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Ask HN: Why did your startup fail and what did you learn?

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Re: Ask HN: Why did your startup fail and what did you learn?

#31

Post by subhobroto »

tptacek wrote: post #17
MisterOctober wrote: post #9

Earlier quoted context omitted.

^ this is real talk. Big companies love to be behind on AP for a variety of reasons, among them: - Their own 'highly matrixed' organizational structure makes it near impossible to find 'the correct person' to talk to about accounting issues, let alone get a straight answer out of them - so chasing these issues down becomes a huge drag on your time and energy and you may very well just give up after a while - Past-due…

A lot of this is probably true, but it's really to your benefit to understand, as a businessperson, that this is generally how large clients expect to conduct business. You can fight it and even establish better payment terms, but it isn't always worth it. It's usually cheaper just to build a business that is resilient to late payments. Over the last 15 years or so, a lot of my best customers have been super-late pay…

I used to think that offering a 10% discount on invoice to clients for payments within NET30 would motivate them to pay early, but very few clients, specially those complaining about expenses ever made good use of that.

Has this been your experience as well?

... and do you "outsource" your AR for a % of your invoices?

Re: Ask HN: Why did your startup fail and what did you learn?

#32

Post by beilabs »

god_bless_texas wrote: post #4

I chased and successfully won a huge customer for my small and fledgling startup. I chased and successfully won a sole service contract for a key part of their business process. I allowed a credit situation with them to grow over the course of 3 months while I allowed them to have 60 day terms. And then, they went out of business and left me holding the bag with $150,000 in unpaid AR after I spent $90,000 generating…

A single company I had a long term business relationship had a similar issue with me. Thankfully I had moved to a developing country and was able to bring costs way down as a result. If I had stayed put, back to work in a cubicle for a time I guess...

Re: Ask HN: Why did your startup fail and what did you learn?

#33

Post by tptacek »

subhobroto wrote: post #31
tptacek wrote: post #17

Earlier quoted context omitted.

A lot of this is probably true, but it's really to your benefit to understand, as a businessperson, that this is generally how large clients expect to conduct business. You can fight it and even establish better payment terms, but it isn't always worth it. It's usually cheaper just to build a business that is resilient to late payments. Over the last 15 years or so, a lot of my best customers have been super-late pay…

I used to think that offering a 10% discount on invoice to clients for payments within NET30 would motivate them to pay early, but very few clients, specially those complaining about expenses ever made good use of that. Has this been your experience as well? ... and do you "outsource" your AR for a % of your invoices?

I really don't think we even think about it that much. We have terms in our contract, and we send emails when payment is due, but it's not like we'd ever flip out if someone was late.

You can try setting late payment penalties, but my experience has been that client procurement and legal people get those stripped off routinely.

At Matasano, I remember one of our anchor customers taking something close to a year to pay an invoice.

Re: Ask HN: Why did your startup fail and what did you learn?

#34

Post by jlelonm »

ilamont wrote: post #11

Choose cofounders carefully, understand the platform dynamics of your industry, don't discount models that experts and the in-crowd look down upon (solo founder, bootstrapping, etc.)

I’ve heard “understand the platform dynamics of your industry” a lot in various forms but it’s always seemed so vague to me. How do you know when you do? What does that look like?

Re: Ask HN: Why did your startup fail and what did you learn?

#35

Post by mrhappyunhappy »

subhobroto wrote: post #31
tptacek wrote: post #17

Earlier quoted context omitted.

A lot of this is probably true, but it's really to your benefit to understand, as a businessperson, that this is generally how large clients expect to conduct business. You can fight it and even establish better payment terms, but it isn't always worth it. It's usually cheaper just to build a business that is resilient to late payments. Over the last 15 years or so, a lot of my best customers have been super-late pay…

I used to think that offering a 10% discount on invoice to clients for payments within NET30 would motivate them to pay early, but very few clients, specially those complaining about expenses ever made good use of that. Has this been your experience as well? ... and do you "outsource" your AR for a % of your invoices?

As a consultant I state that I will charge a 10% late fee for every week a payment is late. I’ve never had a late payment. I’d say offering a discount does the exact opposite.

Re: Ask HN: Why did your startup fail and what did you learn?

#36

Post by subhobroto »

MisterOctober wrote: post #30
tptacek wrote: post #17

Earlier quoted context omitted.

A lot of this is probably true, but it's really to your benefit to understand, as a businessperson, that this is generally how large clients expect to conduct business. You can fight it and even establish better payment terms, but it isn't always worth it. It's usually cheaper just to build a business that is resilient to late payments. Over the last 15 years or so, a lot of my best customers have been super-late pay…

No doubt about it. An effect of the behavior set I describe above [and I was only describing them -- I've been on both ends of that phone call over the years] is that in these relationships, the established payment terms are kind of irrelevant to the way things actually play out.

You are getting me really curious now.

I have tackled this issue (late payers) in two ways:

1. My cashflow from other investments ensure I did not run out of money. This is a bad design where I am effectively extending a 0% APR loan to the client with a term of their choosing

2. When I have ARs large enough to entice "parties that handle payments", I choose to let them handle the invoices on my behalf for a cut. A pretty large cut but 80% is better than 0%.

I am effectively looking for a way to optimize the later but happy to hear alternative solutions, specially when the ARs are not large enough to outsource.

For a bootstrapped business, this cashflow can be critical.

Re: Ask HN: Why did your startup fail and what did you learn?

#37

Post by throwythrow »

For me:

- I didn't work hard enough.

- I didn't have any previous success or experience.

- I was starting it in a second language I didn't speak well enough.

- I was on my own and had no one to turn to for emotional support.

It's all too easy to read the startup blogs and think "Gee, I should be doing that!" but when the rubber hits the road it's much more difficult than I ever imagined. Lesson learned.

Re: Ask HN: Why did your startup fail and what did you learn?

#38

Post by subhobroto »

tptacek wrote: post #33
subhobroto wrote: post #31

Earlier quoted context omitted.

I used to think that offering a 10% discount on invoice to clients for payments within NET30 would motivate them to pay early, but very few clients, specially those complaining about expenses ever made good use of that. Has this been your experience as well? ... and do you "outsource" your AR for a % of your invoices?

I really don't think we even think about it that much. We have terms in our contract, and we send emails when payment is due, but it's not like we'd ever flip out if someone was late. You can try setting late payment penalties, but my experience has been that client procurement and legal people get those stripped off routinely. At Matasano, I remember one of our anchor customers taking something close to a year to pa…

> You can try setting late payment penalties, but my experience has been that client procurement and legal people get those stripped off routinely.

That at best. others just "forget" about the late payment penalties in my experience.

The sibling comment from @mrhappyunhappy is interesting but when I tried it, clients would rarely pay the premium.

Re: Ask HN: Why did your startup fail and what did you learn?

#39

Post by woogiewonka »

My first startup failed because I had no idea what I was doing. I started an online vacation rental site, similar to vacationrentals.com vrbo, homeaway etc... I was getting traction and had people list their rentals on my site but I failed to collect any revenue. The thought was, build it, offer it for free to grow it and then charge. Well, I built it (wasting way too much money on an original solution when existing solutions could have done just fine), people came (after I bent over backwards trying to onboard them), but time sucked me dry and I was not able to sustain the "business" any longer. Looking back, I did just about everything wrong.

Re: Ask HN: Why did your startup fail and what did you learn?

#40

Post by subhobroto »

mrhappyunhappy wrote: post #35
subhobroto wrote: post #31

Earlier quoted context omitted.

I used to think that offering a 10% discount on invoice to clients for payments within NET30 would motivate them to pay early, but very few clients, specially those complaining about expenses ever made good use of that. Has this been your experience as well? ... and do you "outsource" your AR for a % of your invoices?

As a consultant I state that I will charge a 10% late fee for every week a payment is late. I’ve never had a late payment. I’d say offering a discount does the exact opposite.

Clients past a certain size just "forget" about the late payment penalties in my experience, which is why I offer a "on time" payment discount.

I tried both methods and clients would rarely pay the premium compared to those who would avail of the "on time" payment discount.

I have less happier clients when I make them pay a fee than when I take away a discount although mathematically they are the same number.

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