As a bootstrapped CEO, you have to avoid running out of money, that means not letting costs get out of hand until you break even; after which point you want to build up your cushion before re-investing
After IGN bought AskMen and News Corp. bought IGN, I got the entrepreneurial bug. I launched an incubator and saddled with a non-compete, I couldn’t reinvent the wheel and launch a men’s magazine. Seeing the online video revolution take shape, I set my sights on web video as the quintessential storyteller/entrepreneur. I sensed that Montreal was a good base for my ambitions. Given that you want to skate to where the puck is headed and not where it’s at, I knew I’d be in the trenches for a while, I just didn’t know how long success would take to smell. Since the frivolous lawsuit by News Corp. killed off whatever little investor interest there was in content, that meant I needed to stretch the little bit of cash I had. How did I manage to make it work?
While entrepreneurs tend to chase fads and segments where investors are pouring money into, I advise entrepreneurs to focus on areas where they have a comparative advantage, because that increases your odds of success in the war of attrition.
Phase 1 (2006-12):
While the investors in our cohort group peers at Next New Networks and Revision3 recruited experienced executives out of the gates, I served as the CXO and poured every penny to hire young college graduates from creative fields to build an evergreen library. My instincts suggested I was good enough at 1) storytelling, 2) sales and 3) marketing… but I had no experienced in videography and editing. I didn’t draw a salary from 2006-12 while we continued to up the team’s salaries, introducing paid vacations and health benefits (in Canada, we have a stronger safety net). Those years were hard, but I felt like the richest (proverbially) man on earth. I was married and had two daughters, and only once, when my credit card finally got turned down when buying $18 worth of groceries did I feel like “this isn’t any way to live.” I would dream of breaking-even. If you are a sadist and want to read about a masochist, read my piece on PTSD.
Phase 2 (2013-2020):
By 2012, we broke-even but had built a foundation via timeless catalog that served as a base in the years to come. We flirted with in-banner, embedded video but that didn’t seem like legit video consumption to me. We thus focused on sustainable distribution platforms while serving organic audiences to build community with rich engagement. As new distribution channels emerged, we could syndicate our old archives and new output, benefiting from degrees of operating leverage. Our EBITDA grew rapidly as revenues took off.
As labor costs represent the lion’s share of a firm’s costs, indeed our total costs grew as the headcount and average salaries grew, but because of phase 1’s priorities, it was sustainable. I went ballistic and expanded into ten areas, reinvested profits from core unit – the flagship, English-language WatchMojo channel – into new embryonic opportunities, all of which were deficit-financed with zero revenues coming in. I was constantly paranoid about running a business relying on fair use (which is actually a mitigated risk) on YouTube (thus exposed to platform-risk). As such, in the event we were ever hit with a “catastrophic” event, I wanted to have the financial runway to a) retain all staff while b) we found new revenue streams. Venture backed firms may feel differently, but I felt like my team was my “dependents,” perhaps due to my Nature and Nurture. It was wildly idealistic and overtime, I became more realistic, but never became jaded; I wasn’t going to turn my back on my principles.
But indeed by 2018/19, there was a bifurcation:
– the newer employees who were contributing and driving revenues were seeing rapid acceleration in wages but that inflation was sustainable;
– while those who were lagging in money-losing units did not. I felt bad but business is war and over time, I accepted this to be a part of the game.
BTW – When people wonder why I am this transparent, it’s actually my nature… but the broader lesson is never let others tell your story. When the pandemic hit, I realized “why wait to go back to teaching,” so I decided to give back to entrepreneurs because no one really discusses this racket in such a manner.
FWIW, I tend to be a tad more pro-employee than most entrepreneurs (and definitely, investors) given my background, upbringing and the discrimination I faced early on looking for work. As a general philosophy, I generally tell my team that “if I encourage you to go out and fight hard on behalf of the company, it’s only fair that they also negotiate hard on your own behalf.” That doesn’t mean I will roll over and say yes to everything because I have fuller visibility into our costs and risks, but only hypocrites would find that employees who negotiate hard be “difficult.” In fact, I tend to promote such people who know when and how is more critical than what you ask for (even if for any reason I can’t agree to everything they ask for).
This merits #AnotherArticle, but the point is BALANCE: I want a profitable healthy going concern because I got tired of being rejected and d!cked around by investors: no one was going to bail me out. Indeed, smart operators seek to protect themselves before times of duress.
Finally, we did experience a period where we sought to move from being the Oakland A’s (or, Montreal Expos, natch) to the NY Yankees – signing more experienced, expensive veterans. I plan to cover that in #AnotherArticle and relay my lessons and takeaways so you can learn from my missteps and build on our success (TL;DR: overall it was moderately successful, but admittedly not the home run I would have wanted to be, largely due to the new world order media is in).
Your goal ought to be alignment and motivation (and ultimately being long-term greedy). While financial compensation will always be atop any employee’s priorities (and should be), I will wrap this up by saying respect, character, integrity, development and work/life/play balance are powerful aphrodisiacs. Many leaders don’t say “thank you,” “please” and “I’m sorry” when need be; I assure you those are the sweeteners that make you retain the talent you want to build around. That, and giving your talent the ability to work on what they want to work on (within reason).
I have been very lucky, so maybe by sharing this philosophy, you can create your own luck on your course to success.