I have been working with a software startup in Tampa, Florida for the past several years. I was with them from the idea phase and have helped them develop a strategy, fine-tune their product offering, and have even designed several marketing pieces for them, including a new logo and a website.
They are a bootstrapped company and have no outside investors other than the original founders. The first year of their operations they did an amazing job and were able to turn a profit off of booking roughly $1.5 million in revenue. They tripled the number of employees adding a dozen or so developers and were keeping each of them busy with well paying projects.
Around November of last year they became a little concerned that they were growing too fast. They had over a half dozen projects that looked like they were all going to go through. The combined revenue for those projects was double the revenue of their entire previous year and they would all need to be completed within the first 4-5 months of the new year. The rapid growth presented a serious problem as they felt they would not be able to maintain the company`s integrity and fulfill all of the projects even by hiring as fast as possible.
Then they committed the unpardonable sin. They took their foot off the gas.
Realizing that they couldn`t possibly fulfill all the promises they had made and recognizing the strong possibility that all of the outstanding contracts were likely to be signed and executed within the next 30 days, they stopped pushing marketing efforts and told their sales team to hold up and wait to see what would happen with the current contracts before pursuing additional opportunities.
In the end, none of the contracts were signed. Each potential client offered a unique excuse and by the end of the year, they had no signed contracts, no work for their employees, and nothing in the pipeline to produce new leads. Even worse, they had to begin filling the pipeline in one of the slowest times of the year.
As a result, they lost a few key employees, had to lay off a few more, gave away some profits by lowering new bids and were eventually able to sign a few smaller contracts to keep them busy while they were looking for larger opportunities. Their company is back down to the size it was 18 months ago and they look like they might be able to repeat the revenues from their first full year of operations.
In any bootstrapped startup venture you must remember that Cash is King! You must run every facet of your business with that thought in mind. Billing, sales, and contracts are important, of course, but none of them replace cash and you need to make sure you have enough cash on hand to make it to the next payroll cycle. Promises of cash and a log jam of potential contracts are not enough.
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