Ask HN: How to deal with a co-founder who has wasteful spending habits
My co-founder partner is the CEO of our company and I am the other co-founder. This is a tech company with size of 30 people.
Last month a company retreat event announced and it is scheduled only 5 weeks forward. I learned that with other employees on Slack. It is a 5 day beach vacation to very far away. It cost like 10% of annual revenue of the company and company is barely profitable. It is announced that our business partners also will come so all managers including me must attend (None of our business partners attended). I rejected and didn’t go.
During this economy, how wasting so much money on beaches, midnight parties at pubs, and yacht tours can be normal?
How can I deal with this behavior of treating your partner like any other employee?
How can I fix this communication problem and prevent future abuses?
94 comments
[ 28.7 ms ] story [ 3437 ms ] threadDo your job, say no.
https://ia800509.us.archive.org/4/items/TheFoundersDilemmash...
[1] ISBN 9780143118442
In the meantime, clearly setup and define spending controls as it pertains to bizdev. Create -per-department/-per-project budgets and limits (e.g. approvals required over $X amount) with incentives to stay below these lines.
Maybe your idea of a fractional CFO is the same of my idea of an advisor, in which case it's just a term difference.
Advising can only get you so far, especially if the CEO is incapable of taking action on it. Sometimes even smaller companies can benefit from more constant accountability.
For a dozen person tech start-up, it isn't too hard to figure out how a dozen recent college grads are being financially irresponsible without getting in the way. Mismanaging cash flow, paying for things they can get for free as a start-up, failing to file for tax credits and other literally free money from the government for start-ups, buying things they could have rented, overpaying for certain things, etc.
You said the business partners were supposed to attend, but none of them did.
I think this is probably a good opportunity to sit down with your co-founder and discuss what went wrong.
Rather than just accuse them of wasteful spending, create a learning experience for them (or you).
The type of questions you'll want to ask is
1) Why did they think it was a valuable way to spend company money?
2) What sort of result did they expect? If partners were supposed to attend, did they expect an increase in revenue from the event? If not, why are they spending money on partners/
3) What would they do differently next time?
4) Is there a way they could have reached the same goals without spending the money at all? How can they be more creative, etc?
Perhaps the CEO had a master plan that didn't work out (unlikely), perhaps they just wanted to blow off steam. Maybe they heard it's what other companies did, and therefore thought it was a sign of what they should be doing.
I wouldn't attack them, but make sure they understand that you believe this was not a good use of company funds, and that as a result of these actions, you now must do X, Y, Z in order to get back the money that was spent (how much more sale, how much more advertising, which leads to more hiring, etc).
Paint the picture in clear detail of what the event cost beyond the dollars spent and time lost. For every $100 they spent on the event, the company needs to earn $240 (or whatever your margins are after tax, etc etc).
This way you can make it clear that the next time they attempt to do something like this, that they understand the cost isn't the $$$ going out, it's the cost of getting those $$$ back in!
Also make it clear that there are limits to how much they should be spending without discussing it with you. I assume they wouldn't make a major hire without consulting you, so why would it be OK to spend a huge chunk of revenue.
There are probably some notices you may want to write down about the event to keep just in case of future litigation, etc. But you'll want to speak to somebody with legal experience about that...and do the legal thing after the discussion.
Does work get done more effectively when the CEO does not interfere/mess things up but you don't allow yourself to say so?
Does it happen you watch clips from The Office's Michael Scott and it hits too close to home?
PS: Also, are you sure you're a co-founder and are you certain you actually do have equity? Did a lawyer you (not the company/CEO) have paid go over this? Are you in the bylaws?
Remember that we’re only getting 1/2 (at best) of the story here.
Joking. I'm curious what the answers will be. OP doesn't strike me as oblivious to what an MBA is about, or as a "tech dork with no people skills who sneers at any MBA they meet"... Although I wonder how many hugely successful companies were founded by people like that.
Glossed over the actual important point. OP is kind of a loser for not just talking to his co-founder and airing his laundry on HN. It doesn't show much emotional maturity on his side.
The CEO might have a good reason to do this, and we have no clue if this is abuse from the CEO or he doesn't trust his partner to see his side.
Good to remember that nobody is all knowing, regardless of age or experience.
Ageism cheapens whatever you are implying.
Quantities and measurements, such as time, are useful in life.
"And does he point-click his fingers at you, saying 'my maaaan' as he leaves the room without listening to a WORD YOU SAYY???! Gaaaah!"
This was the first thing I thought of. Being a co-founder in name, and legally being one in fact are different things. You'd need to find this out. Lawyer up!
OP: that sucks and it shouldn't have, but you're cofounder too so go tell this guy he just wasted precious company funds on pure vanity and it's damaging the company.
Everyone needs financial controls and financial accountability. No one should be able to spend without cosigners. If you set that up early, it will be in your company's blood. If you don't, you will ALWAYS have a culture of wastage.
It sounds like the CEO is a classic visionary - big picture people person, grand ideas, bad with details like operations and money.
It also sounds like you may be their complement - good with details and proper planning - a classic "integrator"
This is actually a great combination, but in order for the company to benefit from your complementary abilities you've got to get separate responsibility appropriately. At 30 employees you should have a fractional CFO or at least a situation where the COO/integrator can keep expenditures in check. CEO needs to let the team do what it does best.
It's not 2001 or 2009 (yet). Inflation is high, unemployment is very low, so it's hard to say where the economy is actually at.
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I've answered your three questions below, based upon my experiences. The answer to your first question is labled #1. The answer to your second question is #2. The third answer, labeled #3, attempts to answer your third question.
1. It doesn't matter whether this is normal. You should ask whether it is useful and acceptable for your company. Above and beyond that, you need to set boundaries regarding co-owned funds. A marriage won't last between two people who don't speak with each other. In many ways founders enter a marriage with each other, so they need to speak with each other and keep their lines of communication open. After all, you've entwined your financial and business lives together.
2. Stop acting like an employee next to your partner. The first step is to talk with them instead of reaching out to random people on the Internet. It's possible that your co-founder does not see a problem but would be willing to change if you spoke with them. It's also possible they do not see you as an equal. Either way, you need to find out what is going on.
3. You actually didn't state a communication problem in this post. That tells me you don't always speak up and in this case may not have spoken your mind with your partner. If you want them to treat you as a partner, you need to treat them as as a partner as well. Otherwise, they'll never know what you want them to know.
This is the most valuable comment so far. The problem is lack of communication and/or possibly lack of respect of boundaries, but the lack of details and passive-aggressive responses to the event indicate the relationship needs work.
The money does not seem like your primary issue. If you don’t repair things with your cofounder then 10% of revenue (which frankly sounds like it is probably kind of a small number given your other clues) doesn’t matter.
I’d personally just bring up expense management and how I understood the intent but feel as if we need to think of more cost effective ways to engage our team, etc. If they push back, you can always say you think the partners would agree and perhaps is why they did not attend.
Anyways, maybe build a budget together to get aligned as well.
I came from the other side of the coin - a business partner who was the king of false economies, refused to ever reinvest a single penny into the company, and preferred to just see the corporate bank balance increase. Never mind fun days, he wanted employees to go out and buy their own coffee rather than having a machine in the office. I won that battle, eventually, on the basis that he was essentially paying people to go stand in line at Starbucks, but he’d always make comments to employees about how they shouldn’t drink too much coffee because it cost the business money. He’d have me, everyone, pay for travel expenses out of their own pocket. No such thing as a corporate phone. Hell, he even wanted people to bring their own equipment to work on.
I talked to him about it. Our investors talked to him about it. All he would do is sulk, and dig his heels on further.
After a decade, I gave up and left, to his jubilation. He immediately went and spent £100k on a company car for himself, and started paying his wife, who has literally nothing to do with the business, a salary.
Six years on, the business is on the brink of folding.
I spent far, far too much of my life trying to get him to change - sometimes, you just have to cut your losses and run.
An agreed upon budget might help. The budget should have a line item for these type of items. But I suspect you already have a budget and he's not following it.
You won't be able to change him so you need to look at the situation seriously and decide whether it's worth continuing. The reality is that startups without financial discipline will have a hard time surviving. Good luck.
Real problem is to figure out if you guys got what you paid for.
If you're co-founders you need to be able to talk to each other. Not on Hackernews.
There's muuuuuch much bigger issues here than some 'wasteful spending'.
You came to know from other employees about it on Slack? Are you sure you are a co-founder? Have you checked with the other co-founder what your company sells? Who knows the company maybe be selling sea surfing items or beach balls and it would be a perfect thing to invite everyone to the beach to promote the products.
I know plenty of companies who have gone 100% remote and spend part of the money they save on company retreats in order to get actual facetime with each other. It’s not clear if this applies to you or not.
Their MMR could be $20k, making the cost $24k or about $800 per person for a week long retreat. That doesn't seem insane.
There's simply not enough information in the post.
Not in general. But if the company is “barely profitable” then revenue is approximately equal to cost, and thus 10% of annual revenue is approximately equal to 10% of annual “burn”.
First, you should have gone to the company retreat. As a manager it's your responsibility to support team-building things like this, even if you don't agree with the CEO's decisions.
Second, your communication style is hurting you. Don't just reject the CEO's initiative. Don't complain about your boss on HN in a way that, honestly, will be completely obvious to your CEO if they read this thread. Politely bring up your objections, and if the CEO overrules you, accept it and move on. It's a company retreat, you must have more important problems.
How much equity do you and the VCs have in total? From a purely practical perspective, if you have over 50% then you have leverage over the CEO. You can't credibly threaten to fire him over this one incident, but you can rein in potentially worse behavior.
It would also be wise to figure out why he did this. Does he have a family that he was trying to appease by hosting an event on sandy beaches (so they could tag along gratis)? Is he hitting a wall and worried other people are also, and wanted to let people relax a bit?
Regardless, someone should have been in the loop on this before it went out on Slack. Even a sole founder should be getting a gut check from others before planning a trip that could cost 10% of revenue. If I'm reading this right, did this trip move you from being profitable to being in the red?
But the bottom line is to see who has the majority of the shares. If it's you and others, great. If it's him, then you just have minority shareholder rights, which wouldn't kick in at this point. If he's enriching himself at the expense of the company, then you can take action. Good luck!