Never Take Your Foot off the Gas

YEA

I have been working with a software startup in Tampa, Florida for
the past several years. I was with them from the idea phase and have
helped them develop a strategy, fine-tune their product offering, and
have even designed several marketing pieces for them, including a new
logo and a website.
They are a bootstrapped company and have no outside investors other
than the original founders. The first year of their operations they did
an amazing job and were able to turn a profit off of booking roughly
$1.5 million in revenue. They tripled the number of employees adding a
dozen or so developers and were keeping each of them busy with well
paying projects.
Around November of last year they became a little concerned that
they were growing too fast. They had over a half dozen projects that
looked like they were all going to go through. The combined revenue for
those projects was double the revenue of their entire previous year and
they would all need to be completed within the first 4-5 months of the
new year. The rapid growth presented a serious problem as they felt
they would not be able to maintain the company`s integrity and fulfill
all of the projects even by hiring as fast as possible.
Then they committed the unpardonable sin. They took their foot off the gas.
Realizing that they couldn`t possibly fulfill all the promises they
had made and recognizing the strong possibility that all of the
outstanding contracts were likely to be signed and executed within the
next 30 days, they stopped pushing marketing efforts and told their
sales team to hold up and wait to see what would happen with the
current contracts before pursuing additional opportunities.
In the end, none of the contracts were signed. Each potential client
offered a unique excuse and by the end of the year, they had no signed
contracts, no work for their employees, and nothing in the pipeline to
produce new leads. Even worse, they had to begin filling the pipeline
in one of the slowest times of the year.
As a result, they lost a few key employees, had to lay off a few
more, gave away some profits by lowering new bids and were eventually
able to sign a few smaller contracts to keep them busy while they were
looking for larger opportunities. Their company is back down to the
size it was 18 months ago and they look like they might be able to
repeat the revenues from their first full year of operations.
In any bootstrapped startup venture you must remember that Cash is
King! You must run every facet of your business with that thought in
mind. Billing, sales, and contracts are important, of course, but none
of them replace cash and you need to make sure you have enough cash on
hand to make it to the next payroll cycle. Promises of cash and a log
jam of potential contracts are not enough.

Nuevolution

CraigL,I agree with you... What if things did go the other way? How were they going to  handle all those accounts? What if they couldn`t deliver the software to the clients as promised? What if the customer gave them a down payment and since they didn`t deliver on time they canceled the order? I think that it was a wise decision for the owners to take their foot of the petal. In business you need to know when to press the gas and when to let go and take in as much as you can, there is enough for everyone out there.

bert

My past experience says they all will not turn at the same time even though sales says they will, but that is another subject.  Lets look at this another way.  It sounds to me like the real problem is they were not using the price of their custom projects help to control their job load.  It is always better to have potential customers leave the table because they could not afford it.  And if they cut the deal with any of them they will have the money to increase their staff to handle the load.  Use supply and demand to help you grow and prosper.  This is what I meant about using the contracts to control things better.  I just was not clear.  Custom software is much different that off-the-shelf software.