Entrepreneur Office Hours - Issue #65

A type of "viral" we can finally get excited about

Over the past 20 months, lots has been written about viral things. Very little of it has been good, so let’s change that. In this issue of Entrepreneur Office Hours, I’m going to teach you how to make your startup go viral… in the good way!

After that, I’m going to teach you how to tell if your startup is growing fast enough.

And, after that, I’m going to answer a question about budget allocation, which probably doesn’t seem nearly as exciting, but it’s important, so… yeah… let’s discuss it anyway.

-Aaron


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Office Hours Q&A

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QUESTION:

Hey Aaron,

Thank you for the eye-opening newsletter! I find it incredibly helpful.

I lead a startup-ish company and I'd be happy to hear your thoughts on budget allocation. We want to grow as a company and reach more people, and we need to pay the team better wages (currently we are all somewhat underpaid). We have a steadily growing audience and it seems that in order to generate more sales we would just need to invest more in our marketing process. 

Between future development and the current satisfaction of the team, what would be a good guideline for dividing our budget? And is this even the right question to be asking (maybe I've been reading too much of your newsletter 😀)?

Thanks!

-Bar

*I'll just add that we are unable to receive external investments so we can only rely on money we make on our own.

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At the risk of coming off as a callous jerk, I’m going to go ahead and answer this question in a way that’ll make me seem like… well… a callous jerk.

If what you’re describing is, indeed, the case -- if you’re genuinely in a position where you’re having to decide between spending more money on an a proven marketing/customer acquisition process versus employee salaries -- then you should absolutely, 100% prioritize future growth over employee salaries.

Your company’s long term success is more dependent on customers than any one employee. Or, at the very least, it should be, which is why you should prioritize growth.

As the person leading the business, your primary responsibility is to the success of the business, not any one employee. If issues with salaries are going to cause people to leave but your company is going to continue growing, then you need to let those people leave.

By the way, this same logic also applies to you. Sometimes, what’s best for the business requires doing something that’s not personally great for its leader, and that has to be OK. In fact, this is why lots of startup founders end up leaving their growing companies. At some point, the company has a better chance of being successful without the original founder running it.

However, here’s where things get messy. It’s also possible that the growth/success of your company is reliant on employee satisfaction (and/or the satisfaction of a specific subset of employees). In this case, your question becomes trickier to answer. Is investing more resources into marketing rather than salaries going to make it harder for your business to grow because your employees are overworked or otherwise less-incentivized? If so, then you’re either going to have to figure out how to keep employees incentivized without paying them more, or you’re going to have to settle for slower growth knowing that it’s helping you retain critical employees.

If the latter is the case -- if you need to raise salaries in order to continue operating the business -- then your next priority (once you’ve raised salaries and made employees happy) should be figuring out how to make your business less dependent on any one employee or set of employees. In other words, you need to figure out how to systematize your business so you can afford to lose people (or fire people) without it crippling the company.

Again, I realize what I’m about to write is going to seem callous, but I’ll write it anyway: Ultimately, from the perspective of the business itself, your employees need to be expendable. When a specific employee isn’t expendable, your business has a single point of failure, and that’s a huge problem.

To be clear, I don’t think you should treat your employees poorly or as though they’re expendable. I actually believe the opposite. You should treat your employees incredibly well. They’re often a company’s most valuable assets. But treating employees well doesn’t mean you should be naive to the fact that, in order to best protect the company, employees need to be easily interchangeable and replaceable.

For what it’s worth, you shouldn’t feel too badly about prioritizing the needs of the company over the needs of its employees because your employees already see the company as expendable in their own lives. By that I mean, while they might love working for your company, I guarantee they’ll leave it to take a better opportunity if one comes along. And they should! Why wouldn’t they prioritize what’s best for themselves, their careers, and their families?

Just as you should expect and encourage employees to prioritize themselves and their careers, the company should be prioritizing itself, too. However, since the company is, technically, an inanimate object that can’t make decisions on its own, you, as the person running the company, are the person whose job is to focus on doing what’s best for the business. That’s what leaders of a company do. It’s not always a fun job, but it’s necessary.

Got startup questions of your own? Reply to this email with whatever you want to know, and I’ll do my best to answer!