Does your business model suck?

A smart person once said,

“The main job of a CEO is to not run out of money”.

Ya, no shit.

Don’t run out of money, you idiot! 

So why was this so hard for us at Classy? Even after draining our 401ks and maxing out a few credit cards. It was never enough.

We turned to investors. The first guy to believe in us was Steve Smith. He put in $100,000. It felt like a million.

But it didn’t last long. We were soon facing another payroll we couldn’t afford.

So we started asking other people for money. Anyone really. My aunt put in money, then my cousins, then one of my best friends from High School, Chris. I even got Carrie, my girlfriend at the time, now my wife, to put in $7,500 after two bottles of red wine.

Again, didn’t last long.

I was jealous of companies that seemed instantly profitable.

How the hell were they doing this?

It’s not like we were paying our people a ton of money. Or had a fancy office. Pat and I weren’t paying ourselves anything. We even downgraded our apartment, where I slept on a mattress in the living room, and ate Rubio’s Mexican and pre-made sandwiches from 711 to save money.

But this is no way to run a business. It’s survival, at best. Yes, do what it takes, and all of that. But something was off. Really off. You probably think it was bloated expenses, or lack of customers, and you’d be wrong on both.

It was our business model. 

Does your business model suck?

Too many founders lock into an early model and refuse to change. Type of customer, pricing, contracts, invoicing, refunds. All of it matters.

Imagine I hand you a big box with what looks like the end of a vacuum cleaner sticking out. On the box I wrote, “Your Cash Machine”. You notice an on-off switch on the side.

“Turn it on,” I say.

You do. It starts to rev up. What happens next depends on the strength of your business.

Does your cash machine start spitting out new cash from the vacuum cleaner thingy all over the room?

Or, does your cash machine start sucking all the cash from your pants pocket, eventually hanging onto your leg like a needy dog?

Our cash machine was the second kind.

It not only took my last remaining $20 bill, it sucked the pants right off my body.

The fix wasn’t cutting costs. It was understanding our business at a cellular level.

What were the variables in our model that made cash go up or down? We listed them all. Then we went after them one by one.

The biggest one for us was billing. We were charging customers monthly, like every other SaaS company at the time. So we ran an experiment. We started asking new customers to pay their full year of subscription up front. To our surprise, most said yes. The ones who balked got a discount to do it.

That single change flipped the machine.

We went from sucking cash to spitting cash.

We finally had our cash machine.

⁂

Till next time,

Never say die 🏴‍☠️

Scot

→ scotchisholm.com
→ highlandacademy.com

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P.S. That’s what a financial plan does. It forces you to understand every variable, find the levers, and pull the right ones. I wrote the full playbook on how to build one here:

→ How to Build a Financial Plan for a Startup Business

I also created a whole Highland kit around this topic too. Masterclass, instruction guide and summary template. Get it here.

🐐🏔️