tech-company, accounting, debtForgive me if the question is too broad or not appropriate for this category.
History: About 10 years ago a professional creator of content (music) decided to create the greatest sounding recording of all time. Basically it was a success. From that a company was born to sell this great sounding music to the world.
He is professional genius when it comes to the quality of the content as well as Business (sell life insurance to a dead man). However, it’s fairly safe to say He is nearly retarded in terms of technology. This is where the problem started to occur.
He had the product, had the sales chops, had the friends to help build excitement and then we had to build an online presence. So we through together a bunch of random code build by random people and had a very very VERY poor excuse for an e-commerce store.
Fast forward 10 years and the store technology is the same, there’s Loads of debt, the team is still only 3-5 people depending on who’s helping out at the time and monthly expenses are double the sales revenue.
We continue to release product through this horrid shopping technology because making half of our overhead is better than none. because of such poor technology it takes about 30 hours to release one product. So the whole week is spent just trying to release something.
There are 4 main pain points stopping us from advancing.
The reason for the pain is that we are somewhat successful. We have an email list of 30,000 people and We have about 7,500 customers overall. And we were the first company in this niche to develop a retail store and sell products.
So, after 10 years of branding and training 7,500 people to use a certain site, it’s potentially dangerous to change everything. Plus the amount of money it would take to build a store is out of the question. So after 10 years it feels like we are still in the 14-16 startup months of a company except with the massive debt.
Now we are faced with others with big bank accounts who have entered into the market (that we created), only their websites are $200,000 custom technology and are’s is a $50 paypal connection that is incredibly unstable and could break at any moment.
Each product requires contracts to be signed and to have third party vendors agree to our terms. We have never had a laywer write these contracts so they are different every time and no standard contracts for percentage splits are setup.
Finally, the accounting and reporting system is so convoluted and takes such manual labor to configure, It takes the rest of our time just to deal with that.
I joined the team about 8 years ago as a very low level employee (trash cans and vacuums) and have been on and off the whole time; most recently leaving for 2 years and now back in a more prominent role. My job is to increase profit, simplify the technology, improve the online ecommerce system, and transform the company into a $50M business that can sell in 4-6 years.
My problem is with lack of money and constant anxiety about bills, whenever an investment or loan comes in it can be used in a few different ways and with debt one seems to be the bosses choice every time leaving the rest to continue to suffer.
The money always goes to paying the employees and investors.
The very last piece of this puzzle is the employees. We don’t have money to hire the real heavyweights surrounding us (past startup execs) or even freelance web development teams. So we’re stuck hiring people passionate about our niche market and our product (which is good) but who aren’t experts in a specific job. Example we have no expert web developers, no expert legal team, no expert marketers, no expert writers, etc… So we either train the cheap staff and hope they grow into a good employee, or fire people (and lose the creative juice and energy created from passionate people) and hire some freelancers to build the technology we think we need to improve and grow.
My question: How does a struggling startup recover from debt, when the debt is stopping the company from creating new products, innovating the technology, hiring true experts and finding new customers with marketing/advertising campaigns?
In a sense, the lack of money is stopping a company who has proven theirs a market from capitalizing on that market because there’s not enough money to get up to speed and stay inline with the competitors in the market.
UPDATE: Plan of action steps in order
Second Update: We have decided (with my under appreciated guidance :-) to change “elevator pitch” to a much more simple message. It is was less sexy of a pitch than the original, but my impression is no investors will touch a company so convoluted. A simple clear vision for steady short term growth will stabilize the company and allow for realistic projections based on customer interaction. Since my vision and switch a few of the investor/advisors who lurk in the corners waiting for something to make sense have expressed more interest in our new vision.
The vision: We changed from trying to disrupt a niche industry and now are simply an online retail store in need of funding to build a better e-commerce experience.
I started writing an answer telling you to follow the money, cut costs starting from high to low and increase revenue starting from high to low, but I realized that’s 1. obvious and 2. might not be possible easily.
Honestly, I see two ways to go here, either make a plan, think everything through and pull the company out step by step. We don’t know your market nor your company, so nobody here can tell you how to do that specifically, or get an investor.
You already said, your situation resembles the situation of a startup - you got some potentially valuable assets (customer base ..) and an idea that could generate money but isn’t. You say others with more money are coming into you market. The way I interpret this is, either you get someone with good money and good business understanding and let them help you or you’ll slowly drown.
Now, the first suggestion to pull yourselfs out of this does not seem too feasable after reading your question again. It doesn’t sound like everyone’s just waiting for the masterplan to suddenly turn everything around, it rather sounds like you are missing some serious expertise and playing against the clock, so you might not have time to develop that expertise anymore.
Therefore, my suggestion, from only knowing your question and therefore far from optimal, sell. Sell the company or sell some stock, whatever you do, find somebody that wants to capitalize your customer base and has the knowledge and experience to get you into profitability.
The short answer is you MUST get the debt under control. You can make it manageable by lowering the monthly payment via restructuring, selling assets OR you can make it manageable by bringing in more revenue via selling product or bringing on investment.
But you also need to realize that sometimes companies just aren’t worth saving. That’s always hard. I’ve been in similar situations a few times. Once I shut the business down. Once I slashed expenses and took the meager profits out over time. And Once I brought in two partners/investors and turned it into a very successful company with dozens of employees and millions of revenue.
I’d love to know more details if you want to private message me. Good luck!!!
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