We still have no idea how all that stock went missing

At the end of every quarter we did a formal stock count. When we were a real startup, we were always able to reconcile the stock and find it. As we grew, there were some discrepancies but nothing major. The differences were so small that we simply wrote them off.

Last quarter, the first stock count showed that more than 15% of the stock was missing. We counted again and found the same thing. We looked all over the warehouse and couldn’t find it. We now had six people working in the warehouse but they all said they didn’t know where the stock was.

We examined all the invoices and delivery notes and found that they hadn’t been reconciled for over a year. The accountants used the invoices to create the accounts and value the stock. The delivery notes were in piles in the warehouse office. Upon closer investigation it emerged there were no delivery notes for a number of high value items. We called the supplier and they said they were delivered. They provided signed notes to show when they were delivered. All were signed by the same warehouse operator.

When we asked him, he said he didn’t know anything about missing stock. There was nothing else we could do as there was no hard evidence of fraud. We tightened our controls and reconciled all the paper work. All was fine at the next stock count. To this day we don’t know what happened.


Our new admin assistant was paying invoices to a fake company

During the first three years of operation, I signed every check and reviewed every bill. The volume increased beyond what I could handle so we hired a full-time administrative assistant. She was a friend of one of our employees and came from a large company located in the city. I was so glad to get rid of this task.

We got our accounts within 10 days of the end of the month. Everything looked OK. One day I was in our bank and ran into the local bank manager who asked how things were going. I told him things were good and we were profitable and growing. I told him we had a new admin assistant who had come from XYZ company. He asked her name and when I told him, he was very concerned.

He asked if we had asked for references. I told him we had and he advised that I start looking at all the invoices and making sure I knew how we were paying. I wasn’t sure why he said this, but it sounded like good advice with no downside.

I spoke to the admin assistant when I got back from the bank and asked to see the invoices from the last month. Right away, I noticed several new names and that one new supplier had sent in four invoices that month. I got suspicious when I asked our operations people about the company and they had never heard of it.

When I went to the admin assistant, she said she just paid the bills managers signed. I took three invoices to the responsible managers. They knew nothing about them. When I confronted the admin assistant, she denied anything was wrong. I called phone number on the invoice and it went to voicemail. The voice on the message was the admin assistant’s.

I felt proud but so alone as a CEO until I joined a club for startup CEOs

I was the only one left in the office. It was past 11pm and I was tired. I looked around at all the desks and work spaces and thought how far we had come in the last year. I was proud and elated, but I also feel profoundly lonely. We had come a long way, but I felt like all the ideas and emotions has been drained out of me. I was giving everything I had and I was getting very little back. Yes, people appreciated what I was doing but I was the boss and I was becoming increasingly distant from my team. I felt I could no longer ask them for advice. It would be a sign of weakness.

We had investors and I have to deal with them. I also deal with all the larger sales accounts and the Board. All of this is taking increasing amounts of time. These relationship are often characterized by conflict and they are taking a toll on my nerves. I am always stressed out.

My wife looks after the children and has a part-time job so I can’t burden her with all this. I can’t talk tp my parents and my friends think I am some type of superman for getting this far and I don’t want to destroy that illusion.

As I sat there, my loneliness became overwhelming. I heard about a club for startup CEOs where people share stories and experiences. I attended a dinner and in one night, I realized that I was not alone anymore.

Somehow silos were forming when I thought we'd been active in preventing them

We were having a team dinner, there are now 40 people, and as I looked around, I realized I don’t know all of them that well. I noticed people were seated with others from their departments. Sales people were with sales people, ops with ops, etc. I realized I had a problem on my hands; the company was already breaking into silos.

We always valued collaboration and saw it a part of our culture and differentiation. But I could see this slipping away. Where had I gone wrong?

When someone joined the company, they worked in each department and we had open meetings with everyone in the company. When possible, we had multi-departmental teams working on projects. What else could I do? If I failed to act now, the problem would get even worse.

The website I built had too many bugs and Christmas sales were a disaster

I really didn’t like the website. It didn’t have enough functionality.  It was three years old and looked outdated. I made it myself because it was too expensive to have it done professionally. The time was tight though; the Christmas sales season started, which was an added stress.

In the beginning, it was relatively easy. I was putting up new products, updating stock numbers, and making sure new orders were sent out. Friends tried out the updated site and all the functionality worked when I tested it out.

The site went live on November 10. Sales were good, but some of the products couldn’t make it through checkout. I also couldn’t update stock levels. By the end of the week, I couldn’t tell if product availability was accurate. We were out of stock, but people were still able to order on the site. I panicked and started to make adjustments manually.

As sales increased, it was chaos. We lost control of our stock, didn’t have an updated catalog, and couldn’t adjust invoices for discounts. We made hundreds of manual adjustments and planned to sort out everything after the new year though the problems were getting worse everyday.

We fell way short of our sales targets. By the middle of January, we realized we didn’t have any real idea of our inventory. We had customer returns that we couldn’t process and people were contacting us to say their Christmas gifts were never delivered.

We never should have launched so close to Christmas. We should have tested the new site more thoroughly and made sure the payment systems were robust. We learned that no matter how good our products were, we needed to have world class support systems. This mess took us six months to sort out. We lost loyal customers and we almost ran out of cash.


The landlord wanted to increase the rent due to improvements we made to the property

The owner of the warehouse was not a very nice person but the rent and location were right. Six months after we moved in, we asked about the repairs he was supposed to carry out according to the lease. He told us he wasn’t going to make the repairs. He said we’d have to pay for any improvements we wanted. I didn’t understand how he could do this when these were included in the lease and there was certain work he had agreed to do before we moved in and these were yet to be done.

When I took this to our lawyer, he said it could take up to a year and would cost more to take legal action than to fix things. Even then the outcome wasn’t certain.

We had to make some repairs in order to use the loading bay. We got the doors and broken windows fixed. At the end of the year, the landlord came and said he wanted to raise the rent next year even though no rent increase was due until the following year. He cited all the repairs and improvements as one of the reasons for the increase.

The sponsor had outrageous conditions

We needed someone to sponsor our first conference for customers and suppliers. We talked with a number of people with no luck. Finally, our largest supplier agreed to sponsor us. At the follow up meeting they laid out their conditions. They didn’t want any of our other suppliers to provide sponsorship and a guarantee that they would be our sole supplier for the next 24 months. They also wanted their CEO to be the keynote speaker and the right to vet other speakers. All of this for $10K!

How can I start a family on the salary the investors want me to take?

I didn’t take a salary for the first year of the business but now I needed money to live off of. My friends in the corporate world earn six figures. In my country, someone with my degree would earn $70-80K. I was told investors look at how much a CEO proposes to pay themselves. They don’t want the CEO using the business as a personal piggy bank.

I need to raise more money but don’t know what to put in the business plan for my salary. I finally settled on $40K; this was just enough for me to get by. The investors agreed to this and wanted to keep this until we raised more money. My heart sank; how was I supposed to survive on this? I want to marry my fiancé and start a family. I feel like I now have to choose between having a family and my startup.

Is cash or profit more important for my business?

I don’t know which is more important, cash or profit, for my early stage business. I know I need to reduce stock levels and this will increase cash flow, but it will also have a negative impact on my margins. I know I need new computers, but this will increase cash outflow and the depreciation will negatively impact my earnings.

I talked with a serial entrepreneur and she said that the only reality in business is cash, that accounting and profit are an art form. She told me you need cash to pay bills and salaries and that profit and cash were not the same thing. She said not to worry about depreciation, it was a non-cash item. She said get what you really need and can afford and don’t worry about depreciation.

My co-founder benefits from my hard work without doing any himself!!

We co-founded the business and were committed to it, but it didn’t produce enough revenue to support even one of us. We decided to both work part-time on the business until could pay the salary of one person. The other would join when the business could afford it.

It took 18 months for us to get enough volume to support one of us. I quit my job and started working full-time on the business. My co-founder got a promotion, which meant moving to another city and more travel. He was no longer contributing to the business part-time.

Over the next six months, I hardly heard from him and we grew apart. He didn’t really know what was going on with the business and said he couldn’t do both jobs and was going to focus on his career. He wanted to sell his shares but I couldn’t afford them and there wasn’t enough cash in the business to buy them.

I had a real dilemma. The harder I worked and the better the business did, the more he would want for his shares. I tried to get a friend to reason with my co-founder, but he refused to listen. This isn’t fair!!