Anatomy of a Start Up – Life In The Weeds
It’s a place that start-up addicts know well because it happens to us all. The Weeds are that stage between the start-up frenzy and the full fledged company. I am not actually sure if other people use the term, but I like it because that’s exactly how it feels.
In our case the weeds have huge upsides – everything we have going is booming along: The Reware and Juice Bags thought experiment has gone global with growing sales around the world, the PowerCube’s first couple of units are rolling off the assembly line and are due to be deployed this summer, and a couple of new projects are looking like they are set to pop in a big way.
That’s the optimists view of the weeds: If you make it this far, you have settled into a model that actually works. You have figured out your processes and managed to the survive the huge challenge of covering expenses. Every business in the start up frenzy has enormous obstacles that look like total doom. If you make it into The Weeds, then you have managed to avoid most of those. Congrats.
But there are serious downsides to The Weeds too. The vast majority of these arise from the fact that in The Weeds you suffer from having all of the problems of the start-up stage nipping at your heels, while at the same time “real company” issues are booming onto the stage for the first time. There are two that pop instantly into my head as I write this; the never-ending challenge of managing cash flow, and managing energy level.
Managing Cash Flow
In the startup stage you don’t really worry about this, you are so psyched to be selling anything, so excited to be in existence at all, that this doesn’t come up all that much in discussion. Overhead is lower in your garage, you beg/borrow from friends on an almost constant basis to get what you need done. Life on the cheap. The hustle.
The Weeds bring office space. Friends are not quite as excited to loan out their services the fourth time, and you are tired of asking. The Weeds bring cash crunches where larger transactions from customers and suppliers don’t always overlap in time to pay the bills. Cash Flow management is a fascinating thing to ponder from the outside and a total pain from within. You see plenty of money coming and going, there might even be a fair amount in the bank account, but there is also something always looming on the horizon that is going to suck that cash away. In The Weeds while your overhead is pretty mature, your networks of distribution and overall sales need to catch up.
Cash flow management is the single largest challenge to companies. Recently I have been talking to people who run successful businesses much larger than ours, and it is frightening to realize that these issues never go away. The numbers you are dealing with just get bigger. Oh Joy.
Founder’s salaries are always the first casualty of cash flow. The Weeds often force a decision between your own paycheck and something that will help the company grow. You own the company, you believe that it is a great investment in your future, so of course you are going to sacrifice a small, short-term paycheck for long term success. But there comes a point where you need to pay for the day-to-day of your own life, you can’t always be working for the future.
Reluminati, has had two points where we have had to make a leap of faith in the cash flow department. The first was a couple of years ago when we needed an office big enough to grow into. We were worried that our sales per month would not cover the rent, but the space made us a real company and so we took the risk anyway and made it work.
The second leap came recently in trying to figure out how to pay ourselves consistently, essentially factoring in our work as a cost to the company. We have taken that leap as well, and though it is stressful at times, it seems to be working. I’m not sure if this is as huge a step for everyone as it is for me, but I really think this is when a company becomes real.
Managing this has nothing to do with the amount of money coming in, because there is always plenty of that. It is about managing the flow of cash successfully. This is when it feels like you have a job, that playtime is over. It feels good.Cash Flow, Reware, Scale, Start Up, Startups, Zerobase