How we reversed a $300K/mo burn and hit profitability without laying off a single employee.

  • To simply survive
  • To control our own fate. We didn’t want to rely on a funding round that may never materialize. If we did decide to fundraise, we’d be in a position of power. As the old adage says “the best time to raise money is when you don’t need it”.

We explained why profitability was so important and made everybody part of the mission:

While it may seem obvious to you as a founder, “getting more profitable” doesn’t always translate as a high priority for day-to-day employees. They don’t see it as life or death. They’re not looking at burn rates or run rates — it’s not their job. They assume the company is safe, so added pressure to do more with less can seem self serving. Why should they? To put more money in the founders or investor pockets, while they work their tail off?

We chose a simple, company-wide milestone and repeated it constantly:

Once everybody was on board with hitting profitability, we wanted to create a simple metric that would encompass our goal and stretch across the company. We settled on “EBITDA ZERO” — when our monthly expenses no longer exceeded our monthly revenue. We wrote it on the wall. We brought it up every single meeting. We incorporated it into our training materials. If you asked anyone internally what the company was focused on — from managers to trainees — they would say “EBITDA ZERO” without hesitation. It was so ingrained in the company that, after a day of interviewing, a potential employee emailed me to say “well it’s clear everyone wants to be profitable!”. Apparently everyone he spoke to grilled him about his thoughts on capital efficiency. He was applying for office manager.

Employees were encouraged to present new ideas based on the EBITDA ZERO framework:

Like many startups, we try to promote a culture where anybody can come forward with a new idea. Ideas range from product features to new office snacks. Now, anytime an employee wanted to present an idea, they needed to estimate how much potential revenue vs how much expense it would add. On our offsite retreat we compiled all the ideas and calculated their effect on burn. If something added more expense than potential revenue, we all prioritized based off importance or looked to see if there was something less important to cut. This ended up accomplishing a few things for the company

  • It helped minimize the “scope creep” many companies get as they’re growing. Employees often want to help improve the company but they don’t know where to focus their ideas. Since the ideas end up ranging wildly in scope and purpose, managers get overwhelmed and end up ignoring all of them. This had the opposite effect, making everyone feel like a strategic part of the organization.
  • It helped everyone think like a business owner, not just an employee. Not only were employees excited to come up with new ideas that would directly grow revenue, many went out of their way to find expenses they didn’t think we needed — even from their own department! Imagine if every one of your employees was looking for places to cut, so they could make more room for revenue generating initiatives.
  • It helped employees appreciate and empathize with other departments. Many commented that it helped them appreciate the challenges of growing a business they hadn’t considered before. They recognized the push and pull between departments and developed cross-departmental business skills that stretched outside their day to day.

We Kept everybody up to date with the company financials:

We presented our financials to the entire company every single month. We showed where revenue grew, where it stagnated, where expenses grew, where they fell, etc. We talked about what worked, what didn’t, what needed to improve. This not only kept everyone focused and accountable, it became another strategic business goal we could share, regardless of departments. It helped people attach initiatives more clearly to business results.

We Celebrated with everyone once we hit the goal, then set the next milestone:

As I showed above, we ended up hitting EBITDA zero and reached profitability. It was a tremendous accomplishment for the business but it was even better celebrating with the whole team. Everyone had a sense of pride.

--

--

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store