickly found out class work is no preparation for the real world. None whatsoever. Plus he was too stubborn, too short sighted and had no attention span. He would never make it as a president. He was, however, a decent sales guy which is exactly what we needed coming out of the gate.

We started the business in a bar on the North Shore. We had Wednesday night meetings for a few months before going official. Our friend from a big computer firm helped out with some preliminary technical design. We leased an office suite, complete with secretaries and equipment and built our network with stolen computer gear. It is true what they say about startups: "Beg, borrow and steal". We did all of these and then some.

The first six months we spent designing and building the products and acquiring our first customers. We scheduled our first trade show five months from the start. As we would learn, this was very ambitious."

Bring Value and you'll have a Job

We had what was hopefully the second to last manage-by-committee meeting this morning. In this meeting I elected our finance guy to be CEO. Our marketing guy said he was personally disappointed as he thought he was in line for the job. He also went on to justify his less than stellar performance of late. Mainly, his botched job of managing the sales function. He blamed the sales director for rewriting all his marketing materials and he blamed us for not firing the sales director. He also referenced some personal issue between himself and the sales director. None of which is a real ringing endorsement for his leadership ability.

He was also concerned that he might be exited by the new CEO, to which our answer was obvious: continue to bring value and you'll have a job. Seems obvious.

Otherwise the meeting went well and we are all in agreement about replacing the committed committee with a real CEO.

Triumvirate no More

We have decided to move our finance guy up to CEO. The we being me and the finance guy. The marketing guy, who fashions himself the CEO and the third member of the old rule-by-committee triumvirate, doesn't know yet. We'll probably tell him today.

We need a CEO to tighten up the groups and enforce some accountability and structure. Our finance guy is the perfect candidate because he knows every important facet of the business, is currently managing the sales department and is good with customers. Whereas our marketing guy... well we're not even sure what he does any more.

What we expect from the CEO is:

1. Managers will take more responsibility in performing their duties.
2. The marketing group will become more responsible and productive and actually deliver marketing.
3. The sales group WILL make the calls.
4. The engineering group will have more product direction.

And most importantly, if these things don't happen, the CEO can and will take action.

I'll keep you posted.

Committed by Committee

Our company has been running by committee for the last few years. Our previous CEO was dead wood and spent most of his days working for another company where he was a board member. His presence was demoralizing to the entire company and after a bitter, ego-filled struggle he was booted.

Once the CEO was gone, there was no effort to replace him. We had one person who wanted to be CEO and another who should have been CEO. And to keep the payroll manageable we didn't want to hire an outside person at that time. Therefore, we arrived at CEO by committee. The committee included myself (engineering), our finance guy and our marketing guy. Absurd.

CEO by committee is great if you have no decisions to make and nothing to execute, in other words if you don't have a company, employees or customers. We lasted so long in this mode because of one or two big projects that carried us.

Now, however, it is clear this is not working. The company needs someone with ultimate authority and responsibility. And the groups need accountability.

The wheels are slowly turning...

Jokers to the left

Over the years we have developed a real appreciation for our first rule of business: Hire Slow, Fire Quick. Just because we appreciate this rule however, doesn't mean we can actually use it, which brings me to our corollary to the first rule of business: It's easy to learn from mistakes, try doing something about it.

Back to our first rule, we haven't been too successful in executing either side of that rule. We've hired jokers too quickly when we shouldn't have and we've kept dead wood around when we shouldn't have. This rule is also self perpetuating. For example if you hire a joker CEO or VP too quickly, they will hire more jokers too quickly and fire the dead wood too slowly.

When hiring, get a good recruiter and let them find the A-list players. You want people that will bring more than the job description. You want people that will do what it takes to be successful. If you can't afford a top notch head hunter, take your time in filling the position. Do not hire friends, friends of friends or associates from previous jobs until they have been thoroughly vetted and compared with outside candidates. Trust your intuition and don't ever, ever, under any circumstances hire anyone from DEC or WANG.

When firing, don't hesitate. If you identify a person as dead wood act fast. You NEVER need a warm body in a position, never. It is less costly to hire someone good than to keep someone not good. Having dead wood around affects management, other employees and customers.

And on a final note, don't ever try to rule by committee. It's a sure way to break the first rule of business.

Make the Calls

After years of doing startups, I think we have finally figured out what we want in a sales person. The three of us constants during these years are two engineers and a finance guy. So you can't blame us for being a little dense about sales, well you can and should blame us, who else are you going to blame? Anyway, I think we have finally figured it out.

I have interviewed and worked with countless sales people and for the most part I liked them all. There were a few that I really liked and thought for sure they would be successful. Not a single one, not one was successful. Not even close. Of course there were other factors like unrealistic targets, poor marketing, delayed products, et cetera, et cetera, ad nausem. The truth is we had no idea how to pick a sales person. No idea. And that includes the small handful of high-powered CEO's we've had over the years.

When the light finally dawned on marble head, we wanted someone to make calls. Call everyone in the market, every single one. Cold call, warm call, hot call, whatever. Just MAKE THE CALLS. We don't need a closer, a channel, a partner or some new age business development nonsense. Make the calls! Make the calls! Make the calls! Start today and call every single potential customer. When they have all been called start over and call them all again. Sounds simple. Let's hope it works.

Dat Minor

Last week we almost missed a payroll. To most people that is a disaster, but after 10 years in high-tech startups in the immortal words of my old friend Pete "dat minor".

Anyway, we didn't miss the payroll and everyone got paid most of their salary. A few people got 80% and a few of us chose to forgo government withholding to boost our paycheck back to normal levels.

Business wasn't necessarily bad, it's a matter of cash flow. The receivables were there somewhere...

Three Bullets

I think it was back in 5th grade when I first learned to make a slide presentation. I clearly remember our teacher:

"God help you if you put more than three bullets on a slide" He said "You will absolutely lose your audience after the third bullet."

That was quite some time ago; since then we have been through three CEO's, twenty sales executives and half a dozen marketing guys and I have yet to see a single slide with less than 10 bullets.

Today we met with a candidate for sales director. One of our concerns was his performance without the large support system typical of big companies. Specifically, we didn't want sales to be held up by the lack of presentations and marketing collateral.

He said he creates his own presentations, three or four slides with the entire pitch boiled down to three bullets. Beautiful.

Something from Nothing

As you have probably figured out, we are not too thrilled with the performance of our sales and marketing departments of late. The marketing department has been particularly useless over the last several months, however due to factors beyond our control (investors, financing issues, etc.) we can not fire the current VP of Marketing.

This, of course, defeats our one rule (hire slow, fire quick) but that's business; learning from mistakes is easy, try doing something about it.

So we've made the marketing department a Petri-dish. We can't hire a useful VP of Marketing so we'll treat the whole department as an experiment and learn what we can. I'll keep you posted.