Business

Anatomy of a Death Spiral: the Inside Story of the Firesale of a 7 Figure Business

I recently sold my business – a business that I had for 7 years and concluded my involvement in it.

I sold out a longtime friend/client/ally for a fee that represents some of the value in the leads, contacts, processes that were working well, but we didn’t get the multiple that one would hope for after this time.

But that wasn’t his fault, that was mine.

Because I was actively working it, I wasn’t free to talk about things.  Hard to admit mistakes when clients can find the information.

The sale straddled 2018/2019 but the business really got away from me in about 2015. I made mistakes that made it into an inadvertent Ponzi scheme, and never recovered despite working hard.

The process of watching it slide sucked. There was very real grief involved.

I’ve wanted to have a reckoning of every major mistake that I made, or every factor. A medium-style post mortem on what went wrong.

Now that I’ve moved on, I am feel free to write this. There were many things in creating my company that I did right. But nobody needs any more self-congratulatory navel-gazing, and it’s more useful to talk about what I did wrong.

I Had Unsustainable Personal Habits.

I was really into the “rise and grind” vibe for a long time. I didn’t have a schedule that would allow for anything, and I wasted time in a variety of ways.

I was eating badly. I drank way too much to be healthy. I bought into the Valley myth of the Iconoclastic Asshole. How could I be wrong?

All of this was wholly independent of the stress that I was under. I became a caricature. I believed that I was Tony Soprano, or Walter White. One step away from doing everything right. I was more like Chris Christie or Donald Trump, delusional, angry.  Nuts

The truth was there was no time to reflect. Every moment was scheduled. I was hopping from crisis to crisis, and not storing value anywhere, not keeping up relationships.

What I’ll Do Different: I’ll maintain good habits personally, exercising, laying off the booze and I’ll make sure that work is in its box. I’ll work with more efficiency batching things and using a schedule to do what I’m supposed to do.

I Wasn’t 100% Sane. And I Isolated Myself.

Mental health is a thing. Not a lot of people talk about it.
And the pressure that I was creating was getting to me. I had thoughts that are perfectly insane. I know that I had them, I know that I believed them, but I have no idea from whence they came. The habits above interlocked with the insanity.

This manifested in what we’d say was disordered behavior. A lot of the good things we were doing were multiplied by zero because I’d take a testy remark and blow it out of proportion. Or I’d fire a designer that we didn’t wholly support.

I was creating and escalating conflicts just for its own sake.

At home, my relationship with my family was deteriorated and bananas My wife was under a ton of pressure as she was completing school. I was bitter about tuition bills, and I didn’t have the tools to address any of it correctly.

I was absent from being a kind companion, and I didn’t have first principles. Things were very bad, very bad, and we didn’t see a way away from any of it, so I largely ignored it during this time. I wasn’t really committed to being a family guy, I thought any sacrifice was worth it if I could…build some company and get some sort of business week cover or something.

What I’ll Do Differently:

Family first. Relationships first. Good, clear thinking. Easy on the booze.  Sleep / diet / exercise will all have rules that I’ll follow.

I Took On (WAY) Too Much Overhead

This was the key part of of the deterioration of our company. I knew – and know – I can sell. I felt like I needed to have some pressure on me to keep selling. I was always able to make it rain when necessary. Because I’d always sell to our expenses and spend too much time involved in delivery.

My wife is still mad about this. I went from a cheap place in the exurbs to a pricey place downtown. I went from a nut of $3600 a month in outside expenses to $15,000 a month. This created a different dynamic and a different need for cash that I didn’t have previously.

I hired people to staff up without paying attention to how well (or poorly) we were delivering our work.

What I’ll Do Differently: Profit First by Mike Michalowicz will run my life. We’ll pay off money as a first thing we do, not as a second or third.

I had No Hiring Process (Except My “Gut”)

I didn’t realize that we were in a brutally competitive talent market. That what we needed was a specialized skill. There were marketplaces for freelancers that were available to me. I am a Moneyball fan. The gist of that book is to work around warts that don’t matter, to hire for production and talent, not for potential.

But I had no rubric for warts that did matter.

I fancied myself an expert and I hired a ton of creative professionals who had warts. Some of them did matter. I had no real process in place, so I’d interview, buy lunch and make offers.

All of the “mishires” had clues. A process would have found them.

One creative director had left a trail of bodies that I would have noticed had I bothered with a little reference checking, or a deeper conversation about the story.

Another animator had never really done the work in his portfolio. Any process would have fixed this. And in many cases, I hired for affability, rather than other factors. People that need jobs get good at figuring out what you want to hear.

What I’ll do differently:

I’ll build a hiring process that is sustainable, and a general post-mortem process.

We Became A Ponzi Scheme

Because we had overhead, now we had to sell to fund it. That was fun. I got better at selling. That was also good and worked as intended, but downstream, it hurt.

I was able to close more deals for more dollars. We had a pricing scheme that offered multiple videos for cash now. The only KPI was dollars in. Not future liabilities.

We got no better at delivering, and created no processes (other than zeal) for delivering work.

All of this mean we had to hire suppliers, and fast. And as I said, I had no process. So they didn’t get “plugged in” to a system that works. A lot of our hires were poor fits. And they may have even been good fits for what we’re doing, but we didn’t have a good structure in place to organize it all.

So, what happened was that we became a Ponzi scheme. We needed new work to fulfill past orders. We then had sudden pressure on pricing that wasn’t the case when we began. We had been trapped by this.

I called this a “legacy issue.” I figured that sales would cure all, but when each sale may have been at a loss…well, it was harmful.

The lessons here:

  1. You have to pay labor costs even when work is utterly and absolutely unusable.
  2. Mishired employees generally don’t care about if the work is good or not, they want to be paid.
  3. You get the double whammy of refunding clients when the work is terrible.

What I’ll do differently:

We’ll measure the company in terms of what we can deliver, and who we can onboard and exactly when but not what we can sell.

We Took Factoring Loans

As a last ditch effort to make things work for us, we took on a Factoring loan. This loan would cover the refunds as well as some new staff to deliver work.

Don’t know what these are? Well, they are the loan of last resort for companies that have some cashflow. They charge insane markups over very short terms, but they aren’t like bank loans in that they don’t take forever to get.

Basically, we borrowed $35,000 and had to pay back $48,000 on an insane daily schedule (like $325 a day.) This was often repeated (called refactoring) at slightly better terms when there was pressure.

They were silent partners, and they were merciless. “Things aren’t working? F@#% you, Pay me.”

You delude yourself into believing that everything will work out, and I suspect that sometimes they can, but they are brutal tools, loans of truly last resort. It allowed me to kick our issues down the road. And it felt like relief when we were funded. But, the net to us was that we were in deep trouble, and we had this bandaid that also acted as a tourniquet.

We Left the Portland Community

25% of our business, and 30% of our contractors came from Portland agencies and the community. We could do some things to maintain the relationships that we had, but when it was clear I moved out of Portland, and that those relationships were farther, and that I wasn’t local (and there for the long hall) a big bit of business dried up.

I wasn’t able to get the benefits of being part of a community without contributing to the community. I underestimated the impact of this.

I moved – and the move was ultimately good for me- but it was in fact bad for the business.  I should have

We Took Our Cash-Cow to the Slaughterhouse

We got by because we sold a small part of our business to Telestream. That business was something a cash cow, paying us money over a long period of time without a lot of maintenance. This was a library of clip art that could have been the basis for a big business- we were early to the party, but we made an early version of the type of company that Videoblocks became.

We had both direct and channel sales, and it was staggering how cool that that was.

We were earning nearly five figures a month in sales and the work that we were doing wasn’t really costing more than a few hundred dollars each month on SaaS and hosting.

When things got a bit tight (and in order to pay my end of a buyout), I traded that in for a one-time payment that covered a few expenses and also had the impact of masking our problems.

What I’ll Do Differently: Nathan Barry of Convert Kit famously says that “all revenue isn’t created equally,” and any type of automated/recurring revenue is what I’m chasing.

Our Work Got Worse

In creative services, it’s ALL about the work. And honestly…how could the work get better in a situation like this? We were accelerating into some sort of chaotic failure spiral. We had a problem of being able to easily overwhelm our demand.

So, the work we delivered got worse.

Our reputation got worse.

My reputation got worse.

And I was insane, having this denial/high conflict style that wasn’t working at the time. My ego was out of hand because, after all, I built a seven figure business.

The net impact of “worse work” was that we had lost the rehires and referrals that drove our growth prior.

In the past we’d deliver good work. Almost always, that work would lead to more. Our clients were taking delivery of the work, but they weren’t getting the “Woah, who did THAT,” that we used to have (both during and after my former partner’s contributions). That created what was known as net promoter score and that built a nifty business.

A big reason for that was my former business partner’s contributions. He was a great dude. I bought him out because I wanted to create a different type of company, and because I worried about his burnout.

We would have needed to be fortunate in order to make this work.

What I Would Have Done Differently: I would have standards for the process and deliverables, and we would have enforced them at the best scale we knew how.

Sales Can’t Cure All If More Sales Makes the Problem Worse

The Factoring Loans killed us. Our daily payments denied us time to escape. That was a voluntary cancer that added too much to an already gravely wounded business. By the time we were out of the payments, our company was too much of a mess to be worth keeping.

More importantly, the impact of delivering bad work for a long time also wears on you. It erodes your confidence as a salesperson. It feels terrible, and it felt like I was not really helping anyone when I was selling.

It quickly got to the point where I knew the difference. I was no longer willing to access my network. That hurt sales. I couldn’t vouch for my own company. I was stuck selling to strangers and acquaintances, because I respected my network too much.

I knew I’d make a comeback at some point, and I’d need my network later. I kept thinking that I’d need ‘em in just a little while. That I’d get clear of the bad stuff and I’d be able to re-access them.

In retrospect, I’m glad I preserved the network I built and didn’t burn up too many relationships. It makes me trust myself more than I might have had I become cynical and tried harder to liquidate them.

What I’ll Do Differently:

I’ll focus on quality of the deliverables, quality of the business and margins. Doing work without margins isn’t fair to us.

How We Got Out Of Our Death-spiral.

We wound up having the soft-landing-to a sale. We spent a couple of years as a shabby company licking its wounds. To some extent I regret having not just crashed it into the rocks and let it go. That may have put me in a better place, than the long, slow decline. Or, when we were clear to staff it back up, but I lost confidence in delivering amazing work, but not the need to deliver amazing work.

To get out, I slowed down payments to providers (and yes, that hurt my relationships). That type of management was never a strength.

We also outsourced our work to a good-enough-for-us offshore team. We mostly got away with it and built a communication process around that. The margins we earned then paid the legacy costs. This allowed me to have a “soft landing” instead of a “brutal crash.” It wasn’t ideal, and there are good people that have good reasons to not like me very much.

Other Mistakes:

In no particular order:

  • Not automating anything: We left automation alone, arrogantly.
  • Not building a platform: This was a big mistake for us.
  • Not maintaining an email list: we were never consistent here and we never got great at it.
  • Not documenting enough things: A lot of our processes were one offs, and we never got in the habit of doing this right.
  • Not having a dashboard of true reality: We had no KPIs.
  • Not firing fast enough: We didn’t fire anyone.
  • Not pricing right:
  • Accepting unsuitable clients.

All of that stuff was, at various times, a big factor. I’d suspect that pricing was the biggest factor that I didn’t bold out, but it’s not a moral failure so I didn’t mention it.

What’s Next For Me?

I’m not sharing too much just yet.

When a dream dies, there’s some grief involved.

Processing this grief and thinking about this stuff took time. I underestimated that, and it took a while for me to be ready for whatever comes next and to put my shoulder to the wheel.  I had to heal.

I tried to create something that I wasn’t ready for yet, and it didn’t work because I hadn’t admitted and processed these lessons.  Now, it’s time to build the business I want. To use the skills that I’ve earned (the hard way) to make a company worth having for the long haul.

I’m trying to design a lifestyle-first business to support me and the team that joins me. I’ve got a promising horse to bet on. I believe in myself. I’m ready to reengage my network and to deliver good work again.

I don’t know if I’ll have the appetite to blog a ton, but I’ll be building and when cross the line from dabbling to commitment, I’ll engage here when I do.

The Big Lie We All Buy

What if I told you that all you believe about business is actually a lie?

What if you were chasing a dream that you could never attain?

That was me, for a long time.

I was a huge TechCrunch fan. Back in the day, I loved the Michael Arrington-led TC articles, breathlessly championing the fundings, the user growth. The future itself.

I loved their famous Pirate article. I loved it so hard. I wanted to take my place amongst the people that their great and snarky writers were writing snark about. Except that the reality was this:

 That first company I started made a lot of money for the venture capitalists – nearly $30 million – but next to nothing for the founders.

We never believed that that would happen to us. We believed that we’d somehow be immune. We just had to subscribe to the “hustle” worldview.  And if it wasn’t working, of course, hustle harder.

The “Hustle” Worldview is this…and you already know it:

  1. Go (REALLY) Big, or go home: It’s not a worthwhile pursuit to make a nice business for a nice family. The word “service” business is spoken with an epithet. You must be part of a creation myth, making forever companies, being part of the fabric of life itself.
  2. Hustle, Repeat, Then Hustle  Some More It was always about hustle. Making some code, grinding out deals.  Whatever your jam is, by all means, hustle. Tech Crunch taught us this, with their stalwarts MG Seigler posting as many as 10 articles in a day at times.
  3. Funding Is Meaning:  You exist to join the three comma club. A billion dollars. Small is a failure. The best way to get there is to accept funding and grind, grind, grind.
  4. It’s OK To Run At a Loss Indefinitely. Amazon did it. There’s a whole language about it: “burn rate” and “runway.See? We’re building the future. And so running at a loss was acceptable.
  5. You Gotta Risk It All The AirBNB team made cereal at the 2008 Democratic convention. Founders maxed out credit cards, kited checks and risked EVERYTHING because they believed (and were a little smarter than everyone else, just like you).

Every idea here has a sort of creation myth baked in. We wanted to be part of a chain of dropouts, misfits, and rebels. We wanted to be a crazy ones. That it’s somehow a good thing to do this.

This lie is still repeated everywhere. But it was all sold to us to benefit the truly powerful people that funded these companies. The VCs that were placing big bets on everyone needed the billion dollar exits. You had to be conditioned to accept that kind of risk.

Like some addict.

What (Dumb) Stuff I Did

What this did to my business was allow me to have a revenue-over-reality approach. I was pushing hard to grow my revenue. All the time. To grow. Year over year. Month over month. And we were growing. There were some good parts of our company, we were delivering and working with great people, and for a long time we did a good job.

We grew from $8k a month to $85k a month. We had a product that had a successful exit. Of course I was a genius. Duh?

And yet, it was a disaster in all the ways that really matter. Growth hid that. I was growing, so I couldn’t be failing. But I was nuts. My relationship with my wife (who is amazing) was in the shitter. I was barely home to see my kids. I was trying to line up work for now, for later. I was trying to sell and recruit and deliver. It was all working poorly.

When I wasn’t working, I felt guilty.

How Success Begets Failure

I watched with horror as the business I was building morphed into a lunatic Ponzi scheme. We had to grow revenue, so we sold more. Created package deals. Grew that top line number, consequences be damned. You’ve got a check now? Let’s have it

We were growing. So, we had to hire people. The people we hired technically had the skills. But in reality, they weren’t a good fit. They had the mercenary freelancer approach. Too cool for our company because (like everyone in Portland) they once worked on a Nike or Adidas project. So they couldn’t be bothered to deliver good work for us. Because we were dealing with uncool companies a lot of the times. A bolt-on for SalesForce. An analytics package. That was beneath a man that has once worked on the Swoosh. And I could have easily caught that had I bothered with reference checks. But because we had to get work out the door…we didn’t have time to deal with “trivialities” like screening candidates.

So then I needed new money to meet old commitments. That was terrifying. Especially since I was buying a house and my wife needed me to come through.

This built a cycle where we had to issue some refunds. And then we still had to pay the labor that created that defective work. This double whammy crushed what reserves I had (I was focused on growth, reserves are for fools!)

This was all in service to the lie: build the company into something which can be sold. Using revenue as a metric. Grow into your expenses. Then do it again. Be a serial founder.

During this time, I paid myself a lot less than a commissioned salesperson just selling our work would make. And I justified it to myself, my wife, and especially my ego. “This is just what it takes to grow. Plow your money back in.”

The old joke: sure we’re taking a loss on every unit, but we’re making it up in volume!

I was fragile. Exposed and then we hit a wall. A series of deliveries were unusable right in a row. The team I cobbled together wasn’t a fit. They weren’t bad people, I just didn’t have the talent or time for the kind of leadership we needed.

My standards had capitulated. It even became harder to sell because I couldn’t vouch for the work we were putting out. And I cared too much to pretend.  This was a blessing because the best parts of my network stayed intact, but a curse in that I coudln’t use my network for the pickup I needed.

Around this time was when I realized the true precariousness of my position. I was losing $35,000 a month. Selling more wasn’t the answer. Better work, better pricing, better ops would all have solved it. Selling more was just kicking the tire down the road.

And it was harder to sell when you know that at the end of the day you’re doing merely adequate work.

But I’m getting attention!

During this time it’s finally dawning on me that something is rotten in Denmark. I’m realizing, slowly, that the reality is worse.  The gut feeling comes more often. A worry that no amount of sales can paper over my errors. Still, my resolve remains. And some part of me buys into the narrative that it’s OK to struggle, that everyone goes through it. That the best companies barely made it.

During this time, I’m getting attention. I appear on big-time podcasts as a good example. I get to talk to high profile founders regularly. I’m invited to sit at the cool kids table and I get some coaching from a high-end sales guy. I’m on panels. I give advice. Some of it was probably even good.

What’s interesting is that they never ask the real questions: are you profitable? Are you sane? Is your life worth living? Have you created value? Are your books in order? Does your team feel good? Are you proud on the inside? How’s your family?

Nobody asked. So I wasn’t lying when I described the processes that led me here.

All Of This For Nothing?

All of this was for a reason. To someday build a legacy. To someday become ultra successful. To eventually have the life I was meant to have.

The downside of the Big Lie is that of failure. Failure? That won’t happen if we hustle. If we find product-market fit. No. Failure happens. Most funded startups lose money. Most companies do shut down.

I was chasing this impossible dream. I paid myself roughly half what I’d make selling my product elsewhere. My family was deprived half of the money that it should have had had I just taken a sales job. The “growth” fantasy was what I told myself to justify not bringing it home. It multiplied by zero the good things we were doing.

I was less free. I didn’t really take a proper vacation. My body was at the point where I literally couldn’t bend over. I had a case of pneumonia that lingered for a month.

Ultimately I paid the freight for my mistakes. My reputation took a hit, but I cleaned up the busienss. All my work was basically used on a “lesson.” Worth it if I learn. I used the grit that I had. And so I landed the business mostly smoothly and decided to move on. We still do some work for our past clients, and we’re doing good work again. But our plans, long-term don’t include that business.

What I’ve Learned Since

Starting a business often creates a “worst of all worlds” situation where you’ve got more responsibility than any employee and more risk than you can imagine. Intertwine that with a paternal instinct (this is my baby) and you’ve got a recipe for an unbalanced life and a litany of excuses.

With all of that said, however, there are many things that I’ve gotten clear on as I graduate towards my next venture.

  1. The business exists to serve you, not vice versa. You built this business to serve your family. To build value, and store value in the form of wealth. There are times that it makes sense to take outside money. But that money doesn’t mean that you have to take a vow of poverty. You should have as much money outside of the business as inside.
  2. Delusion Will Kill You I talk to entrepreneurs and they tell me that they don’t work “that much” or their hours aren’t that terrible. Or that they only had one “off” month (when that month was bracketed by two “meh” months). All of this delusion is truly lethal.
  3. Make Sure it’s Worth It We are all told to worship at the church of hustle. But the best and most sweet moments in my life were times when I laughed with people I love. They were across kitchen tables, and not conference room tables. To spend money on a business that doesn’t properly
  4. Make Your Numbers Chase You Figure out what you want to earn and what you need to keep and make it into a game. Have your accounting team leverage the automated reporting features of your accounting software. Know when you’re REALLY working, KINDA working and NOT working. Know what you’re earning per hour. Pay attention to clock hours and calendar. (A suggestion: read the 12-Week Year, install RescueTime).
  5. Profit Must Be Baked Into Every Phase Of Every Project It’s easy to let weeks or months go by and say that you’ll be profitable down the road. Every account must be profitable. Doing deals for influencers or friends or family to become someone someday are mostly a ruse. Don’t do them.

I am giving it another go. I’ll have a business that will take 3-4 clients initially, and then I’ll grow from there. I don’t know what “scale” means in this context. I know that if I run my business with sobriety that growth will be welcomed when it happens. it’ll be about a week before I begin to sell. But I do know that with some discipline and reality in place that I’ll have a better chance than ever.

I’ll need less luck, and we’ll be able to learn a lot about what I’m here to give.

[As a postscript, a lot more detail is in the book Profit First by Mike Michalowicz. That book supplies the detail needed to execute a business system that matters.]

10 Preventable Mistakes I Made This Week

There is never a shortage of mistakes that you can make when you’re running a business.

Here are a few things I did wrong (way wrong).

  1. Switched my site to WP Multisite: This was made because I had some vague notion of having a Wikipedia section up, and I was gung ho.  1/3 of my plugins (and I don’t use too many) worked differently and authentication busted.

    https://www.facebook.com/genuinechris/posts/10154978679404747?match=bXVsdGlzaXRl

  2. Didn’t buy groceries the day after I returned home: This led to fast food too much, and “justifiable” purchases.  Not all of it’s bad, but I wound up eating poorly, especially on Thursday.
  3. Let ShutterStock automatically renew.  For some reason we needed some stock on Shutterstock.  I let it auto renew instead of canceling it after a month.  There’s some good stuff on there, but it’s not worth the $200.
  4. Let PayPal debit from an old business account: At the start of the year, I switched accounts, and PayPal debited out of a closed account. It wound up causing the account to reopen and I could either pay $78 in fees or spend forever arguing about it.
  5. Underpriced a change order: We had a change order requested by a good client. I underpriced it because I figured they’d all be simple, and it wound up being something I paid for.
  6. Spent hours configuring WordPress: Instead of working with a stock theme, I tried to configure WordPress behind a set of standards that I never gave a shit about.
  7. Spent a day procrastinating the building of a new schedule: I needed to update my schedule so I could perform like a champion, but instead, I screwed around with it.  The work would have taken 1.5 hours, +/- but I never got to it, and that was the tough part.
  8. I drank a gallon of Coffee on Wednesday.  Couldn’t sleep, hit snooze on Thursday. This meant I was out of sorts on my whole schedule.  All of it would have been prevented by a 30 minute nap.
  9. Didn’t schedule any time to read: I’m at my best when I’m reading 1-2 hours a day. This week that got away from me, and the rest of my week suffered.
  10. Rolled out a cheap version of my product: I sell videos between $8,000 and $15,000.  I have a reliable offshore vendor that can do this for cheaper, and we decided to reduce some fees, and this meant that we undercut ourself like idiots.

All of this is on the business side (or largely so). I also picked did other dumb stuff, like picking a severe fight with my parents, and overreacted to a routine thing that my kids did. And I made this post that will make me look like a dope.

But, if we’re trying to cultivate transparency, why not.

When Sales Does Not Cure All

Right now, what my business needs is sales.

Sweet sales. This wasn’t the case last year.

Here’s where we were:

Last year (fall 2015 to fall 2016), due to a number of crazy things (hint: mismanagement) we were behind on all of our projects. We entered the year with a glut of defensibly late deliveries. Over $100,000 worth in a fairly small business. This was unearned revenue.

Our process was broken, and overhead (and dumb stuff) had soaked up most of the money. We had to lay people off (or let them resign without protest), and a new sale? That would have made our problem worse because we’d have to staff it.

New customers were not having the impeccable experience I wanted them to have. We were reactive, not proactive. We didn’t deliver the experience I wanted, though the final product was good, the customers got a white-knuckled confusing ride that was beneath our standards.

A couple of key people – Vas and Steve were key in helping me get clear on the problems that our service level was causing. One got a nicely done video (a little late- because you can always find an excuse to blame the client). The other got a (deserved) refund.

But had we made more sales, we would have kicked an even bigger problem down the road. Simply put, our business had to get our process straight before we introduced new customers to us. We had to stop and build something that was good enough for our customers.

It was hard to do. My creative director and I spent the summer and fall perfecting scripts, getting clear on what our job was and what our values are. We did this while triaging deals that were hard to finish up, and retooling our creative department.

It sucked – for my ego – to deliberately turn down the volume of sales and turn away customers. I stopped engaging in daily sales activities for the time. But, we were able to deliver what customers started to rave about starting in about October.

And now, we have to do two things:

  1. More customers.
  2. Better work.

Sales will fuel this, again. We got by on talent in the old days. We had some supremely talented artists, but a lot of that work was wasted because we didn’t support them with an exemplary process.

Now? It’s time for sales.

Simplification

I’ve taken my company, Simplifilm, and made it its most pure form.

We don’t have overhead.

We don’t have layers of management.

We don’t have employees on staff anymore.

We have me, a creative director, and a cadre of awesome, long term, freelancers. This is what we should have been ages ago.  That we weren’t was normal, entropy introduces complexity.

The mission, then, is to do $100,000 in gross revenue by the end of Q1. This will mean that we do about 8-10 projects.  The benefit, now, is that this won’t take a long time to do.

The benefit of simplification is freedom.  I have more freedom than I’ve had since I moved out west.

Used Car Fantasy

My father sold used cars.

He did this for a short while in the 1960s, before being a composition and literature professor at a community college.

He tells the tales of his days on the lot. My Mom gets nervous.  Like a wife does. You can see her remembering those days. The worst part about a bad day as a salesperson is to come home to your wife. The inherent suspense of today’s story:

“Got a good one today,”
“Didn’t sell anything today, lick ’em tomorrow.”.
Or “Boss screwed me today, they took half my commission out of that deal that was supposed to pay us good.”

It seems ridiculous if you’re not in the fight. It seems unstable, strange, and impossibly risky.

The struggles of a salesperson happen in front of friends and family and that erodes beliefs. “You’ve made big promises for a long time.” That’s what the wife knows.  But “A salesman is got to dream, boy. It comes with the territory.”

A salesman, though, has a different memory of these events. He’s out there, making things happen. He’s got a chance, by god, and he’s gonna do it. He’ll close that deal and he’ll become so necessary he’ll make sales manager.

I’ve entertained a used car fantasy for years now. I love to sell. Scratch that, I love to _close_. I’ve never done it, but I want to put my lot in with the divorcées and hustlers and slime-bags. Snaking deals and stalking your prey. The squalor and splendor and hope and failure. The 90% turnover rate, and the machismo.

Selling cars feels like the purest form of sales there is. People wander on the lot hostile, expecting you to lie to them. You have to disarm their baggage and get them to choose a car and a payment and to feel like their car better than money. To keep their cool. To win the sales manager over as well, and to keep your colleagues out of your deals.

The problem right now is the hours. They don’t want dabblers, they want lifers. I could do it if all they wanted was a normal commitment, but they want 60, 70 hours. And they want to control you, not to get winners, they want utility team players.

But – what sane person harbors a used car fantasy?

The Truth About “Legacy Issues”

I spent quite a bit of time on Autopsy HQ.  The more I read, the more I understood something was happening. Everyone blamed legacy issues.

  • They started without enough money/burn rate too high.
  • The customer acquisition cost was too high.
  • They started with some systemic disadvantage that they couldn’t overcome. (Legacy isuses)

And they’ll write 10,000 words around this. Hemming and hawing and making excuses and bullshitting themselves. They didn’t know why they failed, not really.

Later on, my friend Len Markidan mentioned the same issue here as part of a conversation with  Laura Roeder and Ryan Delk:

Ryan and Laura were tweeting back and forth:

What we see here is really the Dunning-Kruger effect.  From Wikipedia:

 a cognitive bias in which low-ability individuals suffer from illusory superiority, mistakenly assessing their ability as much higher than it really is.

More specifically, when you’re bad at a skill  you’ll be in a position where you won’t know how to measure aptitude. So you’ll rate yourself as better than you are.

Do We Even Know Why We’re Failing?

As I read through Autopsy.IO it became obvious: most of the founders have no earthly idea why they failed. The reasons that they cite are bedtime stories, not data driven analysis.  A lot of them were feel good excuses. It seemed – from the outside – that the were blaming one thing for another. They had reasons that they mentioned for sure, but they weren’t generally the same as why they failed.

Most of the reasons were  “outside of their control,” and you only had to be there to understand why that they failed.

But as you read these stories, the repetition becomes boring.

What If *You’re* The Clueless One?

I’ve blamed legacy issues for everything that ails my business. I made some mistakes which led me to say – over and over again:

If not for the legacy issues, we’d be rolling right now. 

That’s what I’ve told myself and that’s what I tell myself. But that’s an excuse, right? It’s nice to believe that the problems are confined to our past and that recently we’re on the right track. It’s also a delusion.

The mistakes are not in the past. We’ve made big mistakes and we failed to solve them. By that failure, that means our past mistakes persist to the present.

To construct a metaphor.

Let’s say you’re driving at 70 MPH down the highway. And let’s say you’re headed from New York to LA. But around Chicago, for whatever reason, you turned around and started heading east again.  And you continue to drive east saying “Yes, I made a mistake but that’s in the past, things are going great now.”

As long as you’re in the wrong direction, you’re still making the mistake. As long as the issue remains uncorrected, the mistake is sill killing you.  Going faster won’t help when you’re headed in the wrong direction.

Fixing It:

So it falls to us to fix it.

First, have a tool that assesses where you are. What direction are you heading?

If you’re working to overcome a mistake, let’s be sure we’re working in the right direction. Are we? How do we know?

Finally, make a sunset date for all the legacy issues to no longer be an excuse. Because as long as they are the mistake is still being made.

Minimum Viable Impeccability

Be Impeccable With Your Word. Speak with integrity. Say only what you mean.
-Don Miguel Ruiz

When companies make big promises, customers expect big things.  Those big promises draw us in, we want to see what it’s like to try that new amazing restaurant. Get the legendary service. Have that emotional experience. That’s what we’re after.

These big promises work because they connect us. They excite us and they speak to our deepest hopes. We want to be emotionally connected with every company that we work with. We want to be connected and inspired emotionally.

Except that when we make a promise like this, then we have to keep it.

And if we fail to live up to our standards, then we have to send the money back. All of it. Without being asked. Because that’s what we have to live up to.  When you make a promise -no matter what –  a start date, a delivery date, a result – you must keep it. When you make an error in delivery, you correct your systems.

If you break your word, you can’t keep their money.

Or else you are a fraud. Plain. Simple.

If we promise on time delivery, and we’re FedEx, then we’d have to give the money back the instant we knew that any order was a second late.  Before the customer complained, asked or engaged.

Second: You Are Responsible For the Actions of Your Vendors & Subcontractors

So many providers blame their vendors.

“It wasn’t my fault your site went down, there was an error with our DNS provider.”
(No. You failed to secure a backup.)

“Cover Oregon would have been great but Oracle screwed it up.
Except that Oracle has delivered for every other client.

“Your Amazon Prime Order is Late Because UPS Screwed it Up.”
Except that it was really predictable to know this before hand and you should have adjusted your systems to account for edge cases.

This is typical of a failure. Most providers select their vendors, then blame their vendors when anything goes wrong.

Anytime anyone does this, run.  (Instead: “Hey, the vendor we chose for you is having trouble. We’re working hard to support them so we can be back in integrity.”

When a vendor fails, and you’ve vouched for them, then you pony up.

Because otherwise, what good is your word?

So, What Is Minimum Viable Impeccability?

“When you hold yourself to a higher standard than anyone else can imagine, you always soar above the mark others have set for you.”

Anthony Iannarino, in The Only Sales Guide You’ll Ever Need

Great question. Here’s what the baseline is.

Firstany time you make any promise, you’re saying to your customer: if we mess up any of these things, you’ll be offered a refund.

This includes (at a minimum)

  • Project Start Dates
  • Delivery Dates
  • Amount of interaction they’ll get
  • Amount of work they’ll have to do.
  • Promises you make that are specific to your industry, company or standards

There are many other elements to a good service. That’s one of them.

Second, never wait for the customer to ask for the refund. That’s making them beg for your honesty and beneath the standards of all but the most wretched charlatans.

If you break your word on anything under any circumstances…be unreasonable with yourself.

Initiate the request and give them the option of having their money back. That’s basic honesty, and it will create a situation where failure becomes impossible really quickly

If you break your word you can never keep their money. 

Third, continually increase your standards so that there is no possibility of failure. Create redundant systems when you make and keep promises.

That’s the kaizen philosophy. In the book The Lean Startup by Eric Reis, the most moving passage is when a new engineer made an error that cost lost productivity and server crashes . The reaction of the supervisors wasn’t shame on you for failing.

It was shame on us for allowing you to fail. They blamed the system, not the person. That must be your business.  Make promises, keep them and improve your system.

For a smaller business, this could mean investments in extra hands, this could mean saying no when you’re 99% sure that you’ll be successful.  But being impeccable in your word, as an owner is a core component of your own integrity.

Next Steps:

  1. What promises are you making to your customers?
  2. What implied promises exist?
  3. Are you currently impeccable?
  4. What are you doing to come into integrity in your own business?
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