Hiring Outside Execs Almost Sank My Company
By Kent Lewis, President, Formic Media, Portland, Ore.
In late 2008, I launched a search engine and social media marketing firm, Formic Media. We wanted to target emerging businesses who couldn't afford the services of our enterprise-level marketing firm, Anvil Media. I was already working close to 60 hours a week on Anvil, though, so I couldn't effectively run both companies at once.
I hired two outside executives to manage and grow the business for me. It was huge mistake. At the end of our first year we were losing money, we were behind in our work, and then one of the executives quit. It took the next 12 months to turn things around, but in the end we managed to save the business -- and double our revenue.
Our first mistake
The guy I chose to head up sales at Formic looked good on paper: He had run his own marketing agency for 10 years and specialized in working with small businesses. I assumed that as a senior person he'd have the experience and wherewithal to manage the department on his own. I was wrong -- he was a disaster. Not only did he not sell enough to cover his salary for the year, but he actually lost a few hundred thousand dollars worth of opportunities because he communicated so poorly with our team and our clients.
He was used to having an account person take notes during his pitches, do his follow-up work with clients, and communicate the clients' vision to the rest of the team. His seniority, then, was actually a liability -- he no longer knew how to work on his own. You can't, I realized too late, hire an executive to do a technician's work.
Our second mistake
My selection for VP of Operations wasn't any better. We had worked together at a different company 10 years earlier, and I thought she would be a great addition to Formic. She wasn't.
It would have been easy and sensible to apply Anvil's operating systems to the new venture, but she wanted to structure it her way. We now had two complementary companies using different phone systems, different internet service providers, and different time-tracking and billing systems, among others. It was a mess. To make matters worse, she didn't clue me in as to how dysfunctional the relationship was between our VP of Sales and the account team -- a year later, we were still writing off work that the VP of Sales had sold.
In our first year of business, we brought in $270,000 but lost close to $300,000. Soon after the numbers came out, I got an email from the VP of Sales announcing that he was quitting. A number of people suggested I cut my losses and abandon the venture, or simply fold the business into Anvil. Instead, I decided to do what I should have done from the start, roll up my sleeves and rebuild the company myself.
Looking within
My first move was to fire our VP of Operations. Her management methods were costing us a big chunk of change, and so was her salary. By hiring senior-level executives, I had blown through my start-up capital in less than three months. I was paying someone six figures to run a three-person company. It was stupid.
I learned from my mistake and replaced her with someone internal: my own operations director at Anvil. She did an amazing job, and it only took five hours of her time every week. Her first decision: Fold Formic's backend into Anvil's, so now all the systems are the same.
Next, I took Anvil's VP of Client Services and had her work part-time to clean up the VP of Sales' mess at Formic. Our greatest growth last year at Formic came with no full-time salesperson, although I did pick up the phone and make a few sales during that time.
Finally, I needed someone to be an account manager, a VP and to eventually run Formic. Most companies hire externally to fill that kind of role, but I never wanted to make the same mistake again. I took someone I had been grooming for a senior position at Anvil and transitioned him gradually into the new role at Formic. Within his first month there, we doubled our revenue.
Since then, we've dug out of the hole and then some. We're now two separate companies, with separate sets of employees and similar services sharing an operational backend. We went from $270,000 in sales our first year, to $560,000 in 2010 and will likely break $1 million, this year.
When not anticipating trends in digital marketing, Kent Lewis spends his time cycling, driving too fast, and hanging out with the family at Chuck E Cheeses.
-- As told to Alex Coppola
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