I’m doing a stay-in business

While all the cool kids are doing start-ups, I’m doing a “stay-in”. That is, I am staying in business after 28 years at it. Just in case you might be wondering, here is one of AnnMaria’s first rules of “stay-in” businesses.

Not all work is created equal

Not only that, but some of it is not actually work at all, in my view.  Key to staying in business is understanding the different kinds of work.

1. Work in large amounts that is done for money by clients who pay on time and which I did not have to expend large amounts of money getting in the first place.  This is my favorite kind of work. This is the kind of work that allows you to hire employees because you know there will be money in the bank when you have to make payroll. There can never be enough of this kind of work. If you get more, you just hire more employees.

2a. Work in small amounts that is done for money by clients who pay on time and which I did not have to expend large amounts of money getting in the first place.  This is the work that fills in the cracks. Because it is small amounts you are silly to spend a large amount of money getting contracts to do $1,000 of analysis here, $2,000 there. This can fill in a few days or week between contracts, so is nice to have. It is also often unreliable because those small contracts tend to come from someone who got in a bind, is on a deadline. You don’t want to hire employees to do this kind of work but it’s a good idea to have a few contractors in your contact list (we used to say rolodex) that you can call up to do a bit of programming, design or whatever. I keep in touch with a few fabulous graduate students and semi-retired people just for that reason.

2b. Work in large amounts that is done for money by clients who pay late and which I do not have to expend large amounts of money getting .  This is the kind of work that allows you to hire employees but also requires you to have a line of credit with the bank so that there will be money in the bank when you have to make payroll. If you take too much of this kind of work, you end up maxing out your line of credit and your credit cards. This is known as a cash flow problem. Take this type of work but BE CAREFUL.

3. Work in large amounts that is done for money by clients who pay late and that I had to spend a large amount of money getting. There is no “pay on time” category here. All of these people take at least six weeks to pay. On top of that, there is usually 2-4 weeks of full-time work involved in putting together the proposal. Almost all government work and subcontracts with large organizations goes in this category. I take a pass on most of these opportunities. If it is say, six months of work and I need to put in a month of work to get it and I estimate our odds of getting a contract as one in four, I am going to evaluate that against what other work is available. If there is any of the first two types out there, I take a pass unless this is a project that really interests me and I want to do it enough to offset some of the risk and late payment.   Of course, AFTER you have gotten the grant or contract, this type turns into Type 2b. It’s not that it isn’t worth doing, but I wouldn’t give up too much of the first two types to go after it. I budget about 10% of my time for chasing business and it has to be business I want to do.

Note! If you take on this type of work, you will need to pay your employees before you get paid. If you have been in business a long time, the people paying you late this month for the work you did two months ago will cover the people you billed for work last month who haven’t paid yet. Still, you are very wise to get a line of credit at your bank and keep it at zero except when you are covering the gap between accounts payable and accounts receivable, which WILL occur with this kind of work.

4. Work in small amounts that is done for money by clients who pay late and that I had to spend a large amount of money getting. Most state and local government contracts fall into this category as does much work done for non-profits. If you have none of the first three types, say you are just getting started, or you have excess capacity in your business, this might be worth going after. One of the very few times I remember that I bothered with this was a partner really wanted to do the project. It was a cause that reminded him of his late mother. So, we wrote the grant for a really small fee, ended up getting it and did the evaluation.

Note! If you take this kind of work it is probably reflecting a bad business decision. In the case of my partner, that was okay, I understood he wanted to do it. My point is we knew going in this was not a big profit-making choice for us. If you have extra employees around that you can assign to this type of bid, you ought to ask yourself why you have excess capacity.

5. Work that is done for free or almost free.  No matter what anyone tells you about it is good publicity, will get you prestige, I am unconvinced that this should be considered work at all. That is why I question whether a lot of these start-ups are actually businesses. If no one is paying you, it’s not work. It’s volunteering. Don’t confuse the two.

If you are working for free, make darn sure that you very, very seldom let it interfere with the first four types of  actual work. It is easy to let that happen because the “work” you do for free might be more fun and interesting stuff like traveling to Hawaii to present at a conference. That’s fine once in a while.

I just found out about another trip I have to make, so right now I am scheduled out of town 85 days in the next 180. The last three invitations I received to present,  I deleted or sent an email declining. Same with the second grant review I was asked to do. (These pay but it is very little relative to the work required.)

Years ago, I quit doing any work that costs me money. That is, if you want me to come out and give a talk for you and you can’t pay my way, I won’t do it. On the other hand, if I happen to be in the area, say, visiting my granddaughters, I might be happy to do it.

Note: While that may make me sound like a prima donna, the fact is, if I have to pay travel expenses, that’s not work, that’s a marketing expense. If you decide to go to East of Nowhere to give a talk on multi-threaded processing, that’s fine if you have it in your marketing budget. I confess to not having a fixed marketing budget written down (my accountant rolls her eyes at me a lot), but I do have a general idea of what I can spend on marketing each year, and I pretty much have that all allocated by April.

I’m not saying that you shouldn’t volunteer. I’m presenting at SAS Global Forum this month, and no one is paying me. I spoke at five SAS regional meetings last year, and no one paid me for that, either.  No one is paying me to write this blog.

HOWEVER, in a few seconds, I am going to quit writing this blog and do some work for money – of type number 2.