Part I
Part II
Part III
Part IV
Part V
This is a story from an anonymous answerer on reddit.com.
Our timing was horrible. Walking away from $3M a year business while trying to build a new one with little funding was more wishful thinking than anything. We also had a dozen employees to feed. The founders and I never took a salary because we needed to reinvest all the cash back into the business. This was a real stressful time. My marriage went down the toilet. Not earning an income from me for 5 years changed the dynamics of my marriage. I was no longer the “man” of the house.
The world nearly came to an end by 2009. I had no income, the pivot wasn’t going well because new business didn’t pick up fast enough to offset the lost revenue from the old business. The market and the economy came to a halt. Something has got to give, as it turned out, it was me.
I got divorced, laid off most of my staff. With my divorce finalized, I was back down to $20,000 in the bank. But I had to fund payroll. I was also kicked out of my former home. Not wanting to spend money on rent, I moved into the office broom closet with an air mattress (the picture below was taken using a fisheye lens, a lens with a normal angle of view couldn’t capture the whole tiny space. My head was against the other end of the room).
To make matters worse, we were late on our office lease, got cut off from our vendors and owed the bank a pile of money. I finally hit bottom again. I was broke and homeless.
There were days when my then 6 year old son came to visit me in the office, knowing full well that I lived out of the office broom closet, yet the little boy never displayed any shame or embarrassment, it was as if he knew I can work my way out it. How could I possibly not be motivated if my little boy is unfazed?!! Of course we couldn’t help but turn a bad situation into something fun, so we would bounce up and down on the air mattress just goofing off.
Living out a tiny space with a few possessions makes one realize just little material things matters, I felt like a child again, my head was clear and uncluttered. My employees knew I was living out of the broom closet but no one talked about it, life and business went on as if nothing is going on, even though the whole financial system was in a train wrack. I kept telling everyone day after day just hang in there. In business, success is all about survival. We have to do anything we can to just not die!
It was obviously a dire situation in my life and business at the time, but the funny thing is that I wasn’t sad or angry. I actually found my situation comical. I had always bragged to others that I came from nothing and I wouldn’t be afraid to go back to nothing. I got my wish, now what? I knew I couldn’t stay in the broom closet for too long, it was against the building code. My gym membership (where I took shower everyday) was going to be cancelled because it was a family membership from my ex’s workplace. I had to get back to trading again.
The irony of starting with $20,000 to trade didn’t escape me. This was 2009, a time with extreme market volatility. It was great for a day trader, but I had to be extremely careful not to get stuck. The overnight risk was tremendously high. Fortunately I still had some of my old trading moves, pretty soon I was making enough to make some of the payroll and hang on to my key employees. I renegotiated with our landlord, banks and suppliers to allow us to float a bit longer. I intuitively knew at the time that the worst recession of more than fifty year was going to wipe out a lot of our competitors. All we had to do was to stay alive. I needed to do anything possible to do just that.
It was during this same period I helped out a tech support guy from a competitor of ours. Let’s call him Joe. Joe was recently laid off, his home was foreclosed and the entire family with three teenage kids had to move back in with the grandparents. I sensed the same burning desire in this guy to succeed after his financial failures. I offered Joe a job in sales instead of tech support. We worked together on the company’s sales efforts by going after some of old accounts he supported at his prior job, we managed to poach a few this way. It gave us much needed confirmation that we were on the right track.
By early 2010 I was able to move out of our office broom closet, I turned $20,000 trading stake into $250,000. It gave the company much needed breathing room to survive. We were also able to land our first big customer with our newly pivoted product. The large customer has far flung operations all over the world (it is a household name), so the obvious question for them was how this little company with now only 6 employees can support them. I went back to something I learned from getting my first sales job, namely offering them something that is very difficult to do for free as a trial. We integrated our product with their legacy vendor’s product while adding a software layer to allow easier, scalable workflow while saving the customer money. This took us a few months worth of sweat labor, but at the end we were able to deliver something a competitor nearly 100X our size couldn’t deliver. To service and support the customer, we outsourced the deployment and installation while managing the entire logistical process to ensure a superior customer experience. To go one step better, we wrote an entire manage suite to monitor their operations and the health of our product to make sure all failures and bugs flow back to us immediately, so we can proactively fix the problems even before the customer is aware of any issues. The bottomline, making sure the customer always interact with our product in the best possible light. We finished the year with $1M in new sales.
With the success of hiring guys like Joe, I wanted to model our company after guys just like him and me, underdogs with attitude. Half of the company are development staff, people from all over the world. We have Russians, Romanians, Indians, Chinese, Latvians, Germans, Italians, and so on. We also have people with non computer science background who learned in unconventional ways too. Folks with majors in geography, math, and even an ex-fisherman. The sales and support staff are equally diverse, most do not have advanced degrees, some with serious family problems and personal failures in the past. But they all know we are in it together. This tight knit group has push the business ahead much better than I could have imagined.
Four years later, the economy has recovered and so have I. My company did $20M in sales in the past 12 months and we are on pace to do $50M next year. Much of this had to do with the effort of tech support turned sales guy Joe. From a starting salary of $40,000 back in 2010, Joe made $750,000 last year and he will bank more than $3M this year from sales commissions. In early 2015, Joe took care of all the bad debts from his past and bought his family a nice horse ranch right outside of Seattle with cash (no one would finance him still). The day he bought his house, we sat in the office conference room with a check for his new home, we looked at each other and nearly cried. We understood each other for the shared journey we both went through. Some day Joe should be telling his own story on Quora.
With gross margin in the 80% range and plenty of cash in the bank I paid myself $1M. The business is probably worth 2-3X sales in private market value, so anywhere between $100-150M as of this writing. I am pretty confident it will be able to do $300M in sales in a few years due to our backlog. So the number of $1B is entirely possible. It is probably safe to say that I am firmly back in the 1% again. I hope to stay there this time.
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Tags: how to be rich, how to face failures