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The Case Of The Missing Equity! … Part II
March 9th, 2016 by LOONEYEXECUTIVE

A true story taken from the (Mis-)Adventures of The Looney Executive.

 

If you missed The Case Of The Missing Equity – Part I, it might help to catch up on the chaos of this tale and then come back for the rest!

 

…………………………………………………………………………………………………….

So all of that insanity set the stage for a chaotic, unfocused, middling, small business pursuing government contracts. Having advised a handful of distressed small businesses I’d become somewhat of a distressed biz profiler. I’d seen the story before. And the evidence was laid out in plain sight for all to see.

 

  • No core strategy.
  • No focus.
  • Poor leadership.
  • No bread and butter clients (i.e., clients that brought consistent revenue).
  • No nothing else that was superior or unique or special that could be exploited.
  • Chaos all around.

 

Since he and I shared an office I’d been talking to him on a daily basis. I knew the strategy because I was helping to develop it, or at least I tried. He changed it almost weekly. This was an act of desperation. And I understood. I’d been in the desperate zone myself. But my strongly encouraged advice of developing and executing a core strategy went unheeded.

One week the focus was on applying for government certifications. The next it’s on contract bidding for items outside of his niche. We bid on a few contracts. Won none of them. Winning government contracts is a volume game. The competition can be fierce. So in order to be successful, you need to produce lots of proposals. It was a jungle where only the strongest, and best-connected, could thrive. We also discussed a few unique ideas that we could launch. These were ideas that would bring his thinking more in line with that of a tech startup founder. But Ricky just wasn’t of the mindset to think, and act, too creatively. On top of it all, Ricky was focused on his PhD studies. So he’d spend large parts of days doing school work and not addressing the severely damaged ship careening toward a fiery crash.

And yet part of the promo (before I arrived) included such typical and overused mantras as “highest quality”, “number one company”, “most experienced” … huh?

Even with that I was a little surprised when one day, out of the blue, he broke the news of layoffs for some of his small staff, including me. My surprise was not the layoff itself, but that he didn’t give a heads up, and frankly that it didn’t happen sooner. But he offered what he thought was a carrot to keep us engaged. He offered us an equity stake but …

 

There was no “there” there.

There was nothing original that was being produced.

There were no long-term contracts.

There were no patents or other valuable intellectual property.

There was no A+ management team.

 

And there was a lack of trust too.

On more than one occasion Ricky told a staff member that paychecks were on the way when they hadn’t even been mailed yet. He was buying time. Not communicating with staff. Operating on the edge. Sometimes when the landlord came by to collect, Ricky would pretend to not be there. Why the landlord felt the need to collect in person was an interesting phenomenon in itself. Perhaps he too had been told one time too many times that the check was in the mail.

As the team gathered in a meeting to discuss this dire situation, I just asked a couple of entirely reasonable questions. I didn’t want to say outright that equity-for-work was a damned horrible idea and embarrass him. But I needed to know. When I asked the legitimate question of how much he currently valued the company, he blurted out an exorbitantly high number. When I followed up with the question of how he arrived at that number, he became a bit irritated and defensive. He said that he could create any value he wanted.

Clearly he was delusional. I didn’t see this as an outright attempt at fraud. He was desperate. He wanted to think that his hard work over the years translated into something of great value. Unfortunately, like for most of the hard-working 49er’s of the California gold rush, it didn’t.

This model he’d chosen to pursue was a dead end. He may get a few contracts here and there. But without a clear focus, a good strategy, and great leadership he was destined to pilot this ship aimlessly through the coldness of space until it eventually simply crashed.

 

After evaluating the situation my advice was simple:

  • Shoot this miserable, suffering beast as a means to a merciful death.
  • Kill it quickly and decisively. He, and it, would not have to suffer any more.
  • Get a job. Save money. Pay off the bills.
  • Develop better ideas.
  • Start fresh in a couple of years.
  • Better yet, pursue acquisitions as a path back to entrepreneurship.

 

But if he was crazy enough to keep going as a startup entrepreneur … start over with a core strategy around one or two unique ideas in a space that was not a low-profit, commoditized jungle.

Ricky did get a job for a while. But, ignoring my advice, he kept the company open for business doing the same thing. A couple of years later, after I was gone from the DC area, he told me he had moved into a new office park. Same business model though. I always wish him the best. I hope he succeeds.

But the old saying is true … sometimes you just can’t teach a stubborn old dog new tricks.

 

Blake Glenn shares his looney perspectives, stories, and mis-adventures in The Looney Executive blog. He has interviewed hundreds (or at least tens) of people via  The Looney Executive Podcasts and former TV show. He’s the founder of a tech group called IgniteTech, and claims to be a direct descendant of the original Looney Executive – Because there must be SOME explanation … right?

 

If you dare, I can be reached the old school way … blake@LooneyExecutive.com

 

P.S.  I’m actively recruiting test contestants for my business game show experiment. Interested? Please contact me so I can add you to the player pool!

 

 


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