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The "No BS" version of how startups are really built, taught by actual startup Founders who have lived through all of it. Hosts Wil Schroter and Ryan Rutan talk candidly about the intense struggles Founders face both personally and professionally as they try to turn their idea into something that will change the world.
This is WHY More Money Bring MORE Problems - EP259
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Ryan Rutan: [00:00:00] Welcome back to their episode of the startup therapy podcast. This is Ryan Rutan joined as always by Will Schroeder, the startups. com founder and CEO. Will, you know, as we are, like, looking to find our way around to the next bend and over the next hill and hit the next revenue milestone, once we hit that, then everything's okay, right?
Like, we just get there, and then all the bills will be paid, everybody will be happy, and then it's just Shangri La, right?
Wil Schroter: Yeah, it's just that easy. Hey, Ryan, once you and I find wives and we get married, Everything's fine. We have no problems after that. Once we have kids, everything's fine. No problems. F
Ryan Rutan: I see where you're going with this.
So you're saying with each new milestone comes an interesting, new, delightful set of challenges.
Wil Schroter: Oh my God. I know you, you probably share this, but when we were early in our careers, remember thinking like, if we just got to that next like revenue milestone, or maybe if we just got an investor. It would take care of all these problems we've got and then everything will be fine.
If
Ryan Rutan: we had 5, 000 in MRR, everything will just become simple from [00:01:00] there. It'll be all the dry powder we'll ever need will grow endlessly based on that foundation.
Wil Schroter: And I remember those milestones so specifically too. So specifically because I was like, man, if I can just pay Jason. Our creative director, a thousand dollars a month, like we're golden, like this thing is on a rocket ship, right?
And we were all in college at the time, so that was all the money in the world. And I remember just spending every night mining over those milestones, right? Being like, okay, if we get this one client and they'll, they'll pay us 500 every single month. Um, you know, this will be the game changer that we need and I'll be able to pay my 250 a month of rent.
You have no idea how long ago that was. And I think about that and as the years progressed, uh, it felt like I was running this marathon. And it was always like that, that, uh, the end, the end game, the finish line was, was just beyond my sight. And every time I was just about to cross it, somebody moved it like 10 miles.
[00:02:00] Oh
Ryan Rutan: yeah. Yo, right after you like do the lean, you know, like the victory lean, like you're like, I'm going to break through it early. And then all of a sudden it's like. Another hundred yards down and you're like, but I just used all the energy I had left and I, I timed it so that I would get there before I died and now it's further away again.
It's, it is funny too and it is funny how, like, how much those scale and how fast, right? Like you go from needing that 250 for rent, I, I remember it was like, we gotta get from, from 5, 000 to 6, 000. Uh, in monthly revenue so that we can pay Mikey. Yep, exactly, right? A systems administrator, right? I think we needed Mikey.
We had to pay Mikey. And Mikey wanted a thousand dollars a month, uh, to work out of my college apartment. Uh, and so we had to go from five to six. We had to get there, right? And then, then everything would be easy.
Wil Schroter: I think the premise is broken in two ways. That's what I'd love to talk about today. I, I think the first way that it's broken is that we always think in terms of a vacuum.
We think like if we hit this milestone, then everything else kind of just stops. Again, [00:03:00] it's the analogy I used at the beginning when we were saying, Hey, if we just get married, if we just have kids. The second part is we don't realize what new sets of challenges become exponentially bigger and, and way harder than what we have now, right?
Because in our minds, Hey, if we just get more money, we'll get this fixed. And I'll give one other example. This will just apply to everybody. When I was in college, um, the job that I had at the time was paying five dollars an hour, right? This is, this is during the Napoleonic era.
Ryan Rutan: Fancy money. Yeah.
Wil Schroter: Um, and
Ryan Rutan: In Buffalo nickels.
Wil Schroter: Yeah, in Buffalo, in silk. I remember I was applying for a job that would pay ten dollars an hour and in my mind if I could get that job I literally never need another job again.
Ryan Rutan: Yeah, double my income. Yep. I'm good.
Wil Schroter: And I didn't get that job cause I'm an idiot, right? I wasn't qualified for that job. Right.
Oh, by the way, a side note, I'll never forget what that job was. And I [00:04:00] wanted it so badly. Uh, it was, it was the specialty speaker salesperson at best by Bose in store. And I was a huge Bose, uh, uh, fan of signed the speaker fan. And I wanted that job more than anything. I'm like a total audio file.
Ryan Rutan: You just wanted to hang out back in that special AV room with the leather
Wil Schroter: couches they used to have.
Honestly, you know, dare to dream. And, uh, and, and so I remember how heartbroken I was, uh, when I didn't. Get that. Anyway, point is I thought like, if I could hit that milestone, I'd be on easy street. It isn't funny that in life, every time we think there's just that one milestone, that's all it takes outcomes.
Another one. But in this particular case, in particular to, to startups, it's not just one. It's lots. Every time we unlock that next level of revenue, it brings with it exponentially more new problems. And then those new problems become exponentially harder to solve. It's a [00:05:00] game where the levels keep getting harder as we go, and we keep thinking it's the last level.
Ryan Rutan: Yeah, it's like, it's like you want to increase your chess ranking. Well, good news, now your chess ranking went up. Now you have to play people who are way better than you are. Again, and again, and again, right? It just keeps going up. And I think we don't take that into account, right? And, and, uh, it's kind of the point I was making before.
There's so many times that I can think of in my own history where I I absolutely exhausted myself to hit that milestone, thinking that then there would be the, you know, the, the victory walking lap, right? I would just kind of, you know, walk the bases or whatever. I hit the grandson. I would walk the bases.
You don't get to do that, right? There's no rest afterwards. Uh, and there were so many times where, like, I didn't pace myself appropriately, hit that milestone thinking that everything's going to be smooth sailing after that, only to find out that we'd hit the roughest seas to date, right? Just sort of keeps happening over and over and over again.
Wil Schroter: And here's the thing. Um, early in my career, I didn't get it. And that's why I'm hoping that. Two different folks that listen to this podcast, folks that are just getting into this business for the first time. And they're, they're listening to this going, wait, hold on, what? [00:06:00] And then, and then folks that are old pros that are like, yep, yep, yep, that happened exactly.
I would go. And so, uh, I think both sides could appreciate this journey, you know, early in my career, in those early days where I'm just starting the agency and, you know, we're trying to get. of, of, of recurring revenue every month, you know, uh, uh, retainer revenue, that's all it took. And at that time that would cover all my expenses.
That would cover whatever I was paying people, whatever I was going. Well, as you recall, I've told the story before, the agency grew incredibly quickly. We had one of the largest agency wins in history, like one of the most largest in the landscape, a quarter billion dollar win. Do you remember how those targets moved?
Can you go back in time and like? Yeah, okay, that's it, and here we go, right? Now, if I were to tell anyone, right, that you could go from, uh, zero to, to, to those kinds of numbers, Um, in the, in, in the course of just a few years, they would be like, everything must be perfect. And I gotta tell you, man, everything was far from perfect.
In fact, when we [00:07:00] grew, as our payroll went from, let's call it 1, 000 a month, to like 10, 000, 000 a month, That's a non exaggeration. Billion
Ryan Rutan: dollars a month. Say that again so it doesn't sound like a verbal typo. Ten million dollars a month. Yeah, that's quite a payroll swing.
Wil Schroter: Right, and so as those numbers started to add up, and by the way, it's kind of fun, just like, uh, anachronism, back then, you actually had to sign everyone's paycheck.
It was like a real thing. And so it was just this really like tactile experience. This is like, so old school where like someone would come in someone from like accounts payable and they would hand you this giant, you know, stack of, of checks that you had to sign. And this is such an old school business owner thing where you'd go by each one, one by and Ryan, like I would sit there and be like, What's this guy getting paid?
Seriously? It's like, they have this like mental math every time.
Ryan Rutan: You know, it's funny, but there's actually something to that, man. I was talking [00:08:00] to somebody a few weeks ago about this, like when we used to have to plug all of our expenses into an accounting system where it wasn't just automagically imported or like you literally had to pay attention to everything.
You're a lot more careful about your expenses, right? You had a lot better sense for what was coming and what was going out. Um, just because, like, to your point, it's a tactile experience, right? I remember, like, literally taking boxes of receipts and plugging them into an accounting system at the end of the month, because that was how you did it.
Half the stuff was bought in cash.
Wil Schroter: It was real work, and kind of the physical work kind of, like, felt like The real world work, right? You know, of what you're doing. Um, and also back then I would hand people their paychecks every two weeks, right? Like it was a very like reward based, like, you know, thank you for doing your job kind of thing.
And, uh, and obviously all that's lost now, now that said, as I'm watching these literal stacks get bigger, right? Bigger, the stacks of checks being, uh, signed this, this, this weight starts to fall on right now. No. Also, Ryan, when you hand someone their paycheck, [00:09:00] they kind of expect you to hand another one in two weeks, right?
There's also, like, you can visualize the weight of what's happening.
Ryan Rutan: The weight of when it doesn't happen, too, right? Like, you know, when, if somebody's, somebody's paycheck doesn't hit now, they're like, Hey, was there a problem with the payroll system? Like, doesn't look like my direct deposit went through today, right?
As opposed to, they're standing there in front of you with their hand out and you're like, Uh, so, gang, uh, uh, some strange news, uh, yeah, the pressure of that was significantly different.
Wil Schroter: You know, just stick with this for a second, because I just thought, like, this whole world and comeuppance was fascinating, um, and I was really young at the time, I was like 25, so like, I didn't understand how the world worked either.
So like, I would hand a guy who was like 40, which is ironic because that's way younger than I am now. I'd hand a guy I thought he was at 400, 000 years old. Uh, I didn't go 40, his paycheck that he'd make some mention just cause we had a moment, you know, to interact like, Hey, my daughter's heading off to school, you know, college or whatever.
And, and, and, you know, this is going to be a huge help. And I remember having [00:10:00] those kind of like, like how it's going to be spent, how this is helping out, whatever. And while they're being thankful, the way I processed it was, Oh shit, I got to make sure your kid goes to college now too?
Ryan Rutan: Yes. Yeah. Oh man. Yeah.
Knowing, knowing what people are doing, knowing what's at stake. And especially as that scales, right? It's one of those things we don't really think about, but the, the pressure around that responsibility scales with revenue, with team size, with all these things that, you know, we were trying to do. Um, you're simultaneously creating these, these other vectors for, for risk and, and, and just all kinds of downside, right?
Yeah.
Wil Schroter: Also, as these problems, uh, escalate, I used to call them the weight of more zeros, right? The weight of more zeros on these problems. You're thinking, oh, well, we have more revenue, we can fix them. No! Think of, like, you know, I'm talking to our audience here. Think of, like, the, the revenue and the expenses as two totally separate things.
Meaning, Revenue can come and go all the time, expenses never go anywhere, right? And [00:11:00] people are like, oh, well, you know, you can let go of people. Nah, try it, right? It's, it's, it's not quite as clean and easy as anyone thinks it is. It sucks. And most people don't do it, which is, you know, a whole other issue.
But my point is, as those numbers went up, Um, I would argue that it was easy, I mean it was workable, easy to get to those bigger revenue numbers. But once those debt numbers started to, to, to, you know, those liabilities started to rack up with it, an escalation you immediately see the day you, you take that check where you raise capital.
Right? It happens to everybody. Just raise a bunch of money, hire a bunch of people, signed office leases, the people still do that, you know, whatever, right? And all of a sudden you turn around and you're like, Geez, I have like 300, 000 a month of liabilities, like, if this contract doesn't go through, if we don't hit MRR goals, the hell am I going to pay that?
Ryan Rutan: Yeah, and there's another side to that one where we're taking on cash, that happens really fast, right? In the case of growth across milestones, you know, where it's incremental linear growth, very different than when it just all of a sudden comes in overnight and now we're responsible for [00:12:00] marshalling that cash into growth.
And we have to do all of those things in a very, very short period of time. Um, it's significantly harder to absorb the impact of that and even just to make sense of it, right? Because when your headcount grows from, you know, from 1 to 10, 10 to 20, 20 to 100 over a period of 5 years in slow growth, you understand how to, you can kind of feel it happening.
When you go from 10 to 50 people or 50 to 150 people because you just raised 7. 5 million dollars on your Series A, right? Big, big difference, right? The speed of that change has a huge impact on your ability to process it.
Wil Schroter: Also your ability to make moves, right? It was just a few of us in a room. We actually had a tremendous amount of optionality that we weren't quite aware of at the time, right?
We could make moves that could fail, right? Now you could look at it and say, yeah, but if you have money, you can make more of those moves because if they don't work out, you got some money in the bank. You do. That's true. For a minute, you spend it, right? Well, let's [00:13:00] go back. It's just,
Ryan Rutan: it's a complexity issue, right?
Like, go back to your, your analog with the family, right? Used to be really simple for my wife and I decide where we wanted to go for dinner. Right. Got a lot harder once there was a baby involved. Yep. And a lot harder when there were two and now it's nearly impossible to make everybody happy that there are three of them.
All right. And so like you just, you lose that flexibility, that nimbleness, that, that ease and rapidity of decision making and action, the bigger and bigger you get. Right. So I think that that's, it's a really important point you're making, which is not only do the decisions get more complicated themselves, taking action on them once you even do decide what to do.
It becomes vastly more complicated as well.
Wil Schroter: Let's talk about that. I call these new nodes of problems, new nodes of problems. Okay. So, so essentially what that looks like is, um, initially Ryan, it was just you and I right back to back kind of Kung Fu fighting it out of this problem, right? We raised some money or we, we, you know, grew the business in some way from a revenue standpoint.
We had some money to spend. Um, we hired a bunch of new people. Let's say we heard five, right? We're not even getting crazy. We, we are [00:14:00] five new people because we're thinking when we hire those people, now someone can build more product. Now someone can do more marketing. Now someone can do more sales. So, you know, whatever they're doing right back office, whatever it takes.
And at the time, all we're thinking is that doesn't exist. So money solves that problem. So that problem goes away. What we're totally missing when we say that. Is okay, but now we have a new human, right? And humans are fountains of problems. All of us, right?
Ryan Rutan: Like it's not any one person, right? There was no problem node in my house of somebody writing on the couch with, uh, with permanent marker until I had a child, right?
That, that wasn't a problem. No, that didn't exist. We didn't have to solve for that problem. Uh, back in the day. Now we do. A hundred percent.
Wil Schroter: And so. Uh, now think of how many problem nodes, okay, seeds we plant that are gonna harvest on their own, alright? Five seconds ago when you and I needed to make a decision, we just made it, right?
We're good. Now we, we, we took on [00:15:00] investment. Now we've got a board that doesn't allow us to just do what we do, not because they're bad people that, you know, it says anti investor, it's just the way it works, right? You know, you sign up for that liability. Now we're like, oh, we have money, but now we have a bunch of liabilities, like paying that back.
That didn't exist five minutes ago and that are frankly with us forever. Now fast forward that a little bit more. Now we've hired these five people. Every one of those, uh, people, Has their own personalities. They have their own biases. They have their own agendas. They have, you know, whatever. Now, all of a sudden part of what we spend our day on is making sure that person a in person B are getting along well.
Now we have to make sure our culture. Um, he's working for everybody right now. We have to make sure that whatever decisions that we make on what we want to do in the business are kosher with everybody else. You know, something that's really funny about everything we talk about here is that none of it is new.
Everything you're dealing with right now has been done a thousand [00:16:00] times before you. Which means the answer already exists. You may just not know it, but that's okay. That's kind of what we're here to do. We talk about this stuff on the show, but we actually solve these problems all day long at groups.
startups. com. So if any of this sounds familiar, stop guessing about what to do. Let us just give you the answers to the test and be done with it.
Ryan Rutan: I remember that point distinctly. It was, I hired like the, the, the, the second and third developer. And, and another salesperson, I think it took the headcount to like right around 13, 14 plus me, 14, 15, something like that.
And that felt like such a great milestone because all of a sudden we were going to be able to absorb some additional client work that we had to, that we had started saying no to, um, from an existing client base. And we were going to be able to, to recognize that revenue is going to be great. Um, and then the, the complexity of managing that work across multiple people where there had only been, you know, ones and twos before, now there were threes and fours and fours and fives.
All of a sudden now, [00:17:00] my time was largely spent wrangling those people, you know, dealing with just interpersonal issues, uh, team issues, but even just workflow issues. And so all of a sudden then, it didn't work out the way you think it would, right? Okay, now we add more people, the clients are going to ask us for the work, I can scope the work, and it's, well, now I don't have that time to scope the work because I'm dealing with the people who are supposed to be doing the work, right?
It's, it's all these crazy little things that end up cropping up. And so like, I, I think every time, like, I'd be curious to get your, your number on this one. But for me, whatever I thought the, the kind of the increase in throughput or gain was going to be from any given milestone. It was typically somewhere between minus five and maximum, like positive 25%, right?
What my expectation was.
Wil Schroter: How about this? Um, what happens is as we get these gains, we go from, and we've talked about this before, we go from externally focused. To internally focused. Well, again, it was just you and I, we can kind of just, we don't have to focus on it. We just focus everything externally, uh, building product, finding sales.
Yeah. You look that way. I'll look this way and we'll have everything covered. [00:18:00] That's it. Yeah. Pretty much it. Right. Um, as we grow, as, as we get more revenue and more money coming in now, a bigger and bigger and bigger slice of our time is. Internally focused and that is wildly distracting. I mean, I got to a point I'll never forget like these two specific milestones as we were growing that first company Um, I got to a point where I was in management meetings about upcoming management meetings And I'm like, dude, what the hell?
Like, weren't we an agency?
Ryan Rutan: How much do we get paid for these? How much money do we make when we're doing these? Exactly.
Wil Schroter: Yeah. I distinctly remember like a year into, um, our board meetings, we had, this is a different time. We had, we had 7am, uh, board meetings every Friday. Right? So, uh, in person board meetings.
Right? Um, and, uh, I don't know whose idea that was. Anyway. Um. Bye. Bye. You know, I'd show up and we'd talk about, uh, you know, staffing plans, uh, accounts receivable, like, you know, work in progress, all these things that agencies talk about. Uh, and I remember like a [00:19:00] year into it, I was like, Hey guys, I just want to point out, has anyone noticed that we haven't talked a single thing about any of the work we actually do?
Like our client work, our creative, like, you know, words that we would get, you know, things like that, just like things that relate to what we actually do. Everything was about staffing plans, culture, you know, like. Our, our, our entire focus became internal and that was the cost of our growth, right? I don't, it's something like we're all trying to get to, but we don't realize the, the weight and the cost of that growth.
Ryan Rutan: Yeah. It's, it's interesting, right? The amount of inefficiencies that are created and some of them absolutely necessary, right? Like we, we can't not have meetings. Um, sometimes we even have to have meetings about meetings. I, I don't think that, you know, some of those things, sure we could talk about, you know, eliminating some of that stuff, but I think the, the bigger point here is that you just need to be aware that it's coming, right?
You need to be eyes wide open. As you round that next bend, it doesn't open up into the pasture of Shangri La where you just harvest fruit all day long, eat [00:20:00] and lay around, right? There's gonna be new problems there too. Right. And I think that's the, that's the real issue.
Wil Schroter: When I was growing up. Yeah. I didn't have any money.
Uh, and I remember rich people being like, uh, you know, money's not that important. You know, there's more important things. I was like, fuck you. It's 'cause it's 'cause you have it . I was like, and so, so, uh, I wanna run not quite a counterpoint, but I, I wanna address that point. Okay. It's, it's like Will and Ryan talking about, oh, well, you know, they, they had all this money and, you know, and they, they had problems with it, you know.
I think I'd rather have the money and have the problems.
Ryan Rutan: They're high quality problems. They're high quality problems. Yes.
Wil Schroter: Yes, I get that. Let's address that. Okay. So yes, we'd rather have the money. Okay. This isn't saying income is bad, right? This is definitely not saying
Ryan Rutan: that. Yeah. Ryan and Will just explained to us that if we just cut off all of our sales and stop growing and have no revenue, That life will become far easier, right?
If that's what you heard, rewind a bit and check it out again. Cause that's not definitely not what we're saying here.
Wil Schroter: Definitely know what we're saying, [00:21:00] right? Uh, income good, right? Uh, investment good. What we're saying is what comes with that is highly problematic, right? It is, again, we look at it going, Oh, it solves the problem we have right now, which can't pay for X.
But once you've paid for that. And now you look at all of the things that come with it. It is exponentially harder and, and harder to fix, right? Like when I knew my only problem was I needed a thousand dollars. It was a legitimate problem as an existential problem in the most specific sense. However, if I got that thousand dollars and again, and I didn't create more liabilities, my life was way better.
Now let's talk about that. Let's talk about the part where. We, we, we get the income, we get the investment, and we rush to create liabilities. Here is what future Will and Ryan, back to the future style, would [00:22:00] have said to younger Will and Ryan, pump the brakes, dude. The brakes,
Ryan Rutan: right? Yeah, and it's in that moment that we have to kind of take that pause and say like, look, slow down a bit, right?
Like, let's make sure that as we approach these milestones and as we're, as we're thinking through these things that we want to accomplish, let's be very clear on what the likely problems that we're going to inherit with those are. And whether we're ready to tackle this or not, there are definitely times where I remember we've talked about, you know, growth for the sake of growth, and I think that's one of those challenges where we're just continuously in growth mode, we're just talking about scale, endless scale, endless scale, endless scale, we're not talking about the fact that our problems scale right along with that, and we're not planning and preparing for that.
We're planning for all the good stuff that comes with it, more revenue, more flexibility, theoretically, until you realize that you're creating a whole host of intertwined problems that become harder to untangle, right? Again, to your point, when you've got one problem and it's a thousand dollar problem, not that hard to solve.
If you have a thousand problems that are all a thousand dollar problem, a lot harder to solve. If you have two problems that are five hundred thousand dollar problems, a lot harder to solve, right? So [00:23:00] I think that we have to be really, really careful as we, as we approach this and say, like, look, what are the problems that I really do need to be focused on and worried about right now?
And what are the things that I need to try to accomplish right now? And what can just get kicked down the lane, uh, for, for a later time? What can I address at a later point, right? Whether that's growth or challenges around. Um, you know, revenue growth, hiring growth, there's all these things that I think we get really caught up in trying to push things often faster than we need to, right?
I don't know if you went through that, but I remember at the early stage of the agency, um, there were, there were some points where like I definitely, uh, got way ahead of my skis because I felt like it would make us grow faster and it did. Right, but it didn't help us grow profitably, it didn't help us grow stably, right, it created all kinds of new problems just because of the way I went about it.
Wil Schroter: You bet, and there will, there's always someone that will take your money, right? Ha, you, you've accomplished nothing, right? You know, uh, Ryan, you and I were talking about ad budgets the other day, like, if we were to say, hey, you know, we're willing to spend more money, congrats, right?
Ryan Rutan: [00:24:00] Yes, yes, exactly. AdWords
Wil Schroter: will take as much as you have, trust me.
As much as you want. Yeah, yeah, yeah. The casino has no problem with your money. Um, or hiring more people, like, you know, we're staffing up. And, right, are you making more money? Because just spending money on people isn't an accomplishment. Right. It's what they do that's the accomplishment.
Ryan Rutan: Oh man, I know. I, I have to tell people this all the time.
It's like you realize what you just told me is you're accepting a bunch of new liability. Like, Well, but, but they're going to be able to do stuff too. I was like, well, here's the thing, maybe, right? There's a certainty in this equation and there's a massive uncertainty. The certainty here is that you will pay them.
The uncertainty is whether that will pay you back in any way. That's the challenge here.
Wil Schroter: I remember having this conversation, um, in, uh, at a lunch in Malibu of all places, uh, with David Hedemeyer Hanson from, um, uh, Basecamp. And, uh, And this is, this is a few years back, but, uh, And I remember sitting across from him, and, and I was like, David, where are you guys at headcount and stuff like that?
I'm just trying to get an idea where he was at those [00:25:00] days. And he's like, um, I don't remember what the number was. He was like, like, we're at like 42 people. And I was like, okay, yeah. Are you guys, you know, adding people, or what's the plan? And he's like, no. And he like, he wasn't like, he was like, how dare you ask, right?
And he's like, of course we're not adding people. What I loved about it, and I kind of love their style. What do you think, I'm a failure, Will? You think I need more people? No, essentially,
Ryan Rutan: at a time when that was just not an answer you heard, right? So I just No, no, because headcount was like, that was the, that was the stat that everyone was brandishing.
Oh, we just added our 500th person. Condolences. Wait, what?
Wil Schroter: Exactly, right? Um, but I remember him saying it so stoically, and he said, Good luck. Um, we have all the people we need. If at this point we want to grow the business, it can't come at the expense of adding more liability. Right? Otherwise it's not worth doing.
And I remember thinking, that just makes tons of sense. Yeah. Damn. I was just like, I, you know, I'm so not used to hearing that. And I, and again, that was years ago and I, I fast forward to today and I feel like that [00:26:00] advice could not be more prescient. Right? And I, and I, I know that those guys stick to that, that same, you know, tactic now.
Where, uh, I remember Jason Freed wrote, this is a long time ago, Uh, he's like, look, we make enough revenue where we could have hundreds and hundreds of people. But we don't need
Ryan Rutan: them. Don't need them, right? Why, why, why would we do that?
Wil Schroter: I go back to, why don't we hear this more often? Why don't we hear more often, like, hey, the goal is to grow revenue as fast as we can.
And then, and get it to the point where we're not growing liabilities anymore.
Ryan Rutan: You never hear that. You don't, because people don't plan for it, right? They, they're, because again, they're not considering the fact that increasing revenue does also mean increasing liabilities, increasing your, your nodes, your vectors for, for potential problems.
And so I think that at some point, like look at the early stages, there are times where we just, we do kind of have to throw gas in the fire and, and, and hope for the best. But we have to stop that at some point. I think that's where a lot of startups get into trouble is that they don't get to that point where they realize like, hey, let's maximize the delta [00:27:00] between any increase in revenue we have.
And the increase in liabilities rather than just simply saying, make the decision that maximizes revenue without thinking about what the potential liabilities are. And I, a lot of us get into trouble by doing exactly that.
Wil Schroter: I just think that, that narrative, while it sounds sweet, spend money to make money, you know, all this like bullshit stuff, it sounds like it should make sense.
But you have folks like David and Jason who were like, yeah, that actually doesn't make any sense. Why is no one else doing this math?
Ryan Rutan: Nobody else. Yeah. You have to make money to make money. I think that's how that works.
Wil Schroter: You know, and it's like, there's this whole other, like, uh, bastion of bounders that aren't in the startup spaces.
We know it. And they just look at things logically and they're like, yeah, the goal is to just make more money. Like, how do you guys not understand that? And they're not wrong.
Ryan Rutan: Yeah, right. Buy low, sell high, sell for more than what it costs you. Do that [00:28:00] over and over and over again.
Wil Schroter: Yeah, I don't know.
Somewhere we've gone astray on the calculation. Somewhere we've gone astray on the, um, let me create massive amounts of liability in the tiny percent chance that it might become something. When I could have just said, How about I just make money?
Ryan Rutan: Yeah, just make money. Consistently. Month over month. Year over year.
Decade over decade. And end up in And we talk about this In a better place. Right?
Wil Schroter: Yeah, I'm saying We talk about this all the time, right? You just don't hear enough startups. I'm not saying there's none. You don't hear enough startups. The founders. Yeah. Say, yeah, the goal is to build a three million dollar business that throws off a million dollars a year.
Yeah. That's all I need. That is all the money that I need, and that is the highest and most likely outcome that I can achieve.
Ryan Rutan: Yeah, man. Talk about this all the time. We did a whole podcast on this, right? Which was not just, not just looking at the size of the outcome, but the probability, right? So if there's a, if there's a, you know, minuscule probability that you end up with a hundred million dollar business or a higher likelihood, certainly higher, right?
That we ended up with a three, five, 10 million business. Um, multiply the numbers [00:29:00] together, multiply the percentage chance by the, the total that you're aiming for and tell me which one ends up looking better. Right? The challenge is that to get to those really, really high numbers, Because of the way liabilities stack, because of the way that all the problem nodes are created, because of the challenges of ever getting there in the first place, The, the chances are so damn small that when you do that math, you realize you're far better off to just build something stable, profitably growing, cash flowing, at least to the point where you truly can understand and, and create specific deltas between that increase in revenue and that increase in liability.
Right? I think we get so used to uncertainty at the early stages of startups that we just start to accept that it's going to exist forever. And there are certainly points where we could and should just stamp out that uncertainty and we don't we just say like well We just always grow some and then we see what happens in terms of what it ends up costing us Like well, how about no at some point?
Let's just stop doing that
Wil Schroter: We ever want to get off of this hamster wheel. We have to deliberately say Hey, this [00:30:00] next milestone that we're going to get to, that's the milestone. We're not just going to keep feeding the beast with more liabilities. At some point, the goal we're trying to get to that revenue milestone, that lifestyle milestone, et cetera, needs to get locked in so we can actually enjoy and harvest that goal and not just be a factory of liabilities that we're constantly putting in front of us, right?
That we have to keep chasing. So all we're saying, all, you know, all Ryan and I are saying here is if what you're going to do is build this business, have an end game in mind, have that dollar figure in mind. And when you get there. Stop, stop and go
Ryan Rutan: enjoy your business. Overthinking your startup because you're going it alone.
You don't have to, and honestly you shouldn't because instead you can learn directly from peers who've been in your shoes, connect with bootstrap founders and the advisors, helping them win in the startups. com community, check out the startups. com community at www. startups. com to see if it's for you.
Could be just the thing you need. I hope to see you [00:31:00] inside.