Other Types Of Debt

For close to 6 years I’ve been running a company called Simplifilm. For four years I had a (great) partner. We’ve had some accomplishments. The creation and sale of a product. Best selling authors worked with us. More.

We also pushed a bunch of stuff under the rug. Both in the “partner days” and beyond. They put our company in peril, and took some of the *joie de vivre* out of running our business.

From our friends in tech we understand the concept of Technical Debt. This is when you don’t address the underlying problems with technology and patch software that may not be written correctly. By not embracing current methods, we rely on old fashioned methods. Or by kludging things together this is what happens.

In *The Hard Thing About Hard Things*, Ben Horowitz talks about *Management Debt.* He may have introduced that idea. Management debt is when you put off hard decisions and create a rotten culture. An example would be to give people raises when they brought offer letters. This would train people to always be seeking offers.

I’ll say that there were several types of debt that we incurred:

Administrative Debt

This comes from things like not having a rigorous file structure, not having a setup so we can easily recall information and a system for working internally and externally. Not doing 1 on 1s.

When you just “put something in a Google Drive” in lieu of having a time to name files and organize things correctly. You pay this off when you need something and have to spend time searching for it.

We also find ourselves reinventing the wheel frequently. How, where do we market?

We didn’t have a method to catch issues, a standing meeting or something that would cover relationship, strategy, marketing or anything else. So there was a void and assumptions never got clarified. Nobody was accountable for this stuff.

Strategic Debt

This is the sort of thing that Verne Harnish’s work covers. Having a strategy **and** a method to review, renew and change your strategy. We were “just making videos.” We didn’t have anything that would inform decisions about pricing, about what types of clients we’d take. We just wanted be in the flow. Again, because I can close and Jason could design we got away without really having a strategy.

We also had different ideas as to what we should be. He wanted to be a little, elite boutique (a Ferrari). I wanted to be a higher volume shop (Toyota). We never really reconciled ourselves to that so we were both working from different assumptions, and that could have been resolved.

We were fundamentally working from different assumptions. And because *a lot* was going right, we never took the time to see where we were at with things.

Relationship Debt

My partner is a hardworking and honest guy. I try to be. We had some relationship issues though. All people will. That’s humanity.

All people will mess up, all people will. I know I have.

We’d have issues that would come up – a milestone date would get blown, or poor communication would lead to having to rework some art. Those things will happen in any business that has human beings involved. We’d both grouse at one another but we’d never really create a system to understand, empathize and support one another.

A poor journey on my end would make me seethe but I’d say “No big deal, I can always earn another sale.” Both ideas were totally true. *From a certain point of view.  But the issue really was that the resentment built. The sense of futility.

What happens though is without really solving the issues, you build debris in your relationships.  And that creates a long term problem.

Financial Debt

This is the debt that most of us consider to be the most important debt. When we started, we made some errors in incorporating. We were growing unevenly so we punted on things like “how we’re going to pay ourselves.” We ran for a year as an LLC and then a C-Corp.

We had to pay ourselves high salaries. Me because I was paying for my wife’s school. Jason because we were 50/50. This meant that we took money out of the company that could have been spent on building up the company. Because we had other stuff going on (and no structure to resolve it) it hurt us.

We surfed the payables and then things crept up on us slowly. Money wasn’t there to take care of things. We’d get by with a new batch of sales.

Our growth obscured it – in absolute terms the lag between payroll and the rest was severe. But relative to what we had it kept shrinking.

Marketing Debt

This is all about lead generation. We never built systems to consistently generate leads.

SEO was a skill I employed successfully in our early days, and then we had a great flow of past clients. But we never really addressed “where do we get new leads.” This is a subset of strategy. We just didn’t agree on how much of our time this would take.

An example was that we only made 1 :30 second video for ourselves when we worked together. Because we didn’t have other things get resolved.

Another is that there was nothing other than fairly manual ways to acquire customers.

Cleaning Up The Balance Sheet

This isn’t the only type of debt that exists. Fitness debt, mental hygiene debts are all real things that really do exist.

All of the above added up to some situations we’d not do over the same way. Had we to do it over again, we’d have done it differently for sure.

Now, we’ve been more successful than not. But the “bad stuff” or punted choices threatens to hurt us. It was always there, in the back, restricting our growth.

Taking a toll on my very sanity.

The waiter brought the bill. We have to wash dishes for a while. But we’ve got a business that can make it all work.

Posted in

Christopher Johnson

Christopher Johnson is writing this blog. He's a startup veteran, having built a company called Simplifilm. This blog is about things that he's starting to - but may not actually - think yet. It publishes irregularly.

Leave a Comment

Your email address will not be published. Required fields are marked *

Scroll to Top