Ep. #735 - Don’t Grow Out of Business
In this episode of Startup Hustle, join Matt and Matt for Part 42 of “How to Start a Tech Company” while they discuss how not to grow out of business.
Covered In This Episode
For a business, growing too fast can be just as risky as not growing at all. Startup failures often happen when a company takes on too much without proper planning and preparation.
In this episode, the Matts talk about the common mistakes businesses make when it comes to scaling their operations. They discuss common issues such as losing track of money and resources, hiring too little or too many people, and neglecting the quality of your product or services.
Join the Matts in this Startup Hustle episode to learn more about how to avoid growing out of business.
Missed the previous episode? Click here to listen to the other episodes of the “How to Start a Tech Company” series.
- What does it mean to grow out of business? (1:15)
- VinSolutions’s rapid growth (2:20)
- Business growth (3:40)
- What factors lead to growing out? (4:02)
- Full Scale’s rapid growth (4:51)
- Losing track of money (5:07)
- Hiring too many people (7:17)
- Renting or acquiring facilities that are too big or too expensive (11:14)
- Riding a trend and not getting off of it (16:08)
- Supply chain congestion (16:42)
- Maintaining customer service (18:17)
- VinSolution’s customer support challenge (20:16)
- Neglecting customers (22:16)
- Not scaling technology enough or too much (26:16)
- The quality of people you hire (28:24)
- Managing assets and equipment (31:55)
- Lack or breakdown of different processes in the company (36:27)
- Prepare for growth (45:05)
It’s all the things that are unknowns that get compounded very quickly, right? We’re seeing a lot of stuff but our accounts receivable is a total disaster or other expenses are a total disaster. And they’re problems that you don’t think about, but then all of a sudden become giant problems.Matt Watson
If you’re growing out of business, what you’ll find is the culture gets shitty, the workplace sucks. There’s no structure. You got to deal with a whole bunch of crap. And then people start quitting.Matt DeCoursey
The number of reasons that people won’t do business with you is far wider and longer than the number of reasons that they will.Matt DeCoursey
There’s always a delicate balance of trying to prepare for the future but not overbuilding it. There’s like a science there somewhere in the middle.Matt Watson
Expect the unexpected, and you can’t foresee the problems you’re gonna run into, you don’t know what you don’t know.Matt Watson
Having a hard time hiring software developers? Full Scale has the perfect platform for companies to find developers quickly and affordably. We’ll help you assemble your software development team and manage them throughout the project. Just fill out our intake form, and we’ll match you with the right experts.
Don’t forget to check out the other products and services of Startup Hustle partners.
Following is an auto-generated text transcript of this episode. Apologies for any errors!
Matt DeCoursey 0:00
And we’re back back for another episode of Startup Hustle, Matt DeCoursey. Here with Matt Watson. Hi, Matt.
Matt Watson 0:06
Hey, what’s going on?
Matt DeCoursey 0:10
Dude, I’m thinking about having a growing-out-of-business sale.
Matt Watson 0:15
It happens. You know, people these days can’t get enough supplies to put on the shelf to sell. It’s a whole economic problem these days.
Matt DeCoursey 0:26
That is that growing out of business, or is that something different?
Matt Watson 0:31
I guess it’s kind of different, can’t get the supplies.
Matt DeCoursey 0:35
I think so many people. And that’s, you know, that’s what we’re going to talk about today, here and part 42 of 52 of our series about how to start a tech company. Over the last few weeks, we’ve talked about sales channels talk about not getting stuck in the middle. This is kind of a different iteration of that we’ve talked about when to fire your clients or users and then creating a winning culture. But growing out of business, I think the phrase “don’t grow out of business” is not one that most people have heard. And sometimes when you talk about it, people like hey, those are good problems to have. Not always, not always. So when it comes to that a lot of shit can happen, I’m out.
Matt DeCoursey 1:21
Before we get into that, I want to remind you that today’s episode of Startup Hustle is brought to you by fullscale.io, helping you build a software team quickly and affordably. And hopefully not grow out of business. But with that, we’ve even experienced a little of that. So Matt, when we say growing out of business, what comes to mind?
Matt Watson 1:40
Well, I mean, I had this problem at VinSolutions, you know, so it was like 15 years ago now. We were signing up customers so fast, but we couldn’t get them installed quickly. And then next thing you know, you get a bunch of pissed-off customers calling because their software is not installed. And then my sales team is doing nothing but taking phone calls all day from angry customers. So they can’t, you know, sell anybody new and my support team is not very happy, because they’re dealing with a bunch of angry customers that took way too long to get installed. And it kind of sucks. I mean our last episode was about culture and that’s definitely not a culture you want to get stuck in was not a good place to be.
Matt DeCoursey 2:23
When I think about growing out of business, I just think of any rapidly growing company. And in my book, million dollar bedroom, I talk about the ball of rubber bands. And I think anytime a new business grows quickly, there’s going to be a ball of rubber bands to undo at some point, because it’s kind of hard to not have that happened. But mitigating the mitigating the number of rubber bands or the complexity on which they’re in the ball is important, because at some point, you have to go back and fix all that crap. And you know, there’s, there’s a lot of things, this is not an uncommon problem.
Matt DeCoursey 3:00
Business Growth alone isn’t enough to support and sustain a company if the right conditions aren’t met. So, you know, growing too quickly, can be just as dangerous. So your business is not growing at all. And that, you know, we talked about that getting stuck in the middle. And this is the opposite of that this is this is the problem you have here as the rocket ship is headed to the moon, and you have to figure out how to hang on toit.
Matt Watson 3:22
Well, and it can be really tough. And we’ve got a great, great list of things here to cover. But one of my favorites, the first one on our list is losing track of money. With that, which sounds laughable, but you know, it can be it can be the simplest things, right? Like you’re signing up customers left and right, but you never really knew how much your server Bill was gonna be. Right? Like, it’s all the things that are unknowns that get compounded very quickly, right? Like, it’s like, okay, we’re seeing a lot of stuff. But our accounts receivable is a total disaster or, you know, other expenses or total disaster or what have you. And they’re, they’re problems that you don’t think about, but then all of a sudden become giant problems.
Matt DeCoursey 4:11
I’m looking at this list, and the first three things on it. I keep thinking about the first year and a half at Full Scale. And yeah, you know, that’s the company that’s the company that Matt and I started four years ago. Go to fullScale.io. And that’s the sponsor of today’s show as well.
But we went from having no employees to 100 and a year, and there was a lot of crap that occurred with that and you know, you say losing track of money. How do you lose track of money? Well, I mean, some of that is, you know, where did the expenses go? You’re learning how to kind of, we have to Okay, so we had we say losing track of money. So we started with one billing model of doing it in arrears, which is kind of the more common feeling of service provider to You know, serve as receiver, hey, the service occurs and then you pay for it, you get a bill? Well, we quickly realized that that was not going to work for us. And why? Because all of a sudden, you have to carry those receivables and some of that losing track of money. It’s like, okay, so have these people paid? Was it on time? Are they? And in our case, because we work with startups and early stage business, are they actually is this a healthy client for us to have? Because we were we were not just selling like small items, we’re selling contracts that were 10s of 1000s of dollars each month. And we realized pretty quickly that we could get on the very bad get on a shitty side of that liability in a hurry.
Matt Watson 5:46
Yeah, I mean, if you’re doing let’s, let’s pretend it to $100,000 a month in revenue, and it’s all gets paid 30 days later, you’ve got to have like, an extra $100,000 in working capital, just to facilitate the float of it. And that sucks. But we realized
Matt DeCoursey 6:03
even more Yeah, yeah, well, all of a sudden, we had 100 grand a month in revenue, and we’re like, shit, we need 100 grand to carry it. And then we’re like, No, we need a more like 200 grand to carry, because then everyone pays on time. Yeah. And, you know, we, we solve that by just basically billing in the middle of a month that we were already at. And if we didn’t do that, right, now, we have to carry millions of dollars and receivables. Which is back to that, not what you know, you talked about the lifecycle your cash, and I mean, and that’s it, you don’t understand it in the beginning, you also, you know, next thing on our list is hiring too many people. So all of a sudden, we went from having 100 people and you know, and pretty high engagement to next thing, you know, we got a little too aggressive, and we are too many people, right? And the things slow down a little bit. And you know, we and the act of not knowing much about your own business on Sundays, because you haven’t done it yet. So like, December can be a slow month for us. Because not everyone’s trying to sign up a new team and start a new project in December. So you’re like shit, okay, maybe this does slow or peed or like your relationship with with a client may end unexpectedly or someone isn’t paying their bill. And you got to turn off the faucet. And you know, this is this is a tricky part about growth, especially like when we’re talking about a tech company, but people build tech. And I mean, this is a conversation I have with founders all day is like, what’s the inflection point of when you don’t have enough or too many, I think the thing we realized is, we might be better off to have a little bit of a waiting list than to just have 40 people sitting around twiddling their thumbs.
Matt Watson 7:45
Well, and this is really tough problem when you’re an early-stage SaaS company, especially if you, you just raised a bunch of capital, right? It’s like, well, do we go hire 10? Salespeople? But do we have a product to sell yet? Right? I mean, it’s always the delicate balancing act. And, you know, at Full Scale, the balancing act has been like, well, how fast you recruit, and hire people versus how fast are you selling those? Right, and, and it’s a balancing act. And, and any, the good thing about most tech companies is labor, the labor side of it is not necessarily the biggest component, right? I mean, that’s the great thing about Sass companies, you’re selling a software product, you still gotta hire support people and salespeople or whatever. But the product itself does the work, right. So hopefully, that can scale. And you can kind of try and keep up with the support side as you have to, and try to hire salespeople as you need to. But it can be one of the big mistakes that people make those they hire way too many people too fast. And we all know that in any organization, the more people you have, the less efficient things become as well. So it’s even worse, we got a bunch of people sitting around that don’t necessarily have a whole lot to do. They don’t have any leads, you know, what do you do?
Matt DeCoursey 8:59
Well, and if if either one of our crystal balls was perfect, you know, we wouldn’t, we would just know the answer, but you don’t. And now we also look at things like you also look at things like the pandemic, you know, I mean, that was, you know, we straightened out our numbers situation and all of a sudden the pandemic hits and you lose a bunch of clients and business and it’s like, you got to be prepared to live with either end of the decision either having not enough people or too many. And you can’t really dictate you don’t know you can’t control whether or not a worldwide pandemic starts and you know some of the stuff early Well, it’s like you said now it’s like the this delicate balance of do I need salespeople or not? Is it too early, is it not? And you know what, in some of this stuff doesn’t. You don’t want to put yourself in a spot where you have to just hire everybody that shows up to an interview because you need people that mad? Well, this thing’s really Time to develop.
Matt Watson 10:01
It’s really problematic when you’re on some kind of tight forecast, or you’re raising capital and all that, right? Like, oh, we have to hit these numbers. Well, to hit these numbers, we have to hire X amount of salespeople, and it takes them longer to get trained, and they have to hit their quota. And it’s like, you have to hire the people. And all the math has to work out in the spreadsheet for the VC to be happy, right? But reality, none of that shit happens that way. And that’s the really tricky part is when you’re fundraising or depending on fundraising, and depending on her hitting certain numbers, it kind of forces you to do some things too.
Matt DeCoursey 10:34
All right, next on the list, this is yet another one. That’s all too familiar for so many people, especially after the pandemic, renting or acquiring facilities that are too big or too expensive. You know, I’ve, I’ve been around this. So before I did, before I was an entrepreneur, I worked in the music industry for a musical instrument company. And I saw this happen all the time. With in this is more of a retail phenomenon, some days, but a lot of people buy with their ego, and not with their budget. And they get to offices that are too expensive, too big and small to grow into it. Those things ended up being like a boat anchor. And like at Full Scale, we were having to prepare for these things ahead of time, we have a floor of a building we don’t even use. Yeah, we were planning on using that. And then a pandemic happened. And then we didn’t need really either floor or building, and we spend a lot of money every month on shit we don’t use and will for the foreseeable future.
Matt Watson 11:36
Well, we had the same issue at Stackify right? You shared offices with us for a while we had a giant floor and had 20 people in it, but it could have held three times that. And we were there for a long time with a whole lot of extra space.
Matt DeCoursey 11:52
And you have to learn to leverage. You have to live with these decisions. When, you know, oftentimes, you know, so and we’re you know, we always try to be as transparent and sharing as possible. I mean, at one point the, for us that the the over acquisition of facilities slowed down our growth and our ability to have capital to do other things. And it was kind of like damned if you do damned if you don’t. Now the pandemic did us a favor in that regard, because we were able to go fully remote, but that doesn’t alleviate the fact that we still have the bill until the lease runs out or we find someone else to take it. And you know, that’s the way it goes. Well,
Matt Watson 12:31
The tough part is when you sign these leases, they’re typically three years, five years, sometimes even seven years. And when you’re a startup that’s growing. I mean, that might as well be like 100 years, right? Like, that’s the problem. And I definitely don’t recommend signing more than a one or two year lease, because you just don’t know, it’s just insanity.
Matt DeCoursey 12:51
Well, and that’s where the flexibility and scalability of a lot of co-working places and stuff like that have really are really a benefit. Especially early cause you could go from, and that was another thing you just talked about not knowing. So while we had 100 employees, they weren’t local here, they weren’t in Kansas City where we’re located, you know, they were all across the world. And, you know, then here’s the thing is sometimes finding facilities are places. So in the Philippines, where Full Scale is the majority of our employees are, in order for us to experience some of the tax benefits that we got for opening a business there, we had to be in designated zones. And there just wasn’t a lot of places to choose from. And that can be limiting to and the ability to deploy that and the money you have to put up front to do a lot of stuff that it can be it can be rough, and at the same time, you can’t have people sitting on each other’s laps while they’re working. Because that isn’t the right kind of culture either. So I mean, there’s a lot to be said. There’s a lot to be said about keeping it lean. I think the pandemic’s given me a new respect for that in general.
Matt Watson 14:02
Well, and so learning to work remote has been a blessing for everybody as well.
Matt DeCoursey 14:08
Yeah, well, for us it had been reduced our long-term expense footprint and we were able to settle on a model that feels pretty good because you know, another thing too is like when it comes to some of these facilities now Matt, you and I both run a company where we want the employees to feel happy and comfortable about coming to work so we’re doing things like providing meals and stuff like that. So you know, some of that is part of the culture and the feeling good about coming to work thing, and then if you suddenly don’t have to pay for that either you start to look that’s why so many companies I think Pinterest was about to build this like Mega complex out in the valley and they paid like 30 million bucks or something crazy to break a lease and raise Do you know I’m talking about there’s been a lot of well, and there’s a lot lot of companies that are that are torn about which way to go with a lot of that. And you know, that’s that’s, it’s what you got to figure out. Now, you know, one thing that is certain is knowing that today’s episode Startup Hustle is brought to you by full scale.io helping you build a software team quickly and affordably. In order for us to do that, affordably, we got to have the proper expense structure. Okay. I like this next one, because I think this is important. Writing a trend and not getting off of it. A trend is something that comes and goes, and you’ll see people get on the wrong side of things. You know, they overestimate the growth or the desirability or competition. And then in cases that not necessarily tech, but it could definitely affect IoT companies is over, over ordering. And I bet there’s a lot of that going on right now with supply chain congestion. People like shit, I better order a whole bunch, and then they’re gonna realize they’re on the wrong side. And that’s
Matt Watson 16:02
actually creating more problems for the supply chain is instead of people ordering what they need for a month or a quarter now they’re like, shit, we’re just gonna order for the year, but then that keeps everybody else from ordering that. So you know, as we think about this, this example, you know, some different companies come to mind, but one of them that sticks out for me that I thought would be funny to mention would be something like Groupon. Right? Like you get a company like Groupon when they came out, weren’t like, went off like a rocket ship. And then eventually, that fad just dies. Right? Like, that business model just sort of disappeared. And, but they’re still around, but they’re, they’re like a whole different thing now from what they were right. And, you know, sometimes businesses just as an example, you know, they go through that really phenomenal growth. But eventually that, you know, industry or market or product or whatever it is just kind of dies off. And there’s been a there’s a lot of those things that happen in tech.
Matt DeCoursey 16:58
I mean, it happens in everything, dude, I mean, everything from Beanie Babies to maybe NF T’s you just never know. And they can draw it’s a, it’s artificial pricing is basically what it is. And it’s not a true supply and demand equilibrium. And, you know, they call it the law of supply and demand for a reason. Much like the law of gravity, it’s not up for debate. And that’s something that you can’t overcome, you cannot overcome the power of that law. All right. I think this next one on the list, I’ll let you announce it. But this is, this is one that I think happens in all companies that grow too quickly.
Matt Watson 17:37
Yeah, and it has to do with customer service and maintaining a level of customer service, right? Like, take somebody like Zappos, for example, who sells shoes online and had amazing customer service. And then what happens when Amazon buys them? Right? Can they continue that same level of customer service? Or, you know, as they continue to grow and scale just in general, right? You know, a lot of times customer service can be a big differentiator for for a company. And as they grow and scale, it can be really difficult to keep up that same level of quality.
Matt DeCoursey 18:09
Yeah, and that’s I mean, that’s a leadership management operations and cultural problem, all bundled into one. And, yeah, that’s part of. And I think this happens a lot with early-stage companies that grow quickly, as you haven’t even had the time or focus, because you’ve been so busy hanging onto the rocket ship, to create the kind of foundational elements and support type stuff for your, for your own employees. I don’t even mean the support. Okay, so if you want to talk about scaling support team, well, first off, there’s companies like chat desk, who has sponsored episodes of this show, that can help that help scale with that, and I love that, but that wasn’t always out there. So you have people that show up to work, and you’re like, Hey, we got to offer support for this product. Okay, how does that work? What do we do? Is there a manual for that? Is there a document? Where do I try it, you know, any of that. And that’s the kind of stuff that’s hard to. That’s the reality that I think is hard to live up to. When it comes to fast growth. And another thing too, is like, you end up hot you end up hiring people quickly or doing something or that, or the support requests are overwhelming, which stress people out which bring out the worst qualities and those providing support.
Matt Watson 19:36
Well, we had this problem, but then solutions because also over time, the product got more and more complicated, too. And it just became harder and harder to support. And, you know, it’s easy when you’ve got, you know, the founder and a couple of people that are doing a lot of support and they really understand the product and they do a really good job of getting things taken care of. But then yeah, once you start hiring all those other things People, you know, the quality eventually is gonna go down anyways. But it’s really hard unless you really focus on it. And, you know, back to the point of earlier, high growth, like we were growing so fast that we, and we couldn’t afford to hire support people and then train them for like six months before they came experts, right? Like, we were always holding on to the rocket ship, and never had enough people. And then when we did hire them, like, they didn’t really understand how the product worked that much either. You know, it always annoys me like, I was at Chipotle the other day, and they just hired somebody new and it was their first day at Chipotle. And I felt like as a customer, I knew way more about how to order a burrito person work in there. I’m like, I don’t understand that what to pull out like when you hire somebody who’s eight here a lot that knows how this shit works. Anyways, that’s my rant for the day.
Matt DeCoursey 20:51
Hey, I’ve you know that that that that’s back to not having the right support structure. Now Chipotle should have it. But yeah, I mean, you’re looking at labor shortages, though. And certain things. I mean, that that that new employee may have just been thrust upon the world. Here you go. You’re on the register today. And you’re like, Dude, I,
Matt Watson 21:12
I went through McDonald’s a few weeks ago. And there was this kid work in the drive thru, and I’m looking at him like, holy shit, this kid is young. I asked him like, how old are you? He was 14. Like, holy moly, we found somebody that wants to work. It was amazing. He did an awesome job. 14 years old work in the drive-thru at McDonald’s.
Matt DeCoursey 21:36
I think that this the potentially neglecting customers or providing poor service is even harder to mitigate or control or understand it’s even going on in a remote environment. Yeah. Because you know, when you are in an office every day, well, first off, it can make it a lot easier to ask a question to the person sitting next to you. In some regards, and also, as a manager or leader, like I you can often overhear what people are saying, I’ve done that myself, I’m like, had a salesperson get off the phone or a support person. I’m like, What the fuck are you promising or talking about man, like you’re way off. Like, that is not what we do. That is not how we do. And please don’t ever say that again, because I don’t get us in trouble. Now, you can’t necessarily tell that that is occurring. There’s technology that could record calls or keep up with stuff or customer feedback reports. And some of that stuff’s hard to hard to get a gauge on anyway, because you know, pissed off customer is going to make a lot more noise than one that’s really happy. That’s just the science of clients and customers. So, you know, it says, When do you hear about that? And how do you find the right people and you have the right leadership. And you know, some of this other stuff, too. I think part of the neglecting your customers is if you’re on the wrong side of if you’re growing out of business, you know, the problem, what you’ll find is the culture gets Shetty, the workplace sucks. There’s no structure, you got to deal with a whole bunch of crap. And then people start quitting. And you know, that puts even more pressure you talked about, you know, we go back to the third or the second item of hiring too many people. I mean, you can also get yourself in a spot where you just don’t have enough people at all. And that’s kind of what you’ve been talking about, about so many of the, you know, the VinSolutions you guys figured it out pretty quickly. But at the same time, it’s like, Hey, we’ve got all these people that need our stuff. And we can’t get you set up. We can’t reply on time. We can’t do this. We can’t do that. And in some industries, you can ruin your reputation pretty quickly.
Matt Watson 23:54
Yeah, yep. Yeah, next thing you know, they’re canceling your service going to your competitor and they’re telling your competitor why and then every sales call your competitors on there telling everybody they talk to you about how shitty your services.
Matt DeCoursey 24:07
I heard your service sucks. I heard it. Yeah. Hey, and we’re gonna use this other company. Oh, well, did they? I mean, have you had it hooked up yet? Because I heard that it’s going to take forever. Yeah. Yep. These are the seeds of doubt. That will grow and a buyer’s mind. And by the way, don’t run your company like that. If your company no one wants to hear the dirty laundry, they don’t want to they don’t want the dirty laundry don’t talk shit about your competition. It is not it. People don’t care. They don’t care. Talk about how you’re going to help them. You know, part of I think that you know, you were sitting there talking about neglecting your customers. I think that growing too quickly too. It also contributes to a culture of salespeople that over promise and under deliver.
Matt Watson 24:56
Oh yeah, we love people just get over Sell, sell sell
Matt DeCoursey 24:59
They will I mean, they’re literally just sit there like a machine gun filling out order slips. And, you know, the thing is, is that oh man, telling someone that it’s going to be here next Wednesday, when it’s not, that’s not a very endearing factor. And it I mean, it really take people off and make them nice. The number of reasons that people won’t do business with you is far wider and longer than the number of reasons that they will. So, you know, it’s a delicate balance. Okay, number that number six on our list, not scaling technology enough or too much for businesses needs. Yeah, I unless I think about, I think about any tech platform that’s building things without getting actual user input, or feedback about what’s important thing about people that are guessing what’s really important and needed, they throw a bunch of resources, bandwidth and time into building something, and then they push it out. And it’s like, oh, no one gave a shit.
Matt Watson 26:07
Well, for sure, on the product side, but then you’ve also just got like, the performance and scalability ever, right? Like, Can it handle a million users or a billion users? I mean, one, one thing is that a lot of developers spend too much time on his trying to perfect that stuff. It’s like, we’re gonna make this work for a billion people. When it’s like, we’re gonna have 100 Dude, when you add users. Yeah. And at the same time, it’s also a problem. If you don’t spend enough time on it, you’re like, well, we signed up 100. And it doesn’t work very well, because of XYZ. So there’s always a delicate balance there of trying to prepare for the future. But not overbuilding it, there’s, there’s like a science there somewhere in the middle.
Matt DeCoursey 26:48
I think there’s some other things like you just talked about, you know, having servers dial too high, or I mean, there’s a lot of different things that you can get into and you know, it’s I don’t know, I mean, that, when they say time is money, I mean, when it comes to paying people to do stuff and build things, it certainly is. And if you don’t if you’re growing quickly, I don’t know, man, it’s just really easy to get your finger off the pulse of what’s going on. So some of the notes we have here in this regard are toxic. The it becomes increasingly necessary to invest in better faster technology and, and perhaps tech talent, which is back to the hiring thing. But many businesses failed to invest enough for what the business needs or invest too much in technology and tech talent they don’t need. And I mean, it’s a real thing. How do you find a balance there, though?
Matt Watson 27:44
Well, one of the problems and this is, and this is really related to the quality of people you hire, right? It’s like, we hired a salesperson, but, you know, we hired the cheapest salesperson we could find. And so they suck at what they do. Or we spent $300,000 A year and hired this world class enterprise salesperson. But that’s not really the kind of salesperson we needed either. Right? Like, though, those are real problems do
Matt DeCoursey 28:12
I think you have a great point as some do, you get as a as a startup founder, and especially one that’s out raising capital, you get 10 million opinions from the peanut gallery. And the peanut gallery in this case are people that want to that want to write a check, or they’re with a fund or whatever, and you don’t have a CFO yet, or you don’t have a CTO or you don’t have this leader and you don’t have that leader and next thing, you know, you’ve got 10 leaders and no soldiers and, you know, that can happen, like you mentioned with the sales side of things is you’re going to yield churn some of these people too, if they’re expecting to do one thing, and next thing, you know, they’re sitting there making cold calls when they’re expecting to lead a sales team of 10. And you can and so the thing is, is why why pay someone 100 bucks an hour to do a job someone else would do well for 25 Yep. And you know, the end and there’s a thing too, is if you haven’t had employees, like actual real employees before, when you do there’s a long term liability that comes without if you end up having to scale things down. If you’re like shit, I got to actually let people go and they don’t get jobs quick enough. You can be on the hook for a lot of that you can end up paying, you know, there’s a ton of different stuff. You know, another thing we talked about here is like over investing in certain tech, you know, like, does everyone need a $4,000 laptop? Yes, they do. Well, I do. But I don’t you know, I don’t have $1,000 laptop? I mean, you know like there are some people that my like full I’ll give you an example like Johnny who edits our video his life would be miserable without a power Our full machine because it sucks up a lot of energy. The same thing with developers like developers, you also don’t want to be at a point where you’re paying someone a premium. And they’re sitting there watching the pinwheel spin, because the computers trying to catch up, but at the same time, where’s the scalability? I mean that we own 225 laptops in the Philippines. Like you look at a variance, there’s a variance of $500 per computer there, that is a six figure. That is a six figure difference. And you know, it’s the same thing. Okay, so that same person that’s gonna use the laptop, they might need a desk, do you really need the $1,500? Super desk? Or do you need something less? Okay, there’s another $500 times 220 people, how about a chair, or a headset, and all these things like, they feel, they don’t feel like they add up until you sit down and do the math. And you’re like, ah, like, I overspent by half a million dollars.
Matt Watson 31:03
And by the way, when you have 200 laptops, inevitably, at least one of them breaks every month.
Unknown Speaker 31:08
Matt Watson 31:11
So you get that hunger.
Matt DeCoursey 31:15
I don’t get it a lot. But someone had Full Scale my, it’s, but you know what, man, that’s a great example, I want to share something, let’s go and sit down before I share this with you. So you look at like growing quickly. Some of the other things. So you’re talking about losing track of money, you will losing track of equipment and assets is another thing too. So I tried to keep my finger on the pulse of this. But at one point we, we I looked at the number of laptops we had, and and a manifest I just like, Okay, there’s 225 lines here, but we only had 200 employees. I was like well, do we have 25 Extra laptops. And we did because one would break occasionally. And we weren’t fixing them. We had a bone years we were we were super busy. Well, so I you know, first off there was that. And then so with that, once I was in the down the rabbit hole and me and my feet weren’t even sticking out at this point, I was all the way down it. I went through and I looked through and I was like shit, this is a computer that was supposed to go to a developer. But a tester has it. And that’s back to that $500 A unit thing. So on some of it, you know, out of the 25 Extra laptops, some of that we wanted to have extra, but it was false data, because you could look at it for your future plan. And you’re like, Oh, I’ve got 25 Extra machines Great, well, girl into that in a hurry. Except for you don’t because they don’t work. Because there’s no one that took 10 minutes to send something that was under warranty, back to the distributor. Or, and so like and so this trickle down effect is then you need another computer and you’re giving someone $2,500 laptop that needed $1,000 laptop. And you know, by the way, we fixed 20 of those 25 computers, and the average cost per unit was like 100 bucks. And they’re back and clean, about five of them actually were broken. But that means that 80% of them are well, and
Matt Watson 33:21
I think this is part of a larger, a larger topic around. One thing you can’t really plan for as your business grows, you go through different stages. And as the founder, CEO, you know, leadership team, you end up spending a ton of time on this kind of shit that you would never plan, right? Oh, yeah, oh, we gotta go buy a new office. Okay, now I gotta screw around with that shit, or oh, all of a sudden, we got to go deal with the bank, because we need more money to buy more supplies, or we need to raise more VC money or whatever. Like, you inevitably run around putting out fires all the time dealing with problems that you never expected to have, because you’re just simply growing so fast. And so whatever it is you think your job was or thought you were going to be working on, you’re inevitably not gonna be doing it, you’re gonna be running around dealing with other things.
Matt DeCoursey 34:11
No, and this is similar to talk when we’ve talked in the past about technical debt. I mean, it’s the same thing. It’s the same thing and you get really busy and you say, you’ll do it later. It’s not the most important thing. I mean, that dude, this can also apply to just general subscriptions. And just stuff like that. Like, I mean, it’s a it feels it feels like a nightmare on Sundays, you’re like, you know, and this wasn’t a big deal until you kind of do the math. So at one point we have like, I don’t know, like, we had have some people leave or move on but we hadn’t turned off their G Suite. Yeah, it was like five bucks a month and then but there was like 20 people there that just no one had gone through and audited now. 100 bucks, okay. It might not be the end of the world. But if you think about it, that’s 1200 bucks a year. And there’s all kinds of stuff like this that starts piling up. And that’s one of the things I actually talked about my book balance me it’s called, call it the rule of 12. Take anything that’s a subscription or recurring and multiply it times 12. Because all these things are set up to feel less expensive, oh, man, it’s only it’s only $8 a month. You know, okay, that’s 100 bucks a year. And then you got 200 people, and you’re like, Whoa, that’s a lot. And you got to look into some of that, because some of these things are really, really sticky, once you start using them, and it’s like, you talked about a cultural shift, you know, so, what, why Google has Google Chat, and it does some of the same shit that slack does. But do you really want to? Well, and to be able to do that, again,
Matt Watson 35:47
a lot of this isn’t about the money necessarily, it’s about the lack or breakdown of different processes and procedures to, which is like, hey, we need to hire a bunch of people, but we’re too slow at it. We’re not good at training people we’re not, you know, all those sorts of problems come up as well. And, you know, you talked about, like, employees who quit, I mean, it’s processed there, where Hey, are we locking down all their accounts, and from a security perspective, and all that kind of stuff to where, you know, that $5 a month, you know, adds up, but it could be much bigger security issues were like, Hey, we didn’t, you know, disconnect their access to this, that whatever. And now we have old rogue employees who have access to things they shouldn’t have access to. Right. And but some of them just growing pains, like never had to deal with, you know, having a lot of employees who quit or resigned and all sudden, we’ve got a lot of employees, and we’ve got new problems. And back to the point earlier, it’s like no sudden, I get to take time out of my day to figure out how to solve these things that I never really thought I’d have to solve.
Matt DeCoursey 36:47
Yeah, and I think you know, another thing, and I’m gonna add another item to this list is, you know, is the, I think you get stuck, you start moving really quickly, and you want to do everything, you want to do it yourself. And you say, I did not get you got to take time to train people. And as a founder, like all the shit, you mentioned, none of the stuff you mentioned, it should be stuff a CEO or founder is doing in a fast growing company. Right.
Unknown Speaker 37:17
Matt DeCoursey 37:19
know, who else cares about it? Who else looks at it? And that’s, that’s a question you got to ask yourself on a lot of days. So yeah, I think another thing too, that happens on here, as you talked about growing out of business is a lot of this aggressive growth and expansion, without understanding where you’re like. So there’s a point of diminishing returns on so many things like, you know, when it comes to advertising, customer acquisition, and you’re like, oh, man, it costs us 100 bucks to sign up a new user. And then all of a sudden, it doesn’t. And all of a sudden, it gets turned into doubles, or triples, because the number of people that you can reach becomes, it becomes really tough. So by you know, that’s why I love sunny and rainy day projections, like, you can even have like a middle one, you can have a really aggressive one, you can have one that’s like, Hey, this is what happens if things don’t go that well. And you can get an idea of where where you’re over. I mean, you talk about just losing track of the money. I mean, this is where you see companies that all of a sudden, they’re like, shit, we’re broke. It’s no one’s really paying attention. The expenses are out of control, you lose a client here, you don’t get a deal here, something else happens. And you’re like, wow, we’re telling
Matt Watson 38:39
customer acquisition cost, customer acquisition costs and scaling them and, and then lifetime value, customer churn and all that stuff, keeping those things in check and understanding them. I mean, if you don’t, and all of a sudden, you start multiplying things. It’s like, hey, Netflix can sign up, you know, a customer for $7 a month, and they can sign up a million, but million, but they all cancel after 60 days. It’s like so what? Right? Like, it’s all of those things you have to understand. And that’s a
Matt DeCoursey 39:05
huge expense at that point. Yeah, that’s not that’s not a that’s not a and you know, it’s in the lifetime value. Okay, so we have some clients or Full Scale that have basically been with us and have people on their team for the entire life of our company over three years. Meaning that that close to four, and we and so with that, what’s the lifetime value of the average client is still TBD? Yeah, like it’s still growing. And yeah, and so some of that and part of what we’ve done to you know, with our growth, and it’s still on fire, is that’s when we go back to some of these past episodes like talking about understanding, understanding who the right people to do best and swift are, and you know, right. Right now, most of my days consist of talking to four or five prospects that want to do business with us. And on many of those days, I’m telling four or five people, I don’t think this is the right situation for us, you’re not ready for you were, you’re not quite ready to grow a team with us. And it would be easy. I literally had this conversation with a guy today who had a great idea for startup, he just wasn’t really ready for what we do. He wanted help for a couple months. And that’s not what we do. It’d be really easy to sit there and just make it a cash grab. And you’re like, Sure, yes, we’ll do it. Blah, blah, blah, yadda, yadda, yadda. And next thing, you know, you’ve I mean, we got it, we took on some clients at Full Scale over the first couple years that there’s no way I would get in bed with now No way. And why? Because they’re they they weren’t the right people to do to fit into our mold, which is long term solutions and building teams. It’s what we want. It’s what our clients want. It’s what our employees want. So you know, and that’s, I think that’s where it’s, it’s kind of like the entrepreneurial ADD that so many of us founders have is, you can’t always chase the dollar. Yep, yep, I like the dollar. So I like to ollars them out. So why do I not chase them?
Matt Watson 41:21
I like Bitcoin too.
Matt DeCoursey 41:25
Yeah, you did once offer to employ me for one Bitcoin a month, which I turned down because that was at the time that was like $4,000 a month. I was like, that’s not a good offer.
Matt Watson 41:38
If only you would have taken it and just kept him and never spend them only.
Matt DeCoursey 41:43
Yeah, if I would have just bought them if you know if I would have kept the 1000 at $7 that I almost bought and then didn’t everyone’s got a story like that. So everybody that you know it. I think that I mean, you look at well, I mean, that’s actually a great example. It’s like the trends thing. Like, how many people started a crypto coin? Any of it? Do we really need 500? farms or cryptocurrency?
Matt Watson 42:11
Unknown Speaker 42:12
That’s a couple.
Matt DeCoursey 42:15
Right? A few. But you look at the trends. So some people were timely on that. And we’re in the right place. And a lot of people were late to the game. I mean, I mean, that happens on so many different things. I think that’s a lack of understanding and market timing, and a lot of times just inability to execute. And I think that that’s, that’s probably the core thing that we should end this episode on is like, if you have the ability to execute a plan,
Unknown Speaker 42:46
you have the ability to grow quickly. If you don’t, you don’t have the ability to grow quickly. Am I wrong?
Matt Watson 42:55
No, you’re right. The challenge is that, like any kind of startup related stuff, right, you think you know what the plan is. And there’s going to be a lot of moving and shaking along the way. But
Matt DeCoursey 43:07
we should probably do an episode on what happens when you go out of business. Dude, it I mean, that’s a whole separate subject that Yeah, yeah. You see a lot of people I don’t know, man. There’s a lot of entrepreneurs and founders and people that put it all on the line and spent a lot of time regretting it. You know, Matt, you won’t regret going to FullScale.io.
And once again, today’s episode, Startup Hustle was brought to you by Full Scale, helping you build a software team quickly and affordably. You’ll find us all over the internet and go to fullscale.io. And social media if you want to learn more about Startup Hustle, go to Facebook and just type in Startup Hustle, and come to Startup Hustle chat. You can see all of the great things that Matt Watson has to say about the other things I post right now.
Matt Watson 43:59
Yes, that’s my job is to
Matt DeCoursey 44:03
what? Yes, at one point, I did have to say, Matt, quit trolling me.
Unknown Speaker 44:08
No, yeah. What did I just think that?
Matt Watson 44:11
I have to tell you? Oh, no, you told me to stop being a troll.
Matt DeCoursey 44:16
You were a little troll way there. Yeah, it’s okay. It’s okay. We were growing. What are you going to do? So? Which key takeaway?
Matt Watson 44:25
You know, I think when you’re hanging on to the rocket ship, I think the biggest takeaway is you just have to sort of expect the unexpected, and you can’t foresee the problems you’re gonna run into, you don’t know what you don’t know. And, you know, we went, you know, a lot of people say they want this problem. They want to grow so fast that they don’t know what to do with it. And, you know, actually went through that, and VinSolutions days and it was really painful to be signing up customers knowing that like, it’s going to be three months from now before they can even actually use our software and just hoping that they’re okay with that. And they’re not gonna be really mad at us until we could grow, you know, our staff hires and people and all that kind of stuff so we could install clients faster. So it’s a painful process, if you’ve been through it, and lucky enough for us, we were able to, you know, continue to grow and get through it. It didn’t put us out of business. But it was really painful.
Matt DeCoursey 45:23
I think for me, the key thing here is know what your know what you’re getting into know you’re biting off, like, can you chew it? Can you swallow it? Can you? Is it is it the right size? And, you know, I think when it comes to some of the things on this list, like you talk about some of the like facilities and stuff like that, like, I think the rule of thumb is usually you should be bursting at the seams before you move into a bigger place. I think a lot of people like oh will grow into it, you went through that the SAC fire office did that Full Scale. Now part of that was pandemic driven, which, you know, like, I mean, some of this stuff, you can’t get money back, you’re not getting the money back, when you customize a build on a place that you don’t end up using. And, you know, the question is, is it’s back to almost like your parents, do you need this math? Or do you want it? And there’s a big difference between the two man like needing and wanting like, you don’t need a bowling alley, you don’t need a fucking bowling alley and the office and also it might be really loud. I mean, that’s what I’m thinking. But, I mean, that’s the that’s why you have shows like Silicon Valley that are poking fun at some of this stuff, because it’s like it’s an arm race. It’s an Arms Race of stupidity. In some regards, and, you know, the if you get viewed as having the inability to handle the money, and it’s just, you know, like, go tell your investors, you need more cash, because you know, you needed a $4,000 computer for everyone a $3,000 desk, and a $600. Chair. You know, like, I mean, some of that stuff’s gonna come back to you and and haunt you. All right. Moral of the story, don’t grow out of business, Matt.
Unknown Speaker 47:11
I’ll see you next time.
Matt Watson 47:12
All right. See you man.