Category: Business admin

Priority List

Posted on by Steve Sammartino

Some advice from the street. Love jobs can kill your start up.

Definition

Love Job : Engaging friends or colleagues to perform specific, crucial tasks which one would normally pay for.

Through our journey as entrepreneurs we’ve engaged the help of friends, colleagues, professionals. In this category fall tasks like legal advice, design, advertising. They’re always happy to help, but when it’s delivery time, they got caught up, their boss was on their back, their dog died…

They didn’t make time because they weren’t getting paid. We were low on their priority list. Love Jobs are part of entrepreneurship and bootstrapping. You should and will use them. But if something is vital and you can afford it, it might be best to pay for getting it done and meeting your timeline.

Employee Bug List

Posted on by Steve Sammartino

Like the previous bug list, but related to you job, company and position as an employee. The things you say you wouldn’t do. Mine is written on a letterhead from a company conference which says something like “We have the power”. Not kidding.

The idea is simple. Write down the things you don’t like in your current job and company. Anything from procedures, culture to the way your line manager treats you. Be specific. File it away.

Once you’ve started your own business and have employees, take out the list periodically. Make sure you haven’t become what you despised. Make sure your employees have the environment you would have liked.

Compound Damage

Posted on by Steve Sammartino

No doubt your new start up will face issues. Many of them will be people related. Some will be things simply not getting done or not working once you press the on switch. If issues arise and remain unresolved within 24 hours you will start to suffer Compound Damage. This is particularly the case with suppliers and staff. All things in life compound, it is just natures way.  Consider this with all problems and general stuff ups.

If you ignore them they will go away, along with your business.

Be a Good Payer

Posted on by Steve Sammartino

It’s a well documented strategy in real estate to pay your tradesmen up front. That way you develop a reputation for being worth working for. When you want something done, you get it done quick. And in business speed is a massive advantage.

It is the same for your start up. We pay for things as soon as the bill arrives. Electronic transfer, bang! Then email them the receipt through to them. Beside the fact that we have little choice, we’d do it any way. You see, this is how we are building our team – our heavy gauge supply chain. Suppliers know we pay quickly and we’re good for it. Next time we are in a hurry to get something done, or we’re asking to cut lead times, who are the suppliers going to help? The slow payers or the quick payers? Silly question really. But the reason it is relevant is that most start up’s supply chains are full with SME’s. And SME’s suffer as much as you from the cash trap.  

cash i hand

If you have a promising start up proposition, speed might be the key to beating another entrepreneur to market. Don’t reduce your chance of success by paying slowly.

The Cash Trap

Posted on by Steve Sammartino

Everyone talks about the importance of cashflow. Every start up book says, cash is lifeblood and without it you die. Cash is king – no dispute. If you are wondering why it is such an issue, so was I.

Secret revealed…

The Cash Trap:  

Definition – The gap in ‘time’ and resulting cash flow impact between paying suppliers and receiving actual payments from sales to customers. 

When starting a business you have to pay for everything up front. Everything from stationary, to product inputs to manufacturing runs. All these will need to be paid for prior to receiving services as you do not have a payment record. Put simply, suppliers are not sure you’re good for it.

 

On the flip side, when trying to get new customers, it is very hard to demand money up front. Most re-sellers have terms of trade. For example, payment net in 30 days. This creates the cash trap. In my blog entry 4, I wrote about the customer being the consumer as a must have. The ‘cash trap’ is the reason why. It reduces the impact of the cash trap. It improves cash flows by reducing the gap in time between inputs paid to revenue received. A business with very short business cycles and consumer direct interaction may even eliminate the cash trap.

Huge margins are irrelevant, until you have received the cash from the sale. In fact in a start up with a lengthy cash trap, growing too quick can be you’re worst enemy. Strong sales early, can send you broke.

Profit and solvency are not inextricably linked. 

Key Man Insurance

Posted on by Steve Sammartino

What should your salary be once funded by investors? Market rates. You must be paid what you are worth in start up with funding above $1m.

Why?

If you get hit by a bus tomorrow, that is the cost to replace your skill base. They invested in you. Your investors will need to replace you.  The business will be a going concern with or without you. It will cost market rates. If the business can’t sustain your market value, you haven’t got a business.

An Angel Investor or VC doesn’t want their key men wondering around penniless. They need you to have comfort and focus. In the early and delicate stages paying your wage will greatly impact cash flow. To alleviate this, the payments can be deferred, or arranged through other financial vehicles until cash flow positive.

Also, remember to get Key Man Insurance. It is not very costly. Similar to the cost of a general home insurance. If that rogue bus knocks down a founding member or partner, an equity buy out will be required. Then investors can’t lock you out of the game.

Here’s the trick. All the VC’s we have met have told us to put up our wages in the financials – to market rates. But they don’t want to see it in your plans in the first instance. It’s an insider’s trick to test motives.

Minutes are for Wimps

Posted on by Steve Sammartino

We don’t write minutes from meetings. They’re a waste of valuable time.

 

We trust each other instead.

 

Our position is unchanged with all stakeholders and investors. We just write the 3 or 4 action points that come from our conversations. Then we do them. Often in the time Eddie Employee would be writing his minutes.