In the Spring Term (i.e., now), I teach a course at Johnson called Startup Learning Series.  “Hosting” would be a more appropriate term because the course consists of 10 lectures, all by guests.  No required reading, no problem sets.  Come to class and get 1 credit.  If you miss more than 2 classes you don’t get the credit.

Anyway, last night my guest was Nick Lantuh, the founder of NetWitness.  NetWitness is spooky software that plays Big Brother.  I will leave it at that because what the company actually does is irrelevant to this post.

Nick’s lecture was awesome.  My 90 students were literally enthralled.  One wrote me right after class and the email only said “That presentation was sick”.   I confirmed that sick meant awesome.

Nick talked about company building.  He talked about exits.  He talked about product.  He talked about the customer.  But mostly he talked about sales.  Nick hit some fundamental points:

1.  If your sales guys are not making the most money in the company (because of commissions), then you should change your comp structure.   Note that NetWitness was exploding in revenue and profits prior to its sale to EMC so commission incentives were very meaningful.

2.  Don’t be an ass.  Nick could not stress this enough.  Don’t be an ass to customers (i.e., don’t take advantage), don’t be an ass to employees, and listen to everyone, ESPECIALLY the customer.

3.  Don’t lose alone.  If a sales guy lost a sale alone, meaning that he did not huddle with the team to save the deal, he would usually be kicked out the door.  Sales is a company wide effort – use the company.

4.  But, the sales guys owns the account.  Do not touch a customer without getting clearance from the sales manager (NOT the VP of Sales, but the actual account manager).

5.  All that matters is products and sales.   Have the best product and focus on selling.  Nick’s strategic plans go out 3 months…..purely sales focused.  I know that many of you will take issue with this one, but it certainly has worked for Nick (6 companies, 6 exits).

6.  Build a culture so that employees will die for you.  Incentives…..whatever you can afford.  One time he bought an employee a Harley for a big thank you (again, easier to do when your company is swimming in cash and your VC backed board says “hell, yes”.)

There were a boatload of other great soundbites too.  Sales, Sales and Sales.

Yesterday I gave a presentation on startup myths and corollary truths.  I thought you might enjoy it…..so here it is (without the voice over):  Presentation – Startup Myths February 2012

Happy Valentine’s Day!

It is really easy to underpay yourself in a start up.  After all, there is typically not enough $$ to pay yourself well or at all.  It is easy to cut your salary during a cash flow crunch.  By using the word “easy”, I do not mean easy as in fun or simple.  Rather I mean easy as in you have no choice.  And having no choice is not too easy!

Prior to receiving outside funding, founders often work for very little salary.  Ideally, everyone is motivated by their equity stake and the hope of future reward.  A serious issue arises when the “salary not taken” shows up as deferred compensation on the company’s balance sheet or rears its head in discussions with potential funders.  This is not going to make for a pleasant talk.  It also makes for a messy balance sheet.  It is difficult or impossible to get deferred compensation paid once you have outside investors.  I think the most important point here is actually expectation management.

A similar situation arises when bonuses are granted even though they cannot be paid due to lack of cash.  Is employee moral boosted by paper bonuses that might get paid in the future if cash flow improves?  Doubtful.  I am guilty of falling into this trap as a board member.  The situation never ends well and, again, a messy balance sheet results.

I love to approve bonuses when cash flow exists to pay them (i.e., hey, we are selling product and making some profit).  I love paying market salary when cash flow exists to support.  I wish my VC fund were larger so that I could get paid more out of our management fee.   Reality is……it is not.  Reality is…..the payday hopefully comes later with exits.

Luckily, we don’t carry any deferred salaries on our books.