Good Guy Vibe

About 9 years ago, when I just started, my product was pretty well received and even though I didn't have much revenue (pathetic if I do say so), it was gradually getting known and it was spread by word-of-mouth.

One fine day (why can't it be rainy day?), I received an invitation from a more established company to meet up and discussed about a merger. Of course, I was thrilled and excited then.

During the meeting, the boss of the company was telling me about his company and how much both our companies can synergise. He told me his company had spent about $100k in a certain software. I was perplexed and confused. I told him I was also using a similar software, albeit from a different company but it only cost $100. He tried to defend his claim by saying that the software he purchased had a lot of features and was more powerful. I just nod my head even though I was confused by his claim. He went on to talk about the merger and the conditions.

Firstly, my company and product name will be absorbed by his company. My company product will be renamed as his current product name. I'm also to work from his company premises and was required pay rental of $1000 per month (I was operating SOHO and didn't have to pay rent). That raised a loud alarm in my head. I told him that I'll consider his offer and left the office. I left the meeting with a very unsettled feeling. A very strong feeling that something is amiss and not right.

I called my friend, Khoon. We both agreed that on paper, it seemed like a good opportunity for me to work with a more established company. We also agreed that the timing was disadvantageous to me. As my company was not established, it left me very little bargaining power.

When I went home, I researched on the '$100k' software and found that it did not cost as much as he claimed. In fact, it cost very much less.

I called back the next day and declined his offer of a merger.

Now, when I looked back, I realised I was taken for a ride and he wanted to take advantage of my company.

*****

This month, I had another business meeting with a supplier who was introduced to me by a client. During the meeting, my client was the one doing most of the talking and he knew the supplier very well. At the end of the meeting, I have a feeling that I was being taken advantage of again.

When I shared this incident with my friend, Maggie, she replied, "That's because the other party knows you are a nice guy (aka can be bullied)!"

"But I was wearing black shirt, dyed my hair and had spiky hair style. I thought I looked like an Ah Beng (no offense intended) and I kept quiet pretty much during the meeting! It was the first time he met me!" I complaint.

"Friend, people can smell you are a good guy from miles away!" She revealed.

Can someone pass me Hugo Boss eau de toilette and deodorant, please?

The Bottomless Pit

For the past 9 years, it was my privilege to have met many fellow entrepreneurs. It was a nice feeling to be able to share our 'war' stories with kindred spirits. Through my conversations with them, I notice a common recurring theme. We've all been to the bottomless pit and back.

My friend, KL, his company introduced a very popular web service 9 years ago. It was so popular that no matter how much bandwidth they bought, it was used up very quickly. The problem was, like all dotcoms then, the service was free. At one point, they have finally used up all their savings and they were at the brink of bankrupt. They made the unprecedented move where they started charging their users. It was a made or break decision.

Well, lets just say that decision made them laughing all the way to the bank. Heh!

During the third year of my venture, things looked very bleak for me too. My savings in the bank dwindled to just a few hundred dollars and I still had bills to pay. I didn't want to worry my wife so I didn't tell her. I thought, "This is it, the end is finally here. After toughing out for close to 3 years, this is my end of days."

It was a gut and heart wrenching period. I lost all sense of hope.

Then my luck turned. The shares of a company that I had bought many years ago, which from a $10k investment and then tanked to worth only a few hundred dollars during the dotcom crashed, in my hour of need, miraculously rose back to its pre-crash level. I quickly sold the shares and the $10k helped me tide through the next 6 months when finally orders from my clients started trickling in.

Another group of entrepreneurs, there 3 of them. They threw their business plan out the window after 3 months of operation. They had spent months working on it. They thought they had a foolproof business plan. They could not be more wrong. The reality is always different.

During their first year, they had only $3k revenue. At the start of their second year, they were at the brink of bankruptcy. Not willing to give up, they gave themselves another 6 months. If the business doesn't turn around, they actually decided that one of them will find a job and use the salary to continue to support all 3 of them while continuing to run the business.

Fortunately for them, things started looking up for them before their deadline and they managed to breakeven during the second year. They expect to be profitable this year (their third year).

All of us have reached the bottom before. We have all looked straight into the eyes of failure and survived. This is the time when our resolve is tested and the true entrepreneurs are born.

If you are at the darkest hour of your venture, persevere! Light is at the end of the tunnel.

A New Milestone

It was over coffee with a friend one day some weeks back. We were talking about balance sheet and P&L (Profit and Loss) statements. She asked me if I knew my revenue numbers for the year.

She sensed my hesitation, stared straight into my eyes and asked, "You do KNOW your revenue numbers, right?"

I sheepishly mumbled, "Erm... yeah, sure."

That night immediately after I went home, I remotely login to my accounting server and ran some reports to generate the revenue number for the year till date.

The number surprised me.

Based on estimated projection for the next 6 weeks of sales to end 2009, my company would be very close to generating one million dollars in revenue. Yes, the numeral 1 followed by six zeroes. It was my goal to reach a million dollar revenue by end of next year. I never realised that I would achieve my target so much earlier.

Of course, I was excited by the achievement. It took 9 years of effort and all the hard work by my staff and myself. All our hard work had paid off and we had reached a monumental goal.

For long time readers of my blog, you would know I never divulge any real numbers of my company. This is the first time I've disclosed any operational numbers of my company. I'm doing this now because it is necessary to share a lesson learnt that I wasn't prepared for it.

After a short moment of jubilation, a sudden realisation struck me: my company would need to be registered to collect GST (Goods & Services Tax). So I checked online and confirmed my fear.

Question: When Is It Compulsory To Register To Collect GST?

Answer: Your business must be registered to collect GST if your annual turnover exceeds or is likely to exceed S$1 million from the sale of taxable goods and services.

What it means is that when my company is registered to collect GST next year, to my clients, the cost of my goods and services would increase by 7%. For every $5000 I charge, my clients will need to pay $350 more than the normal price. Under the current fragile economic landscape, it will not be an easy task.

One option is for my company to absorb the GST but that would be a daunting solution. Imagine this, if my company's revenue is $1 million, the net profit margin is 10% (similar to many retail companies), that means my company has a profit of $100k per year. 7% of revenue ($1 million), that would be $70k. If my company absorbs the GST ($70k), my annual profit will shrink from $100k and become only $30k.

Once my company becomes GST registered, we are also required to file GST returns every 3 months (quarterly) and pay the GST collected to IRAS not later than one month after the GST returns were filed. This means that every 3 months, based on the invoices I billed my clients, even if my clients had not paid, I have to pay GST to IRAS first. This would create a new variable to the current cashflow management. Based on $1 million revenue, every quarter, my company will now need to fork out $17.5k to IRAS.

I would like to urge all fellow entrepreneurs and SMEs be mindful of the GST in their business planning. Be prepared and plan an implementation strategy as your business continues to grow.

Well, I probably could delay the registration of my company for one year. However, it has been widely speculated that year 2010 would be election year and it was also speculated that GST may increase to 9% or 10% in 2011. If my company only implements GST in 2011, the clients would then be totally caught off-guard by the 10% GST and I believe I would likely loose more clients then.

I guess it is better to ease my clients from 7% GST first, so when the government increases GST to 9% or 10%, it would be easier for my clients to accept the bitter pill.

Of course, another alternative is to stop accepting any more business for the year when my revenue reached $999,999. I should consider 'close shop' and go for vacation then. :p

Questions From Readers #1

Yay! I finally have questions from my readers! Haha! You see those popular bloggers or famous personalities, they receive questions from their readers and fans from time to time. I'm getting closer to stardom! Right..... :p

*Dancing in the room... leaping across the air... no, you don't want to have the image of me dancing in your mind*

I've received 3 questions from 2 readers. Here goes #1:

Did u start solo or did u start with a team? Cos I find working alone really tough.

Many many many years ago (circa 1996), just after I graduated and started working (yes... that long ago), I had an idea, different from what I am doing now, so I gathered my 3 best pals from university and suggested the idea to them. All were excited by the idea and were fired up to start the business. We met many nights in a cafe after work and bascially just talked and discussed about our future venture. Like many internet start-ups (who wasn't dreaming about being a dot com then? It was dot com fever/rush), we doodled on paper napkins and planned the steps we needed to take. We talked about our visions, our hopes, our aspirations and how big we were going to be. We would talk until the shutter came down and the cafe closed. We would then all go to our respective company the next day bleary eyed and yet feel pumped up again when we meet in the evening. It was a very happy time. There was a strong bond and sense of camaraderie among us.

Then it was finally time to start the real work.

Based on their strengths, I assigned tasks for each of us. Even then, I had the knack of identifying individual strengths and weaknesses. The next meeting would be one month later.

When we met again, E brought in another friend of his, J. E was responsible of the graphics and design portion of our internet project. During our many early discussions, web programming was an identified weakness of the team. At that time, PERL (cgi programming) was the language to use and B was assigned to take up that responsibility. Apparently, E was not confident that we would be able to resolve our lack of technical skill problem so he brought in J.

J was a programmer and he was proficient in PERL and web development. The problem was, J already had his company and it was a company of 4. If we collaborated, it would become a company of 8. Too many indian chiefs.

During many meetings after that when J had joined, J gave me a feeling that he looked down on our team. He felt that our success depended on him. He gradually treated us like second class citizens and put us down. And disappointingly, E continued not to deliver on his end. There were no graphics, no designs.

As time goes by, the meetings became more and more infrequent and then it just stopped. I didn't call for any more meetings because I knew then that the team would have many friction and disagreements due to J's involvement. He did not respect nor value our contribution. We just quietly went our separate ways.

From that point onwards, I vowed that I would do something on my own and not depend on anyone in future. I started buying lots of books and did self-studying, getting myself ready for my next eureka moment. I paid attention to ideas that I can do on my own.

It took me another three years before a new idea (my current venture) came upon me which I believed I could do it on my own. In between, I read up many technical books and kinda become Jack of all trades but master of none.

The first 3 years of my own start-up was one of the toughest period of my life. Something about the New Year eves then. I would always feel very blue and down. Even though I may be surrounded by party revellers, I would feel like an island in the sea of crowd. When people were out celebrating, I would be wondering if it was time to give up. It didn't seem like I was getting anywhere and I still had bills to pay. Self-doubt was a monster which challenged me.

Yes, working alone was really tough. When I had problems, I had no business partners to share the burden with and I had to do everything on my own. However, I was fortunate to have married a very supportive and understanding wife. It was my wife who held my hand and walked with me through the darkest patch of my life.

But many of the lessons (this, this and this) I learnt then made me who I am today. I was trialed by fire.

After 9 years on my own, I am now very used to making my own decisions, implementing my own ideas and solving my own problems.

That being said, I would encourage people to have a team. The trick is identifying the right partners and managing the ego and expectations of each individual. Usually, with the right team, you should be able to achieve more in a shorter period of time. Working alone, I was usually constrained by what I myself can do.

I don't think there is a general answer to the question. Different circumstances require different approach. My circumstances pushed me to walk the path alone.

Mabye, just maybe, I was born to be a lone wolf.

A Long Road Ahead

It is a chilly and quiet night when most residents in the neighbourhood have turned in. There are only a few lonely windows with lights still on. Outside my window, the rain drizzled. The rain wetting the ground, the roads and the pavement quietly. Gradually, pools of rain water were formed and you can see rings and rings spreading out from the point where the rain drops touched the serene surface. The rain added a chill to an otherwise already cold night.

I can't sleep. My mind is still abuzzed with thoughts and activities of the past week.

It had been a hectic week. Had meetings with clients (to talk business) and friends (to seek advice), attended a workshop, bought a new 15" Macbook Pro for staff and in between all these, I had to squeeze time to bring my desktop for fixing. Fortunately, all it needed was 'flashing' the ROM to the latest version.

For the past 3 years, I've invested $16k each year for a competitive analysis report. Prior to this year, I've always wondered the effectiveness and usefulness of the investment. This year, it has finally proved its value. This year, the report showed that my company had lost 10% market share. When I saw the drop, I queried the account manager who was servicing my company. I had hoped he was able to give me the reasons pertaining to the drop. I bought a competitive analysis report afterall. His analysis was part of the package. Instead, he cooked up some lousy reasons trying to assure me that the drop was just statistical and I should not be concerned. My gut feeling told me his explanations were a total bull. I spent days thinking about the result and poring over the data. I can conclude that my company have indeed lost 10% of market share and it was not due to some statistical changes from an expanded basket of parameters.

The result proved it was the right decision made 3 years ago in purchasing the competitive analysis report. This had served its purpose as an early-warning detection system. I've been warned that my market share has been slipping even though my other internal measures are saying otherwise. This was because my internal numbers were only indicative of internal numbers of year to year. The internal numbers were standalone and were not compared to the overall market. Even though the internal numbers have been increasing (year on year), but from the competitive analysis report, it seems like my competitors have grown even faster and chipping away my lead.

I'll need to pore through the report and data in detail to identify the root cause of the drop. I'll also need to develop counter-measures to address not only the drop, but to both regain market share and grab more market share while at it. Fortunately, we still have a huge chunk of the market and a huge lead over our nearest competitor. This will buy us time to react.

For the past week, I had also been scrutinising my company's financial report and statements for year 2008 (yeah, I know, we are late -_-") and getting it ready for the final submission to IRAS (Inland Revenue Authority of Singapore).

In the past, I've only paid attention to profits and monitored only cashflow. Thinking back, I (I rolled my eyes) wondered how the heck I reached where I am today without paying attention to balance sheet, revenue and operating expenses? It was a heck of a lucky streak. Looking at my my 2008 financial reports, even though revenue has gone up by 25% but the profit had remained the same. This means that my expenses have gone up. Studying the financial statements, my cost had gone up by 37%! What actually happened was that I've been approving and funding new projects with wild abandon! I made my decision based on the company's bank account. In actual fact, what I did was spending the company's past retained profits. Without realising, I've spending the company's coffer.

For the past 9 years, running my company, I've never done any budgeting or business planning. I realised now that this had to change. I need to grow up fast. I need to mature from a all gut-feel and instincts entrepreneur to a number crunching business executive.

The burden is heavy on my shoulders. I can feel the weight crushing down on my shoulders. Even though my entrepreneurial venture had carved a moderately successful niche in the market but the competitors are learning and imitating fast. I can feel the crushing stress pressing down on my chest and it is hard to breathe.

I wondered who can share with me my burden. I screamed a silent scream piercing the veiled darkness of the night. There was no answer. This is a burden that I am alone to bear... and with the can of beer in my hand as my sole companion.