As you add resources to your business or your life, you still need to keep your cash flow heading in the right direction. Obviously, you don’t want to begin hiring if doing so is going to put you in the red. But as you hire, you need to be clear in your mind, and with those you hire, that if the business becomes less profitable, you will have to decrease resources. This may seem harsh, but if you have employees in your organization who are not getting you to cash, it puts the whole company at risk. It is better to lay off those people who are not performing or creating value so you can create opportunities for more employees in the long run.
I was a middle manager in a company that hired a lot of employees but did not become profitable. That company waited until it was completely out of money and had declared bankruptcy before telling the employees they were out of jobs. To add insult, the employees were let go without being paid for their last month of work. Blind bliss is not bliss at all. It would have been much better for every person in that company to have been laid off when the problems started so they could begin their new job search, rather than wasting a month doing work for which they would never be paid.
In your life, you have to do the same thing. When you get to cash, you can spend a little more money adding resources such as a house, a car, a computer, or just some things that will make your life nicer and more efficient. When times get tight, you need to immediately tighten your budget and stop adding those resources. If times get really tight, you might have to sell off that nice car to make ends meet. The key is to always keep a close eye on your bottom line. Always stay profitable. If you’re creative as you think about adding resources, you may be able to make more progress and spend less money.
When we began to add resources to CastleWave, the business Ron and I bootstrapped with only $5,000, our first significant hires were not college graduates. They were not even college students; they were nerdy sixteen- and seventeen-year-old high school boys. In our drive to profitability, I needed to add the resource of engineers. I knew I couldn’t afford to hire engineers at the going rate, and I also knew I could train people who had a working knowledge of computers and the Internet to do what needed to be done. It hit me one day that my labor force could be found among my teenaged sons’ friends. My only concern was that I needed them to have a strong vision, so I told them, “When you walk in this door each day, you’re no longer seventeen. You’re an MBA graduate from Harvard, and I expect you to behave like one.” And guess what? They did exactly that. They grasped what I needed them to do, and they bought into the company culture. It probably didn’t hurt that we paid them far more than they could have earned flipping burgers, but for a number of strategic reasons, those kids were so excited to come to work, they would sleep on the couch some nights because they were totally vested in what we were trying to do.