My Company Keeps Running Out of Money In December

Three out of five Decembers, for the past five years, my company has run out of money.

In 2014, we closed a $25,000 angel investment on December 23, about ten minutes before the investor left his office for a 4-week, holiday vacation. Without that check, my company would not have seen the new year.

In 2015, we made our comeback. We raised another $180,000 and did more revenue in one four-month period than we had done in the previous twenty-eight months. Then, in August, one of our key personnel died suddenly (about an hour before the meeting I had scheduled with him that day). As a consequence, we had to shutter the business unit he had been running and shake hands instead on big joint venture with another company that we hoped would replace our lost revenue for the next 12 months. That other company turned out to be full of shit, and the joint venture never launched--a realization that hit us only after we had poured all of our remaining cash into it. Thus, by December, we had once again run out of money. We actually laid everyone off this time and closed the company for good.

In 2016, I went to work for another startup (and apparently brought with me this curse). At the beginning of the year, the company had bent to the will of its board and abandoned its marketing-driven growth strategy for a sales-driven growth strategy. The idea was that the marketing-driven approach, while predictable, was determined to be "higher risk," and that completely replacing it with a sales-driven approach would supposedly make the company's venture dollars go further (because sales people, unlike marketing people, tend to work largely for commission, so the company would only incur "growth expenses" as growth occurred). In particular, the board liked that, unlike marketing-drive growth, whereby you can't exactly choose who takes the bait and comes to talk to you, sales-driven growth allows the salesperson to choose exactly who to contact; and the board wanted the sales team talking to larger, enterprise customers who would sign contracts worth 20x what the marketing-driven approach had garnered. Well, it didn't go well. The company missed its sales targets three quarters in a row, ended up laying off more than half of the salespeople it had just hired, and had almost entirely run out of money by December. (The company's plan B was to get acquired or raise another round in January, neither of which happened, and the company had to lay off 75% of its remaining workforce in February 2017; it was never able to get back to where it had been after that).

In 2017, I started my next company--this time with a cash-flow first mentality. I was frankly tired of running out of money in December. So I decided that solvency would be a higher priority than growth while we were getting everything set up (it was a startup, founded to provide a new value proposition to an audience that didn't know this kind of thing existed; so there was a lot of set up, both on the product side and the sales side). Also, to add one more layer of daring, we chose to not raise money, deciding instead to bootstrap by funding the future with present revenue from paying customers. I'm happy to report that this "radical" prioritization of solvency resulted in just that: that, in December, we did not run out of money. We were still in "set up mode," so the numbers were all still quite meager. But we had the redeeming virtue of spending less than we had to spend. We didn't even stop to celebrate then, because we were focused on launching a new service in Q1 2018.

In 2018, we started the year out with the highest revenue quarter to date. We launched a new service (which was the backside of the marketplace we had been developing) that we had worked on for almost half of 2017. Just when we thought it couldn't get any better than not running out of money in December, it did, and we actually made money. But it was short-lived, because shortly after that Q1 launch--and signing up all of those new, paying customers--we realized that we had too much of an imbalance in our marketplace to keep both sides happy. So we did the kind of thing I imagine you can't really do when you're living off venture capital dollars: we told those new customers to stop paying us, because we weren't happy with our ability to deliver the intended value prop consistently yet...and we would rather be honest with them now than wait for them to churn because we oversold and under-delivered. I still say that doing so was the right move, not just for moral reasons but also for strategic reasons, because that hiccup caused us to focus once again on our "product," wishing to not ever again encounter this same kind of sales success on the wings of product promises we ended up not being able to deliver. So, for the balance of 2018, we worked on the product, and by December, having largely ignored sales for almost six months, our bootstrapped company was once again almost out of money--but not quite. As with the previous year, we did not pause to celebrate not going bankrupt. Instead, we just focused on launching our new product in the new year.

In 2019, we began the year with basically two projects: complete the product-build and find the "beachhead" target audience for it. Long story short, we got about 80% of the way toward completion on each project, but we never crossed the finish line with either. This failure was itself both a cause and an effect. It caused us to, once again, focus on sales at the expense of further product development. But it did so because we did not yet have a clear enough product vision--that was also small enough to build in the short-term--and thus did not have a clear idea of who our audience would be. Looking back, I think that what happened was that we fell in love with our own product idea before anyone had even gotten their hands on it--a classic engineering-driven company mistake. But anyway, because we remained bootstrapped and therefore dependent on consistent customer revenue, we had to shift focus back to sales by the summer of 2019. Average monthly sales increased as result, but then we hit the seasonal slowdown, for which we had not adequately prepared. Although September had been our best sales month in company history, it wasn't enough to subsidize the downturn in Q4, and by December, we three digits away from running out of money.

Although it's still December now, and we don't yet know whether we will in fact run out of money before the end of the year, in a sense, we already have. You see, when you're bootstrapped and you have depleted your cash reserves, your only release valve is your expense column: who are we not going to pay this month so that the company can make it to next month? I'm usually the first expense that gets punted, and there can also be others.

When you're watching that cash balance in your bank account drop and your sales funnel only flicker with activity throughout the month, Decembers like these never feel long enough. You know the antidote is simply whatever you can sell by the end of the month, but the problem is that thirty or so days might not be long enough with the holidays and vacation time that your prospects inevitably take each December.

Meanwhile, here's to not making it two for six on staying afloat in December.

GET MY LATEST WRITING DELIVERED STRAIGHT TO YOUR INBOX

Want to read more like this? Subscribe to my weekly newsletter and get my latest newsletter-only writing delivered straight to your inbox.