Fist Fight at the Board of Directors Meeting – Part 4

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In Part 1 I told you the story of getting in everyone’s face at a ‘friendly’ company dinner party, and how if they didn’t do their friggin’ research they’d fall flat on their happy faces.

In Part 2 I told you about getting in El Presidente’s face about the fact that they weren’t even running an actual business because after 2 1/2 years they still had not demonstrated that they knew how to MAKE ONE DOLLAR.

Then in Part 3, El Presidente struck back, accusing me of being a small-time player whose only expertise is creating income, not building real companies. He offers to buy my stock back for $100,000 at the end of the year, which would be a nice ROI.

I write the board members:

I called [Board Member #1] on the phone and ranted at him for a half hour last week. He says, “Perry, it’s really good to have a different perspective on this, I like your contribution.” Well thank you so much, that’s nice, but my perspective is not a “different perspective.”

Truthfully it’s the only way I know of, to keep this whole thing from sailing over a cliff in a burning bus.

If I do not see a radical change in the direction of this company in the next 30 days, I will resign my board position and mentally write off the money I invested into this company as expensive experience. In the future I will only invest in companies that are willing to demonstrate in advance that they know how to “make one dollar.”

It’s time to do something here. Are you guys ready for a change?

Perry Marshall

I get this reply from Board Member #3:

I’m on board.  I made the same comment to El Presidente. For the same reasons you cited plus misappropriating $30k of my money makes it hard to ask others to invest.  Thanks for sending this.

I get this reply from Board Member #2:

As you have so adroitly explained in your e-mail, you would prefer the company take a more snail-like approach to growing: make a dollar, invest it back, make another dollar, invest it back, and continue making progress at a slow scale until the business is self-sustaining, and without the need for large amounts of outside capital.

El Presidente, on the other hand, having been directly involved with the rapid growth and taking public of a prior employer; has seen just how successful a company can be; and how quickly it can grow…………..”if” it has the support, resources, manpower, and capital…….to accomplish that level of growth.

We knew from the beginning that the “goal” was for the business to be a big one, and NOT for it to be a small venture from El Presidente’s garage or basement.

I thought you especially, having already spent years helping entrepreneurs build their businesses to a higher level of success, would have reams and reams of names of people you had helped make successful; and who would (as fellow entrepreneurs) have likely jumped at the opportunity to be a part of this vision and business idea.

Thus, I could never understand why you have never been able to bring any of those people to the table as investors. The same is true of some other board members who I knew had very strong business contacts.

It turns out that [Board Member #1] and I have been the most successful in helping raise capital for the company even though he and I are the ones with the most “restrictions” in that regard. Despite being in the financial services business, we are unable to contact our own clients and talk to them about the idea. So we have never done so.

Given the fact that we have those professional restrictions, and you and other do not, it has always baffled me as to why you have not been able to be successful in the raising of capital for the business.

(Don’t you love it? He’s asking ME for money! Again!!! And not just me, but you! I guess he learned the ABC’s of selling – Always Be Closing! Sorry for the interruption – back to his memo..)

I agree with the path the company is currently following. Thank you for your input.

[Board Member #2]

I’m trying hard to restrain myself. I volley back:

My point is not that it is bad to raise capital or to have a large vision. Or that we’re supposed to work from a basement.

NOT AT ALL.

My point is that this company ought to have a functional sales model by now and it doesn’t. That “sophisticated” people may not seem to understand that, but they ought to. “Unsophisticated” people certainly do. When someone stands up and points out that we’re ignoring the most very basic disciplines – and then people with suits and ties and MBA’s chuckle – I see that as cause for alarm.

2 years into the development of this company it still lacks a business model. I agree, the market is viable and growing. But being in a viable market is never enough.

Nobody has a clear idea how this company is going to make money, what it’s going to sell, how much or when; at board meetings there is almost no focus on holding El Presidente accountable for growing sales of the company and meeting sales benchmarks. All the conversations are about raising money and negotiations with trivial people like acquisitions of other tiny companies etc etc.

"What should I do next to grow my business this year?" Take my 2-minute quiz and I'll show you where you'll get the most bang for your buck.

The attempts to sell our 40,000 members anything at all have been weak and poorly executed.

We also need to recognize that there is no such thing as “version A” of business in the world for small businesses, and a “version B” that only big companies participate in. ALL businesses operate on the simple principle of acquiring a customer at cost X and achieving Y revenue from those customers in Z period of time. There are no exceptions to this.

There should be no reason why anybody needs to raise $16 million of capital before they ought to be expected to demonstrate their ability to do this. From what I can tell, nobody is even trying.

I understood that I was being brought onto the board because my expertise in selling to niche markets on the Internet would be employed.  I invested because I believed this to be true. The only expertise of mine you have tapped, has been used to only spend money (on Google, which is fine in and of itself) but in no way has that expertise been used to help the company sell anything.

The response from people who are borrowing money and not selling anything has been to pat me on the head and make belittling remarks about my business and the nature of my customers.

When in fact my customers businesses are making money and theirs is losing money.

They are eating, while our employees almost literally starving.

Small businesses, even bootstrap businesses that have proven business models, can and are quickly scaled with investment capital to become bigger companies.  At my previous job we grew a business from 1/4 million to $4 million in 4 years with the help of angel investors, and sold the firm for $18 million to a public company.

We were able to do this because we proved that we knew how to make $1 first. Don’t think for a minute that I am unfamiliar with the process of growing a company with investment capital. Or that I think it’s unnecessary.

I could bring you investment money and would be happy to do so IF El Presidente had the proof that when he spends 75 cents to get a customer he gets $1.50 back in a specified period of time. The people in my world understand that and they do have money. It should not take 2 years and $2 million for a company like this to still have no idea what it’s going to sell or when.

El Presidente’s retorts about Facebook and Yahoo and me having no $1 Billion Customers (BTW I do have customers in the tens of millions… including [Company Z], one of the largest and most successful [industry] firms) only underscore the fact that [Company] exists in in the very kind of niche, almost “fringe” market that he is making fun of, which I specialize in.

Sooner or later, [Company] is going to have to play by the same rules as any real business in order to survive; because [Company] is not going to be another YouTube. Anybody who thinks otherwise is drinking Pink Koolaid.

I don’t understand, sympathize or agree with the strategic path this company has followed.

Sincerely,

Perry Marshall

My email gets us nowhere. At this point I resign from the board.

  • You will recall that El Presidente had said, “On December 31, 2008 we will meet for lunch and I will pay you $100,000 for your stock.”

That would be a hot bargain any day of the week.

I didn’t even bother to try to schedule lunch with him.

Why?

Because he didn’t have two nickels to rub together, much less a hundred thousand dollars.

How do I know that?

Because several months later, quite by accident, I bumped into a guy whose wife worked for the company. She had a customer service job.

She hadn’t received a paycheck in 2 months. She was being asked to lend her paycheck to the company based on her belief in their vision and mission.

If she can’t get a $1500 paycheck there’s no way on earth I’m going to get $100K.

I cut my losses and walk away. It is NOT worth my time to try and fix this company. Laura, my wife and human BS Detector, agrees. (She’s tried to unsubscribe from their emails and the unsubscribe link doesn’t work… she emailed El Presidente to have him personally take her off the list and she’s still getting his emails… you’re probably starting to get the drift.)

As a matter of fact, if they GAVE me the whole company outright and made me El Presidente, I’m still not sure it would be worth my time. Even though… heck, I’ve got Bobsled Run grads that could turn this thing around and make it profitable by December 31, 2009. (Of course they’d have to fire the board of directors and El Presidente and basically start from scratch.)

Sometimes you just have to cut your losses and do what works. I’ve got my own business to grow. I don’t need their problems.

Just because you can fix something, doesn’t mean you should!

HEY WAIT A MINUTE –

I just got a shareholder letter a couple days ago. Story’s not over yet. There’s a new development. I’m supposed to sign all this paperwork and have it notarized because something BIG is coming down. Really big.

What is it?

Saga continues in Part 5…..

Perry Marshall

P.S. You got any stories like this? Post your comments below.

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About the Author

Perry Marshall has launched two revolutions in sales and marketing. In Pay-Per-Click advertising, he pioneered best practices and wrote the world's best selling book on Google advertising. And he's driven the 80/20 Principle deeper than any other author, creating a new movement in business.

He is referenced across the Internet and by Harvard Business Review, The New York Times, INC and Forbes Magazine.

83 Comments on “Fist Fight at the Board of Directors Meeting – Part 4”

  1. Your employees cannot eat air and be productive. Sell me the dream, sure, but be damn sure to show me the numbers, process and growth too. Reminds me of the 2000 tech bubble.

  2. I don’t know the history of Fedex, but I just recently read about the history of Southwest airlines and they did the same thing, started out small in Texas and expanded nationwide from there, once they had proof of their business model working.
    The perfect analogy I think of in comparing the difference between Perry’s approach to building a business which is based on proven “paying” customers and El Presidente’s, which is “buying” fake customers, is that of building a house on solid ground compared to building it on a sand – there’s really no hope of it ever being sustainable.

  3. Hi Perry

    Well fast forward to 2017 and I’m reading this sage for the first time. Was there ever a part five? Did they ever go public? Or did they just go bust and a lot of investors lost their money?

  4. We’re a group of volunteers and starting a new scheme in our
    community. Your website offered us with
    valuable info to work on. You’ve done an impressive job and our entire community will be
    thankful to you.

  5. I worked for a ” company ” and could never understand why they had recruited a real dull, boring and thick sales rep, then one day I found out. This guy got the job through his ability not to become angry or stressed in the companies interview techniques !! He was so laid back he was nearly asleep and so thick he did not know what the hell was going on.

  6. I have a friend that has a dream, a big dream that involves Internet security while making it possible to purchase from any smart device. It also can be security for privacy of medical records, any type of club card (Costco comes to mind) where finacial transactions and fees are involved and personal validation is required.

    Esentially it does this by not storing any personal identification or requiring the vendor/merchant to store personal or credit card information.

    I love the concept and IT IS an engenious solution to providing transaction security.

    The problem?

    It is going to take raising a lot of capital to get the banks, the merchants and the consumers all on the same page.

    The banks are resistant to change and in the U.S. there are so many. Here in Canada there are 7 banks and credit unions.

    For the past 8 years the product has been developed in spurts as more investment money comes in, usually from the same small group.

    I have suggested to the president that he consider developing some clients without trying to bowl everyone over at once. An idea about a community merchant club card was suggested. No dice.

    The health institutions and hospitals would love to have security that validates a user because of the high security on medical records. I got names and numbers to call and nothing happened.

    The Costco idea was presented and it was worthy of being mulled over but the end decision was to put all of these ideas into the big pot and look for investment big time.

    I think this is a parallel story, but I wish that there was one customer/client for this business, something to demonstrate that it works and provides a functional service.

    So now there is Best Buy interested because of the capabilities of incorporating aps with the software. A big world bank is interested because it offers a means of validation without having to send Fedex personal ID, which privacy laws forbid.

    What will happen?

    I suspect the original goal is still the primary goal and the result will be nothing, period.

      1. And when will it show up here in your site? Not everybody can go to Austin.

        By the way, you never replied to the email I sent you with the name of the company I think it is. Was I right? :)

        1. Peter,

          Not sure when the story will make it onto the site. It won’t be as complete as what’s in the Austin recordings.

          I don’t recall anyone correctly guessing the name of the company….

  7. Believe it or not…

    I only come to your site to read about the fist fight with the el presidente. It is soap opera. I am learning from this real life experience.

    Your articles on fist fighting lead me to other articles which is benefical.

    No matter how many articles there are out there. I come and check for the el presidente article. It is addiciting. I love kool-aid stories as well. It save my life from misfortune.

    But, I sitting on edge of my chair waiting for the 5th part of el presidente fist fighting.

    I am hoping out Perry wins this fist fighting round.

  8. Perry, its already over 7 months that we’ve been waiting for Part 5. Is it ever going to come? We’ve been waiting with bated breath…

    1. As soon as there’s something new to report. They’re supposedly going public now. Which should be interesting, I think you’ll agree :^>

      1. An IPO? Good thing they didn’t get any real data on if (or how little) they are going to be profitable then

        ;o)

        Just joking! Hope your options vest quickly!

  9. The Five Stages of a VC Start-up:

    (1) Excitement and Euphoria
    (2) Disenchantment
    (3) Search for the Guilty
    (4) Punish the innocent
    (5) Reward the undeserving.

  10. There are companies like this or worse going public every day. They might have difficulties pushing their public offering but it is possible and they might be listed over the counter or such. There are thousands of companies like these over the counter or on the Venture Exchange, pink sheets etc.

  11. My twin brother is just like El PRESIDENTE.

    A few months ago he invites me to join his company to “help him with all the sales stuff”.

    The first six months he spends, spends and spends money like crazy and doesn´t want to hear what I have to say.
    Result: NOT A SINGLE SALE.
    In this point I tell him to give me 3-4 months to stablish a direct sales strategy and ask him to stop wasting HIS money.
    Result: It´s been 12 months since I stablished the sales funnel and sales are SOARING. (some adwords, some AR, some FREE publicity and that´s it)

    BTW I´m just a simple insurance guy and they have this big law firm and of course, they said “what the h…. is an insurance agent going to do for us?????
    “They” are my brother´s partners.

    Now, “THEY work for me”, you know, my systems provide them with fresh leads and they pay me month after month… and all I have to do is adjust something here and something there, and have lunch with them once or twice per month… Thanks Perry. Leo.

  12. This article may strike a chord of many people who have similiar experiencce Perry had. There are many El Presidente(s) out there try to running business while we offer a praticial solution. Yet, they ignore us.

    Our praticial solution may prevent job loss, economy loss, and lot of heartache.

    Perry, you just wrote what our life was in the real world where we are being bombarded by snake oil businessman’s promise of lofty living of business development.

      1. I guess we could estimate the value of twitter to someone like Google as ad space for selling AdSense on by multiplying pageviews by estimated CTR by cost per click. A quick run through of the figures suggests that the AdSense revenue from twitter would only be about $5000 per day (x the number of ad spaces they sell). Most twitter users are going to be in Zimmer frames before these guys make a reasonable ROI on $100M at that rate.

        On the other hand from my tests at the beginning of this year on Facebook (a bit of my own demographic research), Generation Y (the Twitter generation?) seem to have insane click though rates compared with any other group over a number of markets (but not higher conversions except certain very specific markets).

        So if someone owned the real estate on twitter and made their money from clicks (and shiftly cloaked the poor conversion rates per click by bundling it in with the rest of the content ntwork) it could be worth more but it seems pretty marginal.

        If they stuck ads into the message stream too they’d get that large number of mobile users and have an SMS ad platform to add to the web and video platforms.

        I’m guessing the new Twitter investors and their due diligence teams haven’t thought of any of this.

    1. You can’t compare twitter to something like the company Perry is talking about. Twitter has proven value simply because it has access to millions of people that are actively using their service every day.

      100 million should be more than enough to figure out how to make money with twitter :)

  13. I went to work for a small custom lighting company in a sales position working through independant rep agencies. The prior sales manager was a part time baseball scout so he sold nothing at all during baseball season. Their sales when I started were $500K/year and made real products.

    The founder brought in a friend as COO who was a very capable self-taught engineer who could create anything you needed, but was not good with people. I knew both well and agreed to take on the sales position with a commission based package. No sales = no money.

    They brought in a downsized corporate type who positioned himself with the board of directors (all personal friends of the founder) and forced the COO into a shop manager role and created the CEO position for himself.

    This version of El Presidente set up a 5 year sales plan when I started and hoped to be at $1.1 mil in 5 years. When I had sales at $3.5 mil in 3 years and made more than he did, he cut my pay by 30%. Time for other pastures.

    Within 1 year he had negative working capital and convinced one board member to “invest” $300K which just paid their outstanding debt at that time. The last annual meeting I was involved in was postponed until he could get enough additional sales through the door to fudge the numbers into looking marginal. The year end was on April 46th that year.

    They would deduct the money from workers paychecks for buying tools from the Snap-On truck and not pay the Snap-On guy. Needless to say any 401K money was gone by that time.

    By the time the company folded, this El Presidente, who had been an employee and on board with a larger company owned by the same founder finally ran out of smoke and mirrors and was fired. End of story? Not hardly.

    He sued the bigger company for several hundred K for age discrimination and rather than fight a protracted legal battle, the founder gave in and paid him off.

    As I left, and recovered my personal investment in the company I told that El Presidente that I would remember everything he taught me and hopefully never use most of it ever again.

  14. This must be like the most interesting saga on a blog ever.

    Seeing that it’s now almost October 2009, I think there’ll be a conclusion as to the state of the company by the time the series ends.

    Can’t wait to find out.

    Man, you know you’re a geek when you’re actually looking forward to posts written by a marketer and not a novelist; well maybe the two realms overlap in an ideal world but that’s probably a story for another day.

    1. Maybe I can convince some publisher of fiction novels to give me a $40,000 advance on my book about this saga and that way I’ll get my money back.

      1. And this new book would be in which part of my local book store’s fiction department – horror? ;-)

        A fascinating read, Perry – looking forward to seeing how it ends. I’m now hooked on your site.

  15. I had an experience with a dot.com start-up called GoFishHead.com. The owners did a lot of radio advertising, and made it sound like they were the greatest thing since sliced bread (at least up to the year 2000). I answered an ad to sell advertising for them.

    What did they do? They sold online classified ads around the country, for a flat rate per month. Never mind that Yahoo and other big players were already doing this, and the only competitive advantage they had was a cheaper price. Which, as Dan Kennedy says, if you’re in a business where you’re ONLY competing on price, you shouldn’t be in that business.

    Plus – they were trying to “prime the pump” by having folks work for $8-10/hour, copying and pasting existing ads from Yahoo’s classified ad section on to their own, to make it look like they were a viable business.

    I sat in on a couple of their meetings, and it was obvious they just wanted to grow the business and get bought out by Yahoo, AOL, or Microsoft,

    It was a good experience of what you DON’T want when dealing with a new business venture or new people.

  16. Perry,

    Just a quick thought – sometimes companies like Facebook are very reluctant to get into a serious revenue earning phases because it puts a real number on their value. If they can avoid the “acid test” of showing exactly how money they can make they can keep investors persuaded about fantasy valuation levels.

    Could that be what was happening to your guys?

    Warm regards
    Mark

    1. Mark,

      Yes I think that applies here. Though somehow my feeling is that it’s not as much conscious as unconscious. The gritty world of selling real stuff to real people is not as fun as the fantasy you talk about to investors. (Think about it, most of the businesses that hang out in Planet Perry would not have some glam story to tell a roomful of VC’s or angel investors. It’s basically “We sell these coatings for rustproofing metal on our website and for ever $1 we spend on advertising we sell $8.50 of coatings at a 40% gross profit….” which is sensible but not intoxicating.) I really think El Presidente is just afraid of what it is like when the rubber meets the road.

      If you’re selling something that’s not available yet, you can make it sound as good as you want – plus you can ask for a check, and get one, without delivering the product. That’s addictive.

      Reality is no match for a good fantasy.

      Perry

      1. If you want to play hardball I guess you could write a one page plan of what needs to be done and who needs to be sacked.

        This would include some numerical projections based on your own business experience showing how this would remove the need for further investment.

        You then explaining why you pulled out (or will) unless this is done.

        Each of the majority investors gets one.

        You’ve probably got better things to do with your time than replace El Presidente but it would be nice to see things straightened up properly.

      2. The image in my mind is of Luther and the Schlosskirche but I guess FedEx is more the modern equivalent!

      3. Perry,

        Just out of curiosity. How many customers do they have now? I understand that they´re not real customers as they´re not paying for anything (or at least the maiority isn’t or in any way, not enough to sustain the company), but there must be something that keeps those investors not too worried.

        Besides that, as this is a real story, by now the board must be aware of their story being posted on your website. What are their responses? Are they ok with it? In their world it must be known you were a board member. Is anybody sueing you already?

  17. Perry:

    I read in a medical journal somewhere that “if one is born with shit for brains, it is a life-long condition”.

    Cut your losses and go on to the next case.

    Your loss in this case is on 3 levels:

    -1-loss of capital

    -2-loss of valuable time

    -3-loss of positive inter-actions (dealing constantly with all the negative energy and crap shoveled your way).

    When you try to teach people something, most will listen in one of two modes:

    THE LEARNING MODE

    THE REFUTATION MODE

    When you encounter those in the latter category, there is little or no hope (refer to above congenital condition).

    This tale is another indication of the large numbers of people who learned NOTHING from the dot.com bust.

    In that fiasco having a working business model was scoffed at.

    By the way, your literary talents are compelling as you weave a fascinating narrative.

    It’s time to leave all that negativity behind.

    Best of success.

  18. I have experienced this in many different ways:
    I was working as an employee for a company that was put out of business by the president who had grand ideas but could not manage to have a price book that everyone could agree on what products were called or what they should cost our customers.

    I was working for a foreign owned consulting and development company that had this great idea of creating their own customer segmentation tool. It turned out that they were looking to make their money by waiting for other companies to break their patents and then sue them. They were expert patent writers. No one tried to use their patents.

    There were a number of others.

    I have learned through running my own business how to barter, how to get things done for very little cost and very high quality, how to live off of business networking by providing and working only for customers, partners and colleagues I want to work with.

    Keep up the great work. I learn something new from everything you send out.

  19. It is a sorry saga. While I agree that the President has a large and long-term goal, the fact is vision (for tomorrow) must be connected with cost (today). And Perry’s point is correct: it requires a money-making model, that begins iterativelty to pull in cash, ever so slowly.

    My “partner” agressively spent “our” companies money without even a business plan. He persuaded me that he “knew” business; he had the vision!Well, the last agreement we had was that I was to invest $1 for every $3 of his in extra equity. I invested mine; where was his? He walked away from the deal after he saw the writing on the wall. He did end up investing a similar amount to me, but that was after the event. We were a $10k cash-flow out per week and $1k cash-flow in. I was not going to invest any more until there was substantially more slated for similar investment.

    So, I can sympathise with Perry’s “expensive” lesson.

  20. El Presidente will never admit failure, even when it happens. He’ll blame it on the renegade board members who failed to bring in the capital they “promised.” He’ll blame them for failing to reach that magical $16M mark, and will be confirmed by fellow Kool Aid drinkers.

    My question is this: If he was so successful in launching his near-billion-dollar business, and had other successes, why in the universe is it so difficult for HIM to find the necessary paltry (by comparison) investment capital he believes is necessary? Why would he need to have small-fry foot soldiers out there fighting financial trench warfare?

    I’m not defending Perry, because I question some of the strong-arm tactics he’s using to “persuade” people. El Presidente makes some good points in his letter that were basically disregarded by Perry. Add to this the fact that he was doing an end-run around the elected leader and I can see where the interpersonal dynamic was sabotaged and personalities prevailed over logic and common sense.

    1. Paul,

      If you could describe what you mean by “strong arm tactics” and the points in the letter that I disregarded, and what aspects of logic and common sense I failed to employ, I’ll be happy to address your concerns.

      Perry

  21. Warren Buffett was recently asked if the extraordinary events happening in the present economy have changed the way he invest.

    His responds is enlightening at to me.

    He responds that his approach was learned 60 years ago from a book by Ben Graham [“The Intelligent Investor” published in 1949] and it has never changed.

    Principles are timeless.

    How [Company + El Presidente] are still around with everything that has happened in the last year???

    Now THAT is something I would pay big-$$$ to learn.

  22. The last episode in the saga caused quite a storm of comments. I think some people even thought Perry was going to end up on the wrong side of this whole drama. But after reading this:

    She hadn’t received a paycheck in 2 months. She was being asked to lend her paycheck to the company based on her belief in their vision and mission.

    … I have no doubt that if this company hasn’t crashed and burned, it deserves to. It’s one thing to ask people involved at the executive or director level to forgo payment until the company is in the black. And quite another to ask a working stiff to “invest in the vision.”

    I get the impression that while they’re asking their employees to go without pay, they aren’t letting themselves go hungry.

    You’ve got me fired up, Perry. I can’t wait to hear the rest of the story.

      1. Perry,

        Just wondering here, but the investors,…. aren’t they wondering what’s happening with their money? Investors usually want to be kept up to date on the status and start to demand results. Why no word from them?

        1. I’m sure some of the investors do want to know what’s going on. I have no idea what they’re being told, other than the cheeky letters sent out by El Presidente every quarter or so.

  23. At least through the 4 parts I have learned that to gain 40,000 members to anything I must spend, spend, spend…..I have always been accused of thinking too small…..I need a Board of Directors that will give me the 16M!!!!…and if that happens..I’ll give you your investment and the 100,000 lunch, Perry.

  24. PERI you here? We are very pleased These sparks SEASON OF CONFESSION WHICH send me to read and see this as an open BIBLE holding in their hands, while the others can not I to achieve, can not win DAZHE1 DOLLAR BECAUSE BEDNOSTANE allows me to BUY NOR ONE HOME FOR BUSINESS, ONLY ME CHRIS Carpenter GC LAUNCHES ITS HUMANITARIAN DETEKTIV.SRESHTU fee of 1 dollar, and the Watch and do not know how to WIN IT BACK! PRECIOUS praise of his heart! A PERI to you wish to CONTACT MORE ON OPEN HEART!

  25. Perry
    I was only a lowly Mechanical Designer when I started with a company in 2000. Great market- renewable resources. Company President, Dr. (X)is one of the top 50 experts in his field. However, after my first interview, and previous experience, I was able to say to friends that if this company failed it would be because of “Academia”. The man had no clue about marketing and the company failed not just once but THREE TIMES! He could tell the “story” so well that investors would still get sucked in.
    Just ’cause you’re an expert in one field doesn’t mean you know how to run a business.

    And after I post this I’ll be downloading your latest copy of “Google Adwords” as a Renaisance member. Internet Marketing is easier.

  26. And now I’m in a state of shock. This really *is* real time? “Yarn” comes from sailors talking as they mended their nets… nicely appropriate metaphor.. but this ship is still out to sea?

    1. It wasn’t real time before today…. but it is now! The conversation with the spouse of the customer service person, that was in April. The ship is still out to sea.

  27. My comment was a compliment (from The American Heritage Dictionary, 4th edition):

    yarn (yärn)
    n. Informal A long, often elaborate narrative of real or fictitious adventures; an entertaining tale.

  28. I can relate to this story on a much, much smaller scale. I was smart enough to jump ship before it got too ridiculous.

    It seemed they just loved to raise more capital and borrow more money but never actually put forth constructive effort to make money.

    That was largely left on my shoulders — at which point I figured I might as well start my own business instead of getting only a partial share. All the productive efforts were mine — while most of what the partners did was just make things worse.

  29. Perry-

    Sorry for an unintentional implication that you’re fabricating. What I meant is that essentially the whole story has already played out. You’re not reporting on a work in progress. Probably obvious to most but your choice of tenses has led some people to think we’re not dealing with the past.

  30. Gripping stuff Perry!

    We had a similar experience as the main technology supplier to a Silicon Valley venture capital backed company.

    Their burn rate was $300K per month and their number one one sales guy spent six months (a time in which they were unable to close any deals because of his actions), six months that cost his investors $1.8M, trying to save $25K on software licensing costs with us – trying to show his El Presidente what a mean negotiator he was by trying to get the volume licensing fee for a single product.

  31. I agree. I have a guy here that blew through 6 million dollar and has no product. He has an atty, 3 sales people and and stff. all the SR VP and up are making 150k+ and they have not had product for 4 years.

    Why do you need anyone until you have a solution. Of course the employees and owners are family and friends drawing those salaries.

    now they are out of money and chasing investors saying they need 18 more months and 3 millon dollars. They have never installed the software into 1 site so he may be 18 months from a working prototype but another 2 years from a working corporate product. Does anyoe realy want the product? they have no clue…

    Many of these type of guys are just corporate BS guys. Have never ever taken a risk on their own, have never stepped up where they worked unless they can take credit for someone elses work. They have a degree in BS not in delivering any value so they can survive in corporations where incompetence runs wild.
    and you can be a strong headed bully.

    I see these types of guys all the time here in florida and they have a trail of destruction bigger than Katrina behind them. The most obvious are the guys with backgrounds in MLM and Phone businesses.

  32. Remember that Perry is a master story teller; I’m still convinced dramatic license is being exercised and that this entire tale is a story already told. Like a good lawyer, Perry isn’t going to ask a question for which he doesn’t know all the answers. And yeah, this definitely makes a good yarn.

    1. SG,

      This is not a yarn. Other than an occasional grammatical smooth-over here and there and removal of identities, these memos are word-for-word copy|paste from emails exchanged just over one year ago. Those who have worked in a company like this recognize it: Same story, only the names and faces change.

      SG, I sign my full name to everything I write and it’s what really happened.

      Perry Marshall

  33. Wow, I’m always amazed how the “smart” people drive a business into the ground on borrowed money, then shake their heads and wash their hands after they are done running into the ground. In fact, I have a theory that most businesses had good owners who were at least inately aware of direct response principals who either let the company go to some young grad (because they “know better”) or they die and the 2nd in command who went to college takes over and starts making rhetoric like “we are the 1# provider of X and the most trusted”. Sooner or later, company X dies.

    What they are doing is totally irresponsible, and basically a child throwing money around because they aren’t sure what to do with it. Sounds like AIG to me.

  34. As a small business owner, I focus on what Perry talked about above.

    “ALL businesses operate on the simple principle of acquiring a customer at cost X and achieving Y revenue from those customers in Z period of time. There are no exceptions to this.”

    We have no debt, and healthy sales growth.

    It seem to me that this company is focused too much on raising money that to optimize their process for posting a NET profit.
    Sad state to be in. Sounds like a ponze scheme. Get money in to pay for the past problems.

    Before you dream about the clouds in the sky, better to look at the cold hard facts on the ground. How can you make 10 million if you can’t even make 1 MIL?

    Dream big, but stay real to what’s going on.

  35. It’s amazing how many startups that focus on getting more investment money seem to think that sales is not a priority.

    Invest your own money and that view completely changes.

    Sounds like these boardmembers had a lucky shot when a simple .com was still something you could sell as if it was gold before it it collapsed. I remember working for a company that just bought a piece of a .com collapsed company that had lots of “El Presidente” types. When they explained what happened they showed that the focus was wrong and that it’s better to focus on sales first.

    I never went to business school, but isn’t that like the first subject you get in your first class in the first year in business school?

    1. It would be nice if the importance of sales was the first thing learned in biz school, but sad to say, it’s not. They do teach “market research” but don’t teach that you can’t trust what people say they will buy, you can only trust what they actually do buy.
      I’ve gotten on the business advisory committee for the local high school which actually has a very comprehensive 4 year course. Of course, it’s directed by staff who are very well meaning but without any entrepreneurial experience. I’ve volunteered to give a guest class in a couple of months, about marketing! Heh, heh, this is gonna be fun!
      BTW, Michael Masterson’s “Ready, Fire, Aim” book is excellent, and his section on stage one growth absolutely confirms Perry’s position. Rapid prototype a product, see if it sells, rinse and repeat.

  36. Unfortunately I have had far too many experiences with El Presidente’s relatives. I have worked with far too many companies that survived by raising capital – equity or borrowings – which allowed them to put off making the tough operating decisions.

    I have come to see that lack of money can be a great motivator. You make things work or you are out of business. Making things work is a lot harder than raising money in the form of loans or equity. And we all like to take the easy way out.

    It can be tough to swim upstream against the “big dream” but when dreams are not based in reality, they eventually become nightmares.

  37. Yup, sadly I got involved with a ‘company’ that was run by a smooth-talking ‘serial entrepreneur’ – which I found out only after $30K down the drain that it meant he never could make anything work.

    But oh! It was my lack of faith! Only people of vision should be involved! It took awhile and a big loss to finally realize the emperor had no clothes. Ouch.

    Becki

  38. I don’t see how the people Perry’s been fighting could POSSIBLY be on the right path unless it costs more than $16 million to produce a single widget! Even then, they should have a PLAN that makes sense, where the numbers show the profit potential with conservative assumptions. I’d like to know the company name and all these idjit directors’ names so I can avoid them!

    1. I agree with Patrick. It is a great story, but either side could be right depending on the industry. Would be nice to know the business, but it is a good story anyways. I love reading everything you right Perry, but there are 2 sides to every story.

    2. In what circunstances do you think that Perry could be wrong and in what circunstances or niches he could be rigth?

      I think that are principles that are universals, like invest 1 USD and get something > 1 in return.

      1. There are business models that don’t work on a small scale, but do work profitably on a large scale. One example is a network business model. A well known example is Fed Ex. The capital requirements to build a Memphis hub and buy enough planes to deliver between any pair of large US cities overnight was huge. If they had stated with one plane and one pair of cities, they would never generate enough profit to grow the network. It had to start out at critical mass which required large amounts of capital.

        That said, it is doubtful that “Company” is capital intensive in this manner

        1. Dave,

          Exactly right. Their business model is provable from a standpoint of “lets say we have carve every single product we ship out of a bar of soap, for the first 3 months” and they refuse to do it.

          Perry

        2. If you look at the history of Fedex, they did indeed start out with just a couple of cities and as they grew they added cities. If I remember correctly it was New York and Washington D.C.

          The Memphis hub was developed long after they were successfully running just a few cities.

          They had proved their business model before they expanded dramatically.

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