TC#016 - Protect your leverage

It’s fresh in memory and a very important lesson we learned in the last few months.

If you are a technical founder of a tech agency, you are most likely going to get yourself involved with projects if you’re short-staffed.

It’s so tempting too, the project is ready to start and you don’t want to disappoint the clients or keep them waiting so you decide to jump in. What’s the worst that can happen?

You miss the forest for the trees.

It’s possible that the reason why you think your working on the project is better than delaying or short-staffing until further hires is a better option because before you had the project, your entire life was occupied by winning it. It seems natural that by the time you do win, you feel like you have nothing else to do but execute it.

If that’s you, congratulations, you won the battle … and lost the war.

Ok, that’s hyperbole, it’s not that bad (or is it?).

Fact of the matter is, the time you as the founder spend occupied by projects is the time you could have worked to bring more projects. Make more hires. Grow.

And the more projects that you get scheduled, the more day-to-day management you need, and the more tasks get slept on. And by the time you wake up to it, your business is X months behind.

Do not let the money in the bank fool you. Your job is to monitor monthly growth, not revenue. Revenue is a static figure and offers a sense of comfort if you’re coming out of bad times. But burn rate creeps up the longer you sleep on it. Your existence depends upon growing the business, not patting it in the back for taking care of itself. Your employees will demand raises eventually. Your vendors will rake up prices. Your government will screw up and inflation will rise :(

A static growth rate is a death sentence.

As a founder, you should be working ON the business, not IN the business. Sounds like a common sense advice, but how many times have you found yourself making this mistake?

Here are a few remedies:

1. If your numbers are looking good, there’s no harm in keeping reserve hires. Bootstrapped agencies are often averse to having bench time because it seems unproductive on the surface. That is only true if you don’t know what to do with them. There are at least 5 things you could be making your reserve hires do that will create further leverage for your business. More on that in some future post.
2. If your numbers are not good, and you are barely meeting costs, consider being honest about it with your clients and let them know that you only have this much capacity to begin with. If they want the full thing, they might have to wait. "But Rassam, that is terrible advice. What if I lose the client?" -- that would only happen if you don’t know how to have an adult conversation. In majority of cases, the clients will understand. It’s all about the way you phrase it, “We only have capacity to place one engineer at the moment; I can jump in to fill the gap, but I may have to switch later on; would it be a terrible idea to start with just one for the first month?”. If the client says no, and you are really pressed for work, then it’s time for you to jump in but do not forget the switch.
3. Make alliances with agencies similar to yours. If they have capacity and you don’t, that’s the perfect time to strengthen the relation.

If it seems like a really terrible idea to make any objection at all to the client, then your problem isn’t lack of leads or work. Your problem is vague positioning that provides no moat to your business. If your positioning is right, any lead that comes to you should have a really hard time finding your competitors. That should give you the breathing room to suggest your own terms.

Remember, your leverage is your greatest asset and you need to get very, very serious about protecting it.

That’s it for today’s?Tech Consulting 101. Be sure to subscribe to get weekly updates right in your inbox.