No one was using the supply chain management system!!

One morning, an employee mentioned there were rumors that the port would be closed due to a dockworkers strike. I asked if anyone knew how much material we had coming in. No one did. I asked if anyone knew how much was actually at the dock. No one did. I asked how much stock have we paid for that hasn’t been delivered yet. No one knew.

I was shocked – no one knew what was going in our supply chain. It was all there in the system but no one bothered to look. Clearly they didn’t look at the data everyday. I asked why they weren’t using it.

They said it was all wrong and has been since the day the system was set up, so no one uses it. I asked how they managed the supply chain and they said they’d call friends at the dock and ask what they have, then call the customs agent and ask what is coming in. I asked if this meant our physical stock records on the computer were wrong and they said yes.

Our accountant sent out a report without verifying it

We got the monthly accounts from Quickbooks and it showed a much larger profit than we had expected.  We estimates profit and cash weekly, so this was a real surprise - a pleasant one I had to admit. I didn’t really give the matter much more thought because the variance was positive. If it has been negative, I would have been all over it.

Then, driving home I began to wonder how we could have made so much profit. The next morning I went in early and started looking at the reports. Sales looked right, but the margins were way too high. We normally have around 40% gross margin but these accounts showed it a 56%. I kept looking. Most of the expenses seemed to be normal with the exception of the sales discounts, which looked really low. They were below the normal 15% level. Suddenly it dawned on me: somehow the discount had been added the to gross margin.

I called in the accountant and asked what was going on. He looked at the accounts and said they were wrong. I was right there was a misposting. I asked why he hadn’t checked the accounts and he said he didn’t feel well and had gone home. When I asked who he sent them to, he answered the bank, board, and all our investors. I told him we needed to recall them ASAP and make sure this never happens again. I told him next time he goes home without signing off on the accounts at the end of the month, he needs to tell me.

My cofounder and I were gone for three days and everything fell apart

My business was 8 months old and it’s been a roller coaster. One day I thought we had the next Google. The next I thought we would fail by the end of the year. Whenever both of us cofounders were away, chaos seemed to erupt.

I had to go to China to place the orders for next year. My cofounder wanted to go to NYC to see potential investors. We both wanted to go at the same time.

I said the business was too volatile and the employees too inexperienced for both of us to be away for two weeks. He said we weren’t married to the business needed to trust our employees.

We both ended up going away at the same time. Three days after we left, I got a text saying our merchandise manager decided to join our competitor and just walked out. The accountant didn’t come into work and never told anyone. He was supposed to run payroll so no one got paid. Finally, there was a robbery at our newly opened shop. They took all the money and a lot of merchandise. They also broke the door and the glass in front.

My partner got on the next plane back from NYC.

I couldn't do it all myself but I couldn't give up any control

I am alone and do nothing but work. To save money, I moved back home and feel like a child again. I fight to get out of bed everyday because the amount of things I have to do is overwhelming. My sales were over $150K, but I don’t want to hire anyone else; no one could do things better than me.

As sales continued to grow, I simply couldn’t cope. I hired a fulfillment company to handle the packaging and delivery. I visited them twice a week. Sales were then over $225k and I couldn’t keep track of everything. My accounts were months behind and emails went unanswered, so I decided to hire a part-time assistant.

She was a new mom so it could have been ideal. As soon as we started working together, I became critical of almost everything she was doing. I didn’t want to do things her way and I told her so. Sometimes she was late for meetings and sometimes she did things without asking me first. After six months, she quit. She felt she could never do anything right and that I didn’t trust her.

By this time, sales had grown again, invoices were in boxes, and it took me a week to fulfill an order. The website looked old and I had to update the product catalogue at least once a week as items sold out. This month, 35% of the products have a “sold out” tag on them.

My parents suggested I move out and that I needed an office.  I found a place that was big enough to act as an office and to live in. I moved all my things there.

I tried to hire someone to work with me but couldn’t find anyone good enough. Some people didn’t want to work where I lived. Others wanted too much money. I needed help but I also couldn’t let go. I had to control everything.

The business was in chaos and service levels were really poor. The repeat purchases began to fall away. For the first time in three years sales stopped growing. I had become the problem.

A trusted advisor told me I wasn't a strong leader and needed better people

I’ve been turned down by eight potential investors. It is me or the business? I was getting depressed and thought I should stop. I didn’t know how to make sense of what was happening to me. The investors were so aggressive. They wanted me to make mistakes. They just seem like nasty people.

My sister’s husband is an investor and I went to get his advice. He said it was part of the game to ask hard questions. Investors also want to see how you stood up to stress and adversity. He said he would come to our office to meet the team. When he came to see us he asked everyone questions about the business. He asked for data on customers and competitors.

At the end of the day, we sat down together to review his day. He said he wasn’t impressed by the team or their knowledge of the business and the market. He thought they were all nice people but didn’t have the skills to grow the business. Few understood the business model. Above all, he said they lack passion for the business. Then he said it was my fault for choosing weak people and not educating or communicating with them. Great leaders hire great people. Good entrepreneurs hire people that can scale the company to new levels.

He then asked me about the business plan. He listened to my answers then said I didn’t understand the business and couldn’t explain the operations or its economics in simple terms. He said he wouldn’t invest in me or my business because I couldn’t determine the size of the addressable market, the intensity of competition, or how to differentiate ourselves.

He told me this was real life, not a business plan competition. He said in order to be successful, I need better people, a stronger board, and better results. He said no one would invest in me or the business if I didn’t make these changes.

Business is for real men

This is my company and my money and I will do what I want. I don’t need Board members and investors telling me what to do. If they don’t like what I’m doing they can leave. I don’t believe in democracy and voting in business. It slows things down and causes confusion. 

The same applies to anyone who works for me. My staff do what they’re told. They can’t question or challenge me. I know what’s best. I got us to where we are. Working for me is simple. Get the work done on time and under budget. I pay better than other companies if my employees perform well. If they don’t do it right, they get fired.

I don’t believe in training and all that soft development stuff. Business is for real men. It’s war.

Our raw materials on hand quadrupled while our sales had only doubled; I had no idea why

The team said we needed a bigger warehouse. The stock of raw materials was growing as we grew and the finished orders were piling up in the loading bay. We had racks from floor to ceiling.

I’m a great believer in analytics, so I started to find the data I needed to see what was going on. When we rented the warehouse, it was supposed to handle three times our existing volumes, so something was wrong. I looked at the relationship between raw materials and sales and this showed that we had increased the raw materials on hand by four times and sales had only doubled. But it was the finished stock that really scared me. We had 12 weeks stock on hand – our bench mark was 45 days. How had this happened?

I knew we were using more cash than we planned and this explained why. Before I lost my temper with the team I realized it was my responsibility for finding these things and asking the right questions. I was distracted by other parts of the business and not paying enough attention to the inventory and stock.

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.

I can't deal with my startups' lack of discipline and systems

My to do list was growing everyday. When I looked at the list I got depressed. I could never get it all done. I was never going to catch up. I know that I should prioritize things but I do not really know how to do it. It seems simple but it is very hard for me.

As a team we also have problems establishing priorities. Everything and anything is a priority. Sometimes there are daily changes in what we must do. We are constantly fighting fires.

The CEO often tells us to drop everything and do x. This only makes matters worse. Things are half done and some things just get lost.

When a customers calls asking where their order is, we simply fill that order next.

We can't carry on like this. A business can’t be run this way and it is driving me crazy.