TST EP283_When Can I Afford To Gamble
===
[00:00:00] Welcome back to the episode of the startup therapy podcast. This is Ryan Rutan joined as always by my friend, the founder and CEO of startups. com. Will Schroeder. Will, I think we're all pretty well aware that taking risks is part and parcel, maybe even the foundation of entrepreneurship, right? But. I think here's an interesting reality that you forced me to examine this week, which is that risk is a luxury, not a default.
Right. And most people actually can't take risks because they don't have the safety net to survive. Even a small failure. It's good with you, man. Let's unpack what it really costs to take risks and like, when can we actually afford to make some of these gambles and how to identify like what our minimum viable risk pool, uh, looks like so that we can change the trajectory in our startup and probably your life.
I know, and isn't it weird that like this isn't something everybody talks about like all the time? Like when you think like the first conversation, you're like, Hey, I'm thinking about starting a company. What is my specific number that I need in order to be able to take risk? What ends up happening is, well, one, no one talks about it.
They, they, everyone knows that like, Hey, it'd be great to have more [00:01:00] money. So no surprise there. But nobody really understands to the penny exactly what that number needs to be or what it buys you. I think we should probably first unpack the luxury of risk, right? Like, really, being able to take a risk at all is a massive luxury.
And a lot of people don't think about it that way. Like, I'll give you an example. When I was first starting my career, I was dead broke. People would tell me, Oh, well, you could risk all you want because you have nothing to lose. I was like, no, hold on. If I lose I have nothing to eat. I think that's the part that you missed.
Not that I have nothing to lose. I have nothing to pay money with to eat if I lose. Right. That is way different. Yeah. Saying that, that I could afford to lose something would be a luxury. Not having anything ain't a luxury. And I think that's where it starts when we start to say, we say, what would it take?
How much money would it take for me to be able to take a risk and survive it? That's the part that nobody talks about. Then the other part of it [00:02:00] is, what is it like, what optionality opens up when you can take risk? Right, which is huge, right? And it's something that, again, gets ignored. Right. And so there's this concept in economics called a management base.
And what that means is, it's, it's when a company or could be an individual has enough income, could be savings, what have you, doesn't matter, to cover their base expenses, like their base management, so that they can take risks beyond that. Now, when people say that's why the rich get richer, that's kind of what they mean.
Rich people, and you don't have to be 1 percent for this to be valid, rich people can afford to take risk. It's like the risk buffer that they have. Yeah. That's like, I'm not, I'm not betting the house. I'm not betting the farm or maybe I'm betting the second house or the third house or the fourth farm, right?
Like, and that's, and that's why you can do it. You know, it's funny. I think that one of the, one of the places I think this comes from is we get so caught up in, in the idea of what will it take for the business to work? How much money does the business need? How much money does the, will operations take?
And of course, all of that does need to be factored into this. But I think that it's the, it's the [00:03:00] personal costs that just get completely and utterly forgotten in so many cases. It's if you were like, well, I know kids are expensive. Let's find out how much a kid costs. Okay. Kids can need to eat this much.
It's going to need this many diapers, this much stuff. Okay, great. Fine. All of that's covered. And then you have the kid and you forgot to factor in like that. You have to keep eating at the same time, right? Like you also need to feed yourself or the kids that you're both going to be in trouble. And I feel like that's where this starts to go wrong is that people just don't adequately calculate or that they make these, you know, these.
Poor assumptions around like, well, I'll just, you know, start paying myself right away from a business that has no revenue and somehow that'll make the ends meet again. To your point, it's not that big of a number either that we need there, but it has to exist. That buffer has to be there. Otherwise, even a tiny pothole can take you off course in this journey.
Let me give concrete terms. So the audience can listen and Ryan, this is stuff that, you know, you and I have lived through as we're building startups. com in the formative days of startups. com back in the days of your. When we had essentially no revenue. Every single thing that could have gone wrong could have broke us.
Any of the, the smallest like speed bump [00:04:00] could have broke us, okay? Now, as we got a little bit further into the business, and our monthly recurring revenue started to increase, and we had just enough money to pay everyone a very paltry, like below living wage salary, because it's just all the money we had.
All of a sudden, that was a level up, and this is where I want to start to kind of illustrate this. That was a level up. Even though none of us were getting paid properly, even though we were still eating into our savings while we were getting paid because it just wasn't enough to cover the delta, it wasn't zero.
We had stemmed the loss. Of each of us individually, so that we could be around longer. Now pause there, because at the time that doesn't sound like a luxury, right? And folks listening are like, Okay, well, where's the luxury part? Here's the luxury part. At that stage, we were competing with other companies.
Remember Ryan, this is like the fundable days, right? Yeah, yeah, yeah. We were competing with other companies that didn't have a consistent income. We were competing with other companies that had maybe raised some money. And the clock was ticking, gun to the head. Where they didn't know that they were going to be around in 18 months.
So they couldn't make the same decisions we [00:05:00] do. And that's the crux of this, okay? And watch how that played out. Like at the time, in the formative stages, a lot of people don't know this. Before startups, we were fundable. com. We were essentially a crowdfunding platform. And how many competitors did we have?
Dozens of dozens, it was gross. Yeah, at least 30, okay? Early in that cycle, in the crowdfunding hype, if you will, I call it 2012, we looked at it and said, this actually isn't a very sustainable model, like the model of we get paid when people are successful, etc. Right. I was like, it's gonna work for some people, it's gonna work for very few people overall, 30 different companies trying this.
Correct. So we moved to the model and it essentially became startups. com, which was a SAS model. Okay. How many of those companies that we were competing with are still around today? Three? Maybe? Onesies? Yeah. Yeah, it's, it's a, it's a, it's, it's countable on one hand at this point. Yeah. And of those, they're doing horribly, which isn't my point.
My point is that we made a decision. to establish a management base early on. And that gave us [00:06:00] a very massive leg up from everybody else. What it allowed us to do is take some risks, you know, like buildingstartups. com that wouldn't pay off for a long time, but we had just enough money coming in the bank to keep us alive to be around for if that bet paid off.
To survive, to survive the, the, the missed bets, right? And that was where everybody else ran afoul. They had taken on cash. They made big bets. The difference was there was nothing to sustain them beyond those bets. If those bets did not work, it was game over. And that's exactly what happened, right? They were, as you said, they were flashing Mario, right?
And, uh, they kicked the wrong toadstool. And they were building up an extra life. And so, let's stick with that analogy, because I think it's beautiful, and if you guys love video games as much as we do, you can appreciate that. Flashing Mario means you are on your last life, alright? Like, this is it. Like, you get hit one more time, one more thing goes wrong, game over, okay?
The extra life, which is essentially a lot of what we're gonna talk about, you know, the kind of this, this risk pool, we call it, gives you Enough cash enough time [00:07:00] to fight another day now while we that first milestone the reason I brought this up Well, it felt shitty if I'm being honest at the time that we were getting so underpaid for our efforts, etc If you look back, it's the only reason we're here today Correct because we looked at our business and we did things a lot of other people didn't think about That helped us.
We created a professional services arm to help people build like pitch decks and stuff, which wasn't really our business, but it put food on the table so we could be around long enough to go build startups. It gave us the luxury of time, which is perhaps the greatest luxury of all in startup land.
Correct. And for, for our business, you know, for the business of startups, being able to have time is directly correlated to being able to take risks because most of us are on a timer. We raised money and money is going to be out in 18 to 24 months and we're done. The moment you can create some longevity, which is what we did, albeit at a pauper's level, like I want to be clear, like it's not a big number, at a pauper's level, it set us apart.
And being able to create this financial threshold, however [00:08:00] minor, to be able to stay around gives you the luxury of risk. Now, I'm going to go the other direction, Ryan. I'm going to go, what about at the highest levels, the luxury of risk? Okay. Google, Microsoft, uh, Oracle, they can take bets that no one else can take.
Just, no one has the money, right? So it goes the other direction too. There was just an announcement that came this week, we're in the first month of 2025, so timestamp this, that there was going to be this Stargate project, right? It was a big announcement this week, and like, Oracle was in it, and Google was in it, all these people, and it was gonna be a 500 billion dollar bet.
Now that's a bullshit number, so it doesn't matter. What does matter is, there are like, 10 people that can make that can make that bet. Yep. So assuming that thing does anything of merit, only 10 people have put away enough money to make the bet to benefit from it. It's a lottery ticket that most people can't afford, right?
It's a game. It's a, it's a high stakes poker table. You can't sit at. Correct. And so, yes, that's why the rich get richer. But if you dial that down to not [00:09:00] being ultra billionaires, it's also why founders who come from nothing get richer. Because they can afford to stay around long enough to make it to the next level.
What we did at startups. com is we put ourselves in a position to be alive long enough, not get paid crazy. Exactly. And there's another, I think there's another really interesting aspect to this. When you do build that, that buffer, that risk buffer, right? We've got the luxury of knowing that we can survive a hit.
It also becomes very apparent how big of a hit we can actually take. It's no longer, you know, because when you raise funds or you've got, you know, you've got a burn rate in front of you. You're saying I have to make as many bets as I can, because one of these has to pay off in order for us to, to get ahead of this or we're gone anyways.
Right? So it's a very different mindset. And I think that when you're in a position where you're very clear, like our risk buffer is 30, 000 or 40, 000, you know, that you can make a bet up to that amount. And still be okay. Right. Even if the bet fails, you're still able to move forward in the, in the case where you're, you're [00:10:00] venture funded, or even just, you know, angel funded, you run into a really different situation where you might be making bets, whether they, they, they have to succeed, or there's no version of them failing and you still moving forward.
Right. And so I think it puts you in this very different situation where the calculus of what bets you make become really different. I think it makes you a, in, in some ways, a. better decision maker because you're making it based on a calculation of downside protection rather than optimizing for some upside that is highly, highly speculative.
And I also think that when people think about how much money we're talking about, they way overshoot it, which is a huge problem. Let's unpack specifically what the actual costs are, kind of categorically what these costs are, what some of these, these dollar thresholds are so people can see what we're talking about.
So, so what I'd say is. I'd break it down, having been through this a gazillion times. There tend to be, when people do this math, uh, three major categories that people are concerned about. They're concerned about housing, they're concerned about transportation, if that's important, and food. Right? And within food, I'm gonna add, like, necessary expenses to survive.
What's interesting about that is [00:11:00] when people think about, you know, Hey, how much money do I need to have, uh, to be able to take risk? They think about, well, if I had 20 million and that yielded, you know, 9 percent in the market, then it would allow me to pay this much for life. No, that is not the calculation, right?
Right. That is not even remote. In fact, the moment you go down the path of how much cash do I need to have sacked away so I don't have to worry about money anymore? You're doing the wrong calculus, right? That is absolutely the wrong thing. What you're saying is what's the minimum money that I need in order to cover a minimum amount of exposure.
So that might look more like what will it cost me if I need to suffer through three months of a pivot or of not getting paid, et cetera. It's the minimum that matters, because otherwise you create a number you'll never get to. Exactly, right? And then you don't feel comfortable moving forward either way.
You never achieve it. The safety's not there. And again, it makes you make those different sized bets, right? This also helps you keep those bets in line with what you can survive. And let's build on that. The number doesn't have to be, here's a number where nothing in my life changes. In fact, I still, I would [00:12:00] argue that this is absolute bare minimum.
You're in the fallout shelter, right? Eating five year old ramen noodle, right? Like this is not, Hey, you know, I'm still driving my BMW to work. Like, it's not that now when we were talking a moment ago about where we were in the formative stages of startups. com and we were saying, Hey, we were all getting paid very little and having to subsidize that with our own savings.
That's what I'm talking about. What we're saying is not nothing will change and we couldn't have stayed on that path forever. But we could plan against that path, you know, so I'm just, I'm just making numbers up. Let's say that you needed to make 8, 000 a month. And whenever I say that, I always laugh because, you know, we're, I'm in the U.
S. Ryan, you're in Guatemala. 8, 000 a month is so different from me to you. So what would that be in not the U. S.? Oh, it depends. I mean, it's entirely depends. There's lifestyles down here that cost, you know, twenty, thirty thousand dollars a month. There's lifestyles down here that cost people are making it on seven or eight hundred dollars a month, right?
Kind of depends, right? So, [00:13:00] yeah, you could do a, you could do a much deeper ramen budget here if you needed to, right? So get by here. It looks very, very different. Okay. So I'm 000 is probably too much, but, but, but let's, let's stick with that for a second, right? Let's say that's what you could make in the market.
Our audience is mostly founders. These are highly ambitious people. They tend to be able to kind of command those sellers. So let's start there. And Ryan, you and I both need to make 8, 000 a month and we get the business and MRR monthly recurring revenue to the point where it's at 4, 000 a month that each of us can get paid.
That is not sustainable. It's not, like, long term, we can't keep paying our mortgages or whatever it is that we need to cover. However, there's something really important when that happens, and this is exactly where we were at that time. Something important happens. We know that 4, 000 will keep coming, so we can budget against it.
It's twice as sustainable as 0 coming in. If we have 8, 000 to cover and we got 4, 000 coming in, it is quite literally, it's twice as sustainable because at that point you're, you're dipping into savings half as much as you [00:14:00] otherwise would have been. Um, and this is what also just like the, the signal of life that it gives that, Hey, it is possible, right?
You've said this so many times, like zero is such a specific number. That's also really hard to react to. If we're at 0, we don't know how long it might take to get from zero to. 10. If you've gotten to 4, 000 we can each take home at this point, it tells you something about where we're at and the likelihood of being able to get to 8.
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 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. What I'm saying there is when we're thinking about what that minimum number is, like if you and I were sitting down and planning our business and we said, hey, [00:15:00] what's our, our minimum number kind of, you know, where we can still continue to take risk, we might have landed on 4, 000.
Uh, and again, right now we're talking about, just this example is talking about monthly recurring income, things like that. Uh, this could also just be amount of cash in the bank. It doesn't have to be recurring income. Just using one example because it's easy to calculate. What we might say is, okay, look man, All that matters, and this is what I want the founders to hear, all that matters right now is that we get to 4, 000 each in personal income, however we need to get there, however we need to get there.
Doesn't matter, right? If that means we also, uh, are bartenders at night, so be it, so be it, right? A lot of disappointed drinkers in my neighborhood. Yeah. Happy drinkers of mine. What I would say is Establishing that threshold says okay. It's not awesome. Not what we're trying to do It's not the big goal, but it's gonna allow us to take some risk It's gonna allow us to extend some timelines in life span our blinking Mario so that we can make a mistake and [00:16:00] still be around after it which is Everything.
Everything. That's the whole point of risk is that you can afford to lose, but I think it's, it's super important. I think you touched on this earlier. Let me say it again. It's super important to calculate this risk pool down to the penny and to be real, really realistic about it, right? Like what is the bare minimum, right?
Not like what is steak dinners four times a week look like? No, not, not for a while. Okay. That, yes, I know that you like that, but we're not going to do that for a bit, right? So it's really important to bring that budget down because the smaller it is. The more likely you are to actually achieve it, right?
And again, the decisions you make to get there will be different, right? That 1, 500 client per month on the retainer that's, you know, is going to take up some of your time that isn't really part of the core business or the 1, 500 a month bartending job doesn't feel meaningful. If you're setting this, like we have to get to 100, 000, but if you got to get to five.
Or you got to get to 10, that's a meaningful change in that situation. So I think it's really important to calculate this down to the penny, you know, funny enough, we're, we're going through some of this right now at a personal level, as we are calculating our personal [00:17:00] risk in, in moving to Spain, where taxation is going to become a very, very different story.
And so all of a sudden you're looking at potentially facing, you know, 50 percent of your income going away to taxes. And so you go, okay. Well, what does minimum viable life look like? And are we willing to make that trade? Are we, can we suffer that can't, can we actually make it work one with half of our income?
And then do we like that trade off, right? Is that risk worth what we think we gain from being in a place like that? And we're going through that exercise right now. And it is really interesting when you start to look at where spending goes and what you're doing and paring it down to like, what do we actually need?
It isn't that much. I mean, as a family of five, it's not insignificant, right? But it's not hundreds of thousands of dollars a year that are necessary to run the family. My wife and I talk about this all the time. I am militant about costs, right? I'm also our CFO, uh, and we go, we are so militant about every single penny that we spend at startups.
com. I go through the exact same process at home. Every month, at the end of the month, my wife and I sit down, I show her where every penny went, exactly, you know, down to like 2 at Dairy Queen, [00:18:00] right? Like, every single penny. What can you buy for 2 at Dairy Queen now? Uh, nothing. That's a fraudulent charge for sure, bud.
Yeah, I know. We don't do it because we're trying to be miserly. We're doing it because But here's the It actually maps back to this exactly. We're doing it because we know the more we can reduce costs The lower our threshold for being able to take risk. It's kind of just that simple. When, when, Ryan, every month you and I look at our, our P& L, our income statement, and we say, hey, what costs could we do without?
What, what things could we remove? And we take that active step, and we always have. We do that because what we're really saying is, what costs could we spend somewhere elsewhere to take a better, more efficient risk? And so, it's not like, like, like, we're just trying to like, uh, be miserly. It's, we want to take more risk.
We want to do more stuff. But in order to do that, we gotta lower that threshold. We gotta lower it, over and over. And so, when I look at, when I look back, personally, at how big of a change this kind of, the [00:19:00] funds made, let's say, or how much, having even just a little bit in the bank, changed my life, I want to rewind Way back in the, in the time machine, uh, in the DeLorean, let's do it.
Let's go back because, because man, I don't think we can say this enough on this episode, knowing your risk pool, like what it really looks like, isn't just empowering, man. It's life changing. It's literally your freedom fund, right? It's your freedom fund. So, so dig into the story here, because this, I think this will, this will highlight exactly how different this number might be than what people are thinking.
So, rewind back to, we'll go two quick moments in time. Will at 18, and Will at 22. So when you say rewind, you actually mean rewind. We can't hit the back button, we actually have to hit the rewind button. That's how far back this shit is. You know what it reminds me of? My wife the other day, she was entering her birth date, and you know, you gotta scroll the year.
Oh, dude. You're still scrolling, aren't you? Still scrolling, huh? It's getting painful. I turn off the friction wheel on my mouse when I do that now. Like man, that thing goes. Anyway, anyway, at, at 18, I've got absolutely nothing, right? Not a penny to my name. [00:20:00] And everybody say, well, nobody had a penny to their name.
That's, I'm not going to get into my backstory, but, but it wasn't great. And so if you could have negative money, negative money, right, right. So I'm starting for, for whatever is less than zero, no optionality, meaning I couldn't take a risk to do anything. Right. Because I couldn't afford to lose again, that nothing to lose is.
It's what people who aren't really poor say. You're on the other side of it, trust me. You got everything to lose. You got nothing but suckers. When you're at rock bottom, there's nowhere to go but up. False. Somebody will hand you a pick and tell you to fucking dig. Yeah, exactly! It could always get worse.
Always get worse. A couple of things happen. Where, you know, I'll be able to put together a little bit of cash to start my business. You know, start this, this, this agency in, um, in 1994. And a few years later, the agency starts to, like, turn a corner, right? And for the first time in my life, I have 20, 000 in my bank account.
Now, to be fair, Having 20, 000 when you're 22 years old is a lot now. It [00:21:00] was a billion dollars back then, okay? But I want to timestamp this to say, and that would be the last time it ever mattered that I had cash in the bank, okay? I want to timestamp that. I would go on to start eight more companies, right?
Take infinite amount of risk, because I funded a lot of those companies myself, like it wasn't, like I was just using other people's money. I risked everything I had over and over and over again. But, You risked everything you had, not everything you didn't have, right? Which is the difference, right? You had the risk pool to allow for that.
And here's how I calculated it, and I still calculate it to this day. I always calculated it by saying, I'm willing to risk this much, and I'm willing to get hurt this much. I'm willing to risk this much to say, I'm willing to risk 10, but I'm willing to live on only 2 if that's what it took. to risk the 10.
Okay. Now, again, you have to have the 10 to risk, but you also have to have the ability to operate on 2. So one of the things that I always did in Ryan, you can appreciate this because you've been through this exercise with me at the business [00:22:00] level when we've acquired companies, et cetera. And we've done a whole podcast about this.
I said, all I care about is the downside. If the upside works, that's never a problem. And they're like, Oh my God, what are we going to do with all this money? Yeah. Yeah. I need more accounts. Yeah. It's when things go go negative. So here's what I learned with 20k in the bank Yes, I put more money in the bank after that, but it never mattered That was the one that made 80 percent of the difference for my whole life.
Here's why in my life There were very few problems that I couldn't solve with that money Okay, now I'm 22, so health issues aren't, you know, an issue yet, right? The other side of it is, I kept my expenses crazy low. That year I'd bought my first house, my mortgage payment, and this is different times, was 1, 400 a month.
My payment, uh, at my campus apartment prior to that was 250 a month. You know, 500. Yeah, like, relative to 20, 000, my exp and that was by far my highest expense at the time. My expenses were still very low. Coulda you coulda cruised for a year or more on that. Correct. Now, but here's what I'm saying in the [00:23:00] 20 K could have been 10 K, but here's what happened.
There were lots of moments, lots of them because I'm an entrepreneur where shit went sideways, right? Where I had good years. And then I had negative years where I not only didn't make money, but I lost money. Lots of it, right? So you're making those investments and it all goes away, you lose all of it, right?
But, never when things went super negative, were they so negative for such a sustained period of time, that it ate up all that cash. And I want to talk about time, okay? Yes, I had moments, quarters, you know, uh, half years, maybe a year, where things were really Shitty, you know, from an income standpoint, etc. I was at a point where my expenses were never that bananas.
I kept that management base low enough that I knew I could survive long enough. Your 20k or whatever your number is has to do with when things go terrible, and they will, how much time does it buy you to do something about it? And I want to focus on that now. The mistake people make when they set this number, Ryan, I think, is they say, Well, hey, if I lose my job, [00:24:00] I need enough money to live for a year, let's say.
I'm just making it up, right? Yeah, if you do nothing for a year, What were you doing for a year? What the fuck are you doing for a year, right? And so, I looked at it saying, okay. If my income goes from 100 to 0, and I need at least 30, I'm just making up a number, right? Maybe I've got enough to cover 30 for, like, six months to nine months, which isn't that long in the grand scheme of things, but it also gives me just enough time to make adjustments, to lower my expenses, right?
You might go from 30 to 10. 20 to 10. Correct, right? I just need enough time to operate. Things you wouldn't necessarily do now, you wouldn't even consider today, because you don't have to, all of a sudden get put on the table in those moments where, you know, you are living out of the risk pool, right? We've all been there where it's like, absolutely, I would never go back to eating ramen again, says person who's now being paid, and will be eating ramen again in six weeks when they're not getting paid, right?
Like you, you do, right? You, you can go back. I never needed. A fuck you a lot of money where I never [00:25:00] had to worry about money again, like actually just never come up and not from lack of risk. I've done this for 31 years and doing nothing but taking risk. I think there's a difference between never needing to worry about money again and never needing to make money again, because I heard you say never worry about money again.
But I think you can actually get to a place where you don't have to worry about it, but you still have to keep making it right. And as long as you do keep making some, then you don't have to worry about it. I think that's exactly what the security pool buys is. The 20k for me was always about if I get a significant problem, right?
And again, those could be anything. It could be a health problem. It could be a debt problem. Whatever, right? I get sued. Who knows, right? Uh, it's just enough that I can operate long enough to do something about it. It's not enough that no one can stop me. I am not invincible. But it gives me one extra life that I didn't have before.
To be around long enough to see if I can still beat that boss. It needs, it needs to be the amount of time that's between, Hey, there's an iceberg and how long it takes to turn the ship so that we don't hit the iceberg. Right. Doesn't need to be longer than that. Needs to be at least that long. Right. And [00:26:00] again, we've been kind of oscillating between personal budget and company budget, because I think they both have a very similar parallel.
You know, when we were talking about just the minimum MRR, I love for founders, after they listen to this episode, go, man, you know, these guys might be right about something. Like we might be looking at this all wrong. We've been thinking about how do we replace all of our salaries when our next milestone should be?
How do we make just enough that we can stay around long enough to make the rest of our salaries? Because it always takes longer than you think. Yeah, for sure. No, I think that's the, that's the hallmark of like the most successful founders and the most successful startups that I know. They're not the ones that the ones that who can afford to fail.
And keep trying, right? We've got to come back and do this again and again and again. Rebuild that risk pool, then take another bet. Rebuild the risk pool, take another bet. Keep failing until you don't. Stay in a position where you can at least keep failing. And let me give an example of that because this is all around the same time.
Prior to me having 20k in the bank, maybe even just like the year prior. I'm sitting with all my co workers, which weren't many, like maybe six people, and I'm like, uh, I have to let all [00:27:00] of you go, right? I have no money, and I was always super open about the finances so they knew where we stood. And none of us were getting paid crazy amounts of money because we were all still in college.
But I said, look, I've got to let everybody go, and I've got to get rid of this office, which was like a big thing at the time, I got to get rid of this office, and I'm going to move the business back to my campus apartment, right? Which, I got to say, like, wasn't cool. You know, like, now there's like, Oh yeah, we worked out of our campus apartment or our garage or whatever.
Yeah, there, there was no, like, pageantry about working from your ca I felt like the biggest loser in the world, let's put it that way. Right? I get to that point, and here's what happened. We had no money coming in at the time. We had great clients, but just our cash flow sucked. Right? And we weren't charging them.
At the beginning of that year, I'm essentially broke. I'm working on my apartment, and I'm an employee pool of one. Okay? Things aren't going sweet. But, here's what happened. Here's the game changer, and I want folks to understand this. I was willing to go to zero from like, uh, uh, an expensive standpoint.
Like, my total monthly expenses, if you can even imagine this, were 550 a month. I mean, this is [00:28:00] literally eating ramen, but only eating half of it so that you could keep going. Now, but here's the way I saw it. I just needed time. I just needed time to be able to kind of get on top of receivables, to be able to get cashflow going in.
We were a services business. So for as long as I was waking up every day, I could output something for someone. It's again, it's a chance to stay alive at that point. You might've been flashing Mario at that point, but you were still flashing it. But what I did to get, you know, my risk pool dollars back was just cut my expenses to zero.
Ideally, I would have had 20, 000 in the bank, and I could have kept everybody on, and we could have had a slow month, and I could have dug into that, and I could have kept going. But what I'm illustrating is, the other answer is reduce to zero, but stay alive. Stay alive. Again, the focus here is actually stay alive.
So I stay alive, and Ryan, you know this story, but at the beginning of that year, that's when we were selling websites in exchange for, for wings and ribs. Literally, uh, we were trading food for websites, and at the end of the year, we had one of the largest agency wins, lopsided wins in history [00:29:00] of a quarter billion dollars.
Now, that never happens, right? When I say that, it clearly happened, but obviously a lot of things happen along the way. But the moral of the story is the only reason it happened, was because I was alive long enough to see it. Had I shut stuff down, like, oh, I guess I can't make my full boat, so I'm off to do something else.
I would have never seen that. Now there's just as many stories that I can tell you that are mine, that are, I held on and it still ended horribly. Right? Ha ha ha, right? So it, it, it, just holding on doesn't guarantee a good outcome? There's a guarantee here, right? Yeah, there's a guaranteed failure if you're not around.
I think a, a big part of what we're talking about here is recognizing that a risk pool needs to exist. Yeah, 100%. Right? And I think within that, if we think about, uh, if we put full focus with us, our teams, our, our spouses, you know, kind of looking at that, uh, dynamic of life, and we say, Hey, I need to figure out what my minimum viable risk is, right?
What's the minimum amount of cash I need to be able to make risks so that I could have one extra life in case thing goes wrong, [00:30:00] and I'm going to do any, in, Everything to get to just that milestone, maybe after that, you know, totally different tactics, strategies, et cetera. But whatever it takes to get to that minimum risk pool right now is all I'm going to focus on.
And if I can get there, then I can take a big swing. 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 inside.