Questions

There is that vicious and endless cycle whereby you need money to hire employees and pay their salary but you need the work to feed them and your business. Sometimes you can't get the work without having the employees in place. Is the best way to break the chain taking a loan (as well as a risk that having the employees won't call forth the work)? Perhaps it's most strategic to first take a smaller financial risk hiring one very strong salesperson who solicits projects that feed the business. Does anyone have experience with this problem, perhaps specifically in the creative and digital agency sphere?

I went through this when I started Spheric Technologies at 24 years old. I did save $70K to start, but quickly ran out of money after hiring 3 people (cashflow almost killed me). The company grew 150% year over year to 30 employees and was acquired in May of 2008.

How I solved the cash problem for hiring ... a few things.

1) Dynamic pricing. When a customer asked me the cost for a project or our rates, I always said it was contingent on the payment terms they could accept - 50% up front, Net 0, Wiretransfer for payments was 20% less then Invoice 30 days, Net 30, cheque in the mail. Here's the trick though - ask them first what they're willing to do for payment terms, THEN use the items above to negotiate :)

2) Hire a recruiting firm that can get you amazing talent at the price you need within 2 weeks - and negotiate paying them 3+ months out. That way, you can pre-sell the work, and feel confident you'll have someone solid to work on the project when it starts (2 weeks isn't un-reasonable to wait.) I set this up 9 months into the company, and it's what allowed me to grow so fast, and ensure we always delivered on the promise to our customers. That partner exists, find him.

Those 2 things 1) Customer Financing, 2) JIT Talent Pipleline can transform your business.

Hope that helps - feel free to request a call anytime to discuss the details.


Answered 10 years ago

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