IM company issues... "the cash flow game", drowning in red tape...

by ttrance

Posted: 9 years ago 21 replies

INTERNET MARKETING

Hey guys!

Ok so just a headsup, this post will only be relevant to other IM people out there who are in senior levels of successful startups...

In our case:

Me and another partner are great at IM, great at making companies ROI positive with our skillset etc, but we are techies, so we didn't really push the financial side so much.

We teamed up with this in-the-box thinking guy who is great, and he was able to secure us the $20k we needed to put in to get the company off the ground originally.. That was about 4 months ago.

Now the 3rd partner who brought in the initial money is also now an equal partner, and he knows basically nothing about IM but knows about general business. We figured as techies his role was to be the 'corporate suit' in the company, more or less dealing with the clients, ensuring payments come in, etc...

So basically within a few months (anyone who sees the posts of mine recently knows what we are doing...) we have closed several clients, and are doing really well when you look around. We are overall just about at the break even point.

So you would think things are amazing right? Well thats why I'm posting this.

The entire flow and points of success that we had until now have been swallowed I feel by the cash-flow monster. We cannot move an inch because we do not 'have the cash flow', for it, which is just a figment of ones imagination because we are 'booming' accoridng to any analyst, and in a few months we are 100% making as much as we are spending.... but we NEED to pay things like paycheques not exactly when we HAVE the money on hand... so we are always bouncing around for cash flow...

So me and the other techie partner are just getting fed up. We know this company is already 'breaking even' but with the thinking of the other partner, its like we hit a virtual wall, we cannot expand, spend even 1 dollar extra because we don't have it... But I thought this partner was supposed to take care of the cash flow issues, especially considering the not-normal growth we have experienced.. Can't he get a line of credit? apparently not.

So... today we had a meeting and may take on an additional partner to give us this 'cash injection' we don't even really need we just need a line of credit to be able to flow and invest the small amounts we need to expand (even slow expansion!) But its like this vicious black hole called cash flow is LITERALLY destroying the life and energy of the business.

Like have you ever seen this before? Company is doing ok, bills can be paid each month without going into minus.... but company may shut down.

I perseonally feel while the business minded partner has a point, and is doing his tasks generally well, this virtual wall of cash flow issues for a company exploding in success like this just should not happen!

What am I missing?

I want to keep the company going, and preferably just get through this rough point and get beyond the "break even of death" point. However the business partner just cannot get over this point, and tries to make me feel like im crazy tech guy who doesn't understand the basics of business.

This is an article (not sure about the site) but the article was the only thing I found that even touches upon this subject!
Breaking the break-even barrier for cash flow | The National

So guys... what are your thoughts?

Normal growing pains? Count my blessings? This really is a problem?

From my experiences, we should easily be able to grow fast and steady monthly, but since we are always waiting to be 'cash flow positive' we are literally not closing clients, or 1000 other scary things because of the MOST IMPORTANT RULE here it seems: We are not allowed to borrow even 1 dollar ever. ???

I feel like I'm going insane. Does anything I write above make sense??

#breaking even #cash flow issues #company #drowning #internet marketing advice #issues #red #tape #the cash flow game

rhinocl 9 years ago

Talk to the partner who won't allow borrowing, until you understand his thinking. If you agree with him afterwards then good. If you don't then it may be that you need to look for a way to separate.
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- Kay King 9 years ago
  
  Yes, makes sense but not sure that helps. Cash flow problems are the reason many startups don't survive.
  
  "So me and the other techie partner are just getting fed up. We know this company is already 'breaking even' but with the thinking of the other partner, its like we hit a virtual wall, we cannot expand, spend even 1 dollar extra because we don't have it... But I thought this partner was supposed to take care of the cash flow issues, especially considering the not-normal growth we have experienced.. Can't he get a line of credit? apparently not."
  
  Let me ask some questions:
  
  How much cash have you and the other techie partner invested?
  
  You thought the third partner "was supposed to take care of cash flow issues"....but he put in $20k. He may not see the gangbusters business you are describing - and may not be willing to put more cash at risk or put a credit line in HIS name for you.
  
  Were the expenditures of the $20k discussed/planned/approved by all partners? What was the investment to be used for - products or software or was it "operating cash"? Were there any provisions or discussions about how to raise additional cash if it was needed?
  
  Are any of you taking salaries from this business?
  
  Not sure what you mean by being "fed up" - starting a business is not easy and you may have to scrabble for money for quite some time to get the profit rolling. Can you and your 2nd partner put up some money or credit line?
  
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yukon Banned 9 years ago

You remind me of Bernie Madoff, Google the name.

You think more cash is the answer when you're not breaking even. So... you have the bright idea that bringing on a 4th guy to bankroll a money pit is a good idea, it's not & when you go bankrupt you'll look back & blame someone else like you're doing right now.

I think you shouldn't be allowed to be involved in handling any money for the business, you said you have existing clients but you can't turn a profit. Here's a tip, you're doing it wrong.

My advice is cut your losses now & move on because you're obviously digging a hole for everyone involved.
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Mark Singletary 9 years ago

My opinion is that until you fix your issues, which appear to be deep and wide, bringing in someone else will do more harm than good no matter how much cash they have.

What are you selling?
Why are you proud of your signature free status since 2001 yet are needing money? Is this a marketing/mindset issue?

Mark
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ttrance 9 years ago

hey guys we are breaking even with expenses and revenue.

3rd partner brought his silent investor brother who put up the initial 20k. It was used for working capital. We are 100% in the black now, but despite the businesses phenomenal success we hit a point where something must give.

We need to hire some additional hands, which won't be covered yet with our cash flow, but will enable us to take on more work, as we are currently maxed out with the resources we have.

So 3rd partner has been pushing off signing up any new clients for the last month because he is waiting for some magic time he feels ok to close new clients to bring in the much needed cash when we are telling him we need to upgrade/scale a few areas which is not a matter of big expenses but his traditional thinking has locked us into this impossible zone.

Need to scale up/more workers? Need a even small line of credit, but partner says we need to approach a new investor for that.

Investor for a small improvement in cashflow so we can expand??? Give up more equity???

If me and other techie partner were to just work on our own, we would probably run into a similar issue like everyone of hitting the virtual cash flow wall but I think we would of figured out how to get over this cash flow problem together, instead of just throwing the hands in the air and putting the company into a complete standstill.
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ttrance

9 years ago

and i just wanted to respond to the negative nancies above who decide to try to put me down...

the company is turning a profit.

We make massive profits with each client.

Our success is unheard of within 3 months going from startup 0 clients to breaking even.

We have 7 new clients in waiting because the 3rd partner is new to IM and is delaying closing them until he feels more safe. Then he says we cannot afford anything more, even though we have at least a few new clients waiting to pay us its been a month and 0 new closes because the 3rd partner is waiting for some magical signal to sign up more.

How are we acting like Bernie Madoff?? We have a company that is posed to double revenue within the next 6 months just by signing up clients already in the sales pipe, but instead we need to add a new partner to help us with this imaginary cash flow problem??? If we were to take a lot of time and present the company as it stands now, any investor or bank would give us at least a small line of credit like 10k so we can pay bills on time and not stress if a client is late paying us monthly....

But of course on WF you have angry people always ready to tell you to go home.

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yukon

Banned 9 years ago

Originally Posted by ttrance

You're contradicting yourself because If you turned a profit you would have money today, after expenses.

Breaking even isn't a business plan, you can do that sitting on the couch watching TV. So now you want to scale up to break even on a much larger scale. Why? What's the point?

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Tom Reed

9 years ago

Originally Posted by ttrance

You may be confusing us because you have not provided enough info and your statements contradict each other.

You cannot be making massive profits per customer and still need outside money UNLESS...

...Unless you have a recurring revenue type model, or extended payment model, and you are essentially spending $1,000 to sign up a customer that pays you only $500 / month but is committed to a 2 year contract so each customer is really worth $12,000.

This is obviously just a made up example but it is the typical scenario for a high growth company that cannot pay it's bills.

Is this the case with you?

Please disclose more info to get a reasonably accurate response.

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JC Web

9 years ago

Originally Posted by ttrance

and i just wanted to respond to the negative nancies above who decide to try to put me down...

the company is turning a profit.

We make massive profits with each client.

....

any investor or bank would give us at least a small line of credit like 10k so we can pay bills on time and not stress if a client is late paying us monthly....

But of course on WF you have angry people always ready to tell you to go home.

You have a very bizarre definition of "massive profits." You can't be making massive profits and need a 10k loan just to pay your bills. You don't seem to have any understanding of how finances work. That's just not possible. You also said earlier you were breaking even. Again, that's not massive profit nor wildly successful like you claim.

You should be thanking the partner you are upset with for protecting you and your business from your lack of knowledge in this area. I would suggest swallowing your pride and sitting down with him and asking him to educate you on this so that you can make better decisions about your business. Or you can just be mad at him and at us and let your business self-destruct.

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salegurus 9 years ago

Originally Posted by ttrance

and i just wanted to respond to the negative nancies above who decide to try to put me down...

WF ranters dictionary: "Negative Nancies" People who don't agree with me, stroke my inflated ego, feel sorry for me, when i'm ranting on WF...

*Feel free to add, Wikipedia style....
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wolfmmiii 9 years ago

It's looks to me like you are really the only one that's angry. You asked for feedback and received it. Don't get upset because it runs counter to your opinion.
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Mark Singletary 9 years ago

Look here are the facts - and yes I've been there and done that:

Your problems all come down to one or several of these:

1. You are spending too much money providing the services you provide. This also includes ineffective services or products. For example, 3 people touch a task when 1 would do.
2. Your profit margins aren't where they need to be.
3. You don't have enough customers.
4. Your collections aren't handled in a timely manner.
5. You and or partners have a mindset/ignorance problem when it comes to knowing how to run a successful business. That's why I asked why you are proudly promotion free in your sig but you obviously have money issues. That's nothing to brag about.

That's it. Solve whichever of those issues are true and the issues go away. Simple as that.

Now, let's say that marketing is your problem - #3. Add another $20,000 through another partner or a credit line or whatever and guess what? In 3 months you'll run out of cash because you'll have spent it all and still haven't solved the problem.

In another of your posts you complained about all the rules of the company you worked for. I assume that was not this one. But in that post you didn't like checks and balances and anyone micromanaging you.

It sounds like this is the same thing - you feel someone else is controlling your destiny. You can't move because someone else says you can't move.

Do you have a job or a business? If it's a job just do your job and be happy you have one. If it's a business then treat it like a business. That includes not letting partners push you around when maybe 2 of the 3 of you want to go a different direction. But, of course, it all depends on how you handled your contracts and legalities.

Finally, defensiveness is a sure sign of problems. Every time an owner gets defensive when they receive advice or bad news, it's a sure sign of two things - they have their head in the sand and bankruptcy or being out of business isn't far behind. Who are you trying to prove to that you are in the black, and even, and on track for this or that or the other. You don't have to convince us how great things are. The fact is, if they were so great, you wouldn't be posting here in the first place. So get a grip on the real deal. Get your clarity about what is going on and go handle it.

Mark
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- Kay King 9 years ago
  
  i just wanted to respond to the negative nancies above who decide to try to put me down...
  
  I thought you were asking serious questions but apparently not. No one told you to go home and that defensive attitude won't help your business.
  
  It's too bad because it sounds like you have a potentially profitable plan - but you need to cut expenses to the bone - plow all of the "massive profits with each client" back into the business.
  
  "Cash flow" is a rolling fund that can be depleted and replenished as bills are due and payments are received. You KNOW that! If money is only flowing out - something is wrong.
  
  You have gotten defensive but didn't answers questions about the business:
  
  -How much money did you and other 'techie' partner put into the business?
  
  -Are you taking salaries or spending any money on extras that can be cut for now?
  
  -What was the $20k cash investment used for????
  
  - What is the percentage profit for each client - can that be improved? Are you paying business expenses that could be cut?
  
  If you have more customers than you can handle - if you are indeed making massive profits with each customer....you HAVE to identify where the money is going. "massive profit" and "break even" aren't the same thing.
  
  You don't have to do it here - it's none of our business. You need to dissect your business plan with your partners in an honest way - looking at the profit levels - the work hours - the expenses that can be cut.
  
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Kurt 9 years ago

This brings up one of the, if not the most important parts of running a business, and that's cash flow. Making money is one thing. Getting your hands on that money and being able to use it is another.

One example is affiliate marketing. Even if you're successful, it can take two or three months to actually get paid. If you're using PPC advertising, you can quickly run out of cash to pay for more advertising, bringing your business to a halt.

I don't have any specific advice for the OP, as there's not enough details. What's the specific hold up with getting cash?
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yukon Banned 9 years ago

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- Steve B 9 years ago
  
  ttrance,
  
  Poor cashflow is really not the problem . . . it's simply the outward manifestation of a greater internal company issue within your selling system. If you fail to fix the problem in your business execution, no amount of credit or cash infusion is going to make your company viable.
  
  Many startups suffer through cash flow crunches. Typically they are the companies' own doing centered in issues like starting out with too little available capital (underfunding), poor revenue and expense planning, unanticipated but necessary production increases, rising labor costs, poor sales performance, or inability to collect revenues in a timely manner.
  
  It's management's responsibility to manage cash flow and to weather the storms of the first couple of years. Taking on new partners, increasing company debt, and other stop gap solutions rarely fix the problems that exist in the company internally.
  
  Regardless of how healthy or "good" you feel your company might be, it appears that management is running the company toward melt down. Throwing additional funds into the mix without fixing the problems within the company will only hasten it's collapse.
  
  All your efforts right now should be focused on closing clients in the pipeline and getting paid immediately. That's where your new cash for working capital should originate . . . not from a loan or line of credit which just heaps more debt on your backs and doesn't solve your underlying problem. Management is derelict in their duty if they don't attack the roots of the company problems. Poor cash flow is really only a symptom of a much more fundamental management issue.
  
  Recognizing, addressing, and fixing problems when they arise separates the good companies from those that can't figure out where they went wrong or those that never understand where the real problems lie.
  
  The very best to you,
  
  Steve
  
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chaitanyathengdi 9 years ago

You won't get enough money to expand through profits alone, and neither through bringing in additional investors - you'll loosen your hold on the company by bringing in more investors.
But you do have to borrow money which you can use in expansion, and as others said, keep an eye on where it's going. Otherwise it'll only end up getting spent.

Chaitanya
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Alexandre Valois 9 years ago

Excuse me, are you in business? As in, are you a business owner? Not a charity or a non-profit?

Because you got me confused when you keep repeating the same rhetoric that you are wildly successful but aren't making any money and have no cash flow or liquidity.... That is the exact definition of a struggling business with a bad business model.

Reality check - you are not wildly successful. You are running on fumes.

You have a startup that's still struggling to find it`s ground and stabilize. And your "investor" partner is probably smart to realize that. He put up the money, it was your job to manage it, which you and your partner both seem to have failed at doing considering you're both "techies" and not "suit" material.

At least I hope this is simply a case of incompetence, and that you and your "wildly successful" partner haven't been living it up squandering the investor's money on an ego trip...
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Synnuh 9 years ago

I'll admit I haven't read the whole thread, so I'm not sure if someone mentioned it yet, or not, but why aren't you charging up front for services? Or figuring out another service you can implement that you can charge up front for?

Sounds fishy to me. May need to let the secretary know her blow budget just got cut short, or something.
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DotComHelp 9 years ago

It sounds like too many people are trying to manage the business. I see this on reality TV all the time. I would have a meeting and vote on who's in charge of what. If that doesn't work there's usually a partner holding the business back and should be bought out right away.

The next thing I would do is figure out a way to lower your costs. If you are breaking even after serving clients, then you are actually losing money because of the time it took to service these clients. Small process improvements can make you profitable. If you can service your clients 20% faster at the same cost, for example, then you can take on additional clients and be 20% profitable.

If cash flow is the BIG problem, I would follow Jay Abrams advice and find a way to get your clients to spend more money with you faster. Create additional products and services. Reactivate past customers and that sort of thing.

If it was my business, I would do any of the above before bringing in another partner.

Good luck to you!
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Freebiequeen1999 9 years ago

Are you going to bring in more investors every time you have a 'cash flow" problem?

How are you going to pay them back? Maybe you need to take a look at your "process"?

Getting paid up front - or at least half up front- should IMHO be priority

While you are upset I am sure the guy who put in the 20K is not felling real great ether
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IM company issues... "the cash flow game", drowning in red tape...

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