Read any business headline today and you'll see layoffs. That's a big clue - people are expensive,
and they are the most sure-fire way to lose money fast. If you have never been in a position
where you had to determine salaries, find people, pay recruiters, and fit it all in a budget, sit down with a
calculator for a while and do some math. You'll see how quickly millions go flying out the door when
the staff ramps up.
Really, go get a calculator and do it - don't feel silly. Feel relieved. There are a lot of CEOs breaking out
their HP19bII's and doing that math right now, except they've already hired the people. While you're having a
beer with your partner figuring out how many people you'd like to hire some day, that CEO is sitting alone with
a bottle of whisky adding up how many people to cut.
So the first thing you want to do is take the old adage "you've got to spend money to make money",
and forget it. Smack whoever told you that. I've got a better adage, one that's much easier to prove scientifically.
"You've got to spend money to lose money."
Herman Miller Bashing Galore
What kind of equipment do you need? Perhaps lots of computers. Let's say you're starting a software development house
- you will need a few computers for each person. Since we're keeping the staff small at first, that's no problem.
These days, the PC hardware industry's pain is great news for you - PC's are cheap. Red Mercury just bought
a new server for under $500. It handles all of our orders. The machine it's replacing was even cheaper - a
PowerMac 7100 running MkLinux, free from the Crap Closet. Keep an eye on the price tag - it's
easy to go from $1000 to $2000
per seat without knowing what hit you.
How about cheap digs? A startup with impressive office space will only impress the naïve. One of my favorite companies, Bungie, had
offices in one of the worst areas of Chicago for years. Every time the subject came up, one of the OGBs would
relate the story of an employee having a gun held to his face right outside the front door of the building.
Some enraged guy, either trying to snag a wallet or just inspire fear, put a gun to the Bungite's face, and
then for some reason, just ran away. Bungie was recently acquired by Microsoft, and they are all happily twittering
away amid the recently-cleared-for-more-Microsoft-campus-expansion Redmond wilderness. If they had started out
in a really sweet Loop office, well, they would have gone out of business, I bet. They saved some money, nobody
got shot, and the company went on to great success.
Hindsight...
A discussion on thriftiness is an easy sell in these days of impending recession, but believe me, this would
have sounded ridiculous in the furor of 1999. A plan to keep staff small, keep equipment cheap, and keep office
space crummy would have probably been smacked down with a hail of "risk vs. reward" lectures. In place
of "risk vs. reward", I would prefer "you reap what you sow." If you plant some seed, care
for it, and grow it, you may very well end up with some fruit, and more seed. Over the past few years, we've seen
non-farmers dumping truckload upon truckload of expensive seed onto very small lots of land that never had very
good yields in the first place. When the pile of seed didn't grow, no army of people with watering cans or
manure spreaders could save the farm.
Sow your own seeds, care for them, and grow them. DIY. Which brings us back to people. Why not get a modest
group together, start making some money, expand slowly, grow larger, and make more money? If anybody tells you you're being too conservative,
just show 'em today's headlines.
About the Author:
Scott Corley left his previous company in September of 1999 and
almost got involved with three different internet startups. When the dust settled, Scott started Red Mercury in November of 1999.
This article was written from a Herman Miller Aeron Highly Adjustable Workchair with all of the levers and switches,
so take any advice from Scott with a grain of salt.
All links in this article are for reference only and are not sponsored in any way. That said, if you need a shipping address for the whisky link, we can provide one.
Send comments, criticism, and corrections to mmceo@red-mercury.com
Monday Morning CEO appears on the first Monday of each month.
The next column will be available Monday, May 7, 2001.
