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“Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

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Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#141

Post by hyperpape »

bdcravens wrote: post #117
hyperpape wrote: post #81

Earlier quoted context omitted.

There's a good reason to support businesses: if you airdrop money to individuals, businesses will go under because they don't have any revenue. That'll result in job losses, and when the virus is under control, there won't be jobs for people (you can't start a business and ramp up to a large number of employees overnight--it's a big organizational problem). But the support for businesses should be limited to those th…

Businesses that are crucial will be recipients of that air drop spending, as will the employees of those businesses. Cat litter task management SaaS apps? Not so much.

See my response to the sibling comment.

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#142

Post by tomp »

outside1234 wrote: post #77

Is he the majority shareholder? If so, is he really making a sacrifice here or just deferring when or how he is getting returns.

That's the idea, no? Ownership is optionality, you can end up with 0 or with billions. Employment is security, you're "guaranteed" your salary but no more (or fired).

Sounds like he's promising security to his employees, and eating the variance himself - taking a hit in bad times and, conversely, making bank in good times. Sounds fair to me!

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#143

Post by ttul »

the8472 wrote: post #102
ttul wrote: post #99

Earlier quoted context omitted.

Business owner here. First, let me dispel the myth that business owners are wealthy. All of my friends from school have more liquid assets than I do. I am utterly broke unless you count for the paper wealth of my company shares. When COVID hit, within a week we had customers dropping out of our sales funnel. Half of our expected revenue growth disappeared as customers decided to reduce risk and stick with existing so…

> Half of our expected revenue growth I am guessing that restaurants would be pretty happy if that's all they were facing.

Restaurants are levered differently.

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#144

Post by ttul »

mistermann wrote: post #129
ttul wrote: post #99

Earlier quoted context omitted.

Business owner here. First, let me dispel the myth that business owners are wealthy. All of my friends from school have more liquid assets than I do. I am utterly broke unless you count for the paper wealth of my company shares. When COVID hit, within a week we had customers dropping out of our sales funnel. Half of our expected revenue growth disappeared as customers decided to reduce risk and stick with existing so…

> A small stake in each company, for instance, that we have the option of buying back at cost later . Because if society is supporting my business, society should have a stake in its recovery. If businesses can buy it back at cost later, is this not a textbook example of moral hazard? Now I in no way believe you, or business people like you, are responsible for this debacle any more than the average person on the str…

I hope that governments make some adjustments to tax policy to incentivize some industry-wide de-risking.

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#145

Post by qqqwerty »

danans wrote: post #87
zaroth wrote: post #83

Earlier quoted context omitted.

Yes, the grant also provides some downside protection on actual compensation, not just employment count. A vast number companies are hanging on to employees to pay them to do nothing right now. Stores closed, employees who cannot work from home, but still getting a paycheck. These grants basically allow the companies to keep these employees on payroll.

Downside protection to whom? A significant amount of the terms of the loan forgiveness rely on employers "doing the right thing" by their employees: not docking their pay up to 25% while still claiming the full loan forgiveness. So in this case the lender and the employees are holding the bag for that 25%. Why allow the employers to convert the full loan to a grant while reducing employee pay? Looking at it the other…

The loan can only be used on qualified expenses, roughly rent, payroll, and utilities. And there is a $100k cap on qualifying salaries. So in the hypothetical scenario where revenue goes to 0, the owner can only use the money to pay their own salary up to $100k.

Of course, in the real world, I assume revenue for most companies won't go to 0. So there are probably cases where they could offset payroll costs with the loan while pocketing the revenue that would have been used for payroll. In the grand scheme of things though, the loan is only ~2.5 months of payroll, and the businesses that won't feel the impact of this coming recession will be few and far between.

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#146

Post by mistermann »

ttul wrote: post #108
pdeuchler wrote: post #104

Earlier quoted context omitted.

If a 50% drop in expected revenue _growth_ causes you to default on your debt you are either a startup that had trouble raising money, in which case now you know that you do not have a viable business plan, or you are running a completely unsustainable business that only existed because of easy access to cheap debt the past couple of years.

Common misconception. It’s not uncommon for companies to use leverage to fuel growth. High yield venture debt is often tied to growth metrics. It’s not a mistake to operate a company using venture debt. In a highly competitive market, if you don’t lever up, your competitors will eat your market.

> It’s not uncommon for companies to use leverage to fuel growth.

Seems true.

> High yield venture debt is often tied to growth metrics.

Seems true.

> It’s not a mistake to operate a company using venture debt.

Is this true, or might it be more accurate that particular people, depending on their situation, would like to have us believe it is true?

If a company is operating using venture debt, or operating in any arbitrary fashion for that matter, and then a disruptive incident occurs and the company's finances are insufficient to sustain itself and must shut down (in turn losing at least a significant portion of the initial investment), is it accurate to say that "no mistakes have been made"?

If the business in question then goes hat in hand to the public (whose constituents are often lectured to "save money for a rainy day", and who also have serious financial issues of their own), asking for a bailout with this story as a justification of sorts, does this not seem a little bit absurd?

Am I looking at this the wrong way, because it kind of seems counter-intuitive to me?

> In a highly competitive market, if you don’t lever up, your competitors will eat your market.

Seems true.

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#147

Post by mistermann »

ttul wrote: post #144
mistermann wrote: post #129

Earlier quoted context omitted.

> A small stake in each company, for instance, that we have the option of buying back at cost later . Because if society is supporting my business, society should have a stake in its recovery. If businesses can buy it back at cost later, is this not a textbook example of moral hazard? Now I in no way believe you, or business people like you, are responsible for this debacle any more than the average person on the str…

I hope that governments make some adjustments to tax policy to incentivize some industry-wide de-risking.

I hope that we some day have competent, completely arms length people perform a proper systems analysis and produce competent, evidence-based recommendations, and then we implement those (because done correctly, these recommendations should be as close to the gold standard as humanity is currently capable of), plus, and extra say 0.5% skim off the top that goes into a kitty for a rainy day.

Why this seems like too much to ask (or even consider!) is another one of those things that I "just don't get".

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#148

Post by dhimes »

rsync wrote: post #71
benatkin wrote: post #38

There are a bunch of tech CEOs who pay themselves one dollar. https://thehustle.co/1-ceo-salary/

I am aware of this, of course, and always find it interesting ... According to my own understanding of US tax code(s), one must not reduce their w-2 income to zero - or even relatively small numbers that do not befit their position or responsibilities. The issue here is that a funding for welfare programs, such as social security, are taken from wage earnings. It is, in fact, preferable for me, as a business owner, t…

I always assumed that it was because they got paid in dividends, which are taxed at a much lower level. Not an expert though.

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#149

Post by bdcravens »

hyperpape wrote: post #137
klyrs wrote: post #98

Earlier quoted context omitted.

A huge number of folks, perhaps an overwhelming majority of americans, are living paycheck to paycheck[1]. When they get "airdrop" money, these folks tend to pay their outstanding bills or make large purchases that they would otherwise need to save up for. Who's getting that money in the end? Businesses whose services are in demand. This, in turn, incentivizes hiring and maintaining capacity to deliver their services…

It's a hard pill for people to swallow that they deserved to be laid off because their employer was non-essential. In an advanced economy, an enormous number (maybe even the majority) of jobs are non-essential. If they all disappear overnight, we'd have to rebuild the majority of the economy, and we'd extend the economic crisis by years. "Non-essential" businesses that are in trouble under major social distancing inc…

I think people will spend some of that money even in "non-essential" businesses, after they pay their essentials.

For many small businesses, they can leverage the SBA benefits in the stimulus package to stay afloat.

Re: “Today I cut my pay to $0. I'm committed to laying off 0 of our employees.”

#150

Post by triceratops »

hyperpape wrote: post #137
klyrs wrote: post #98

Earlier quoted context omitted.

A huge number of folks, perhaps an overwhelming majority of americans, are living paycheck to paycheck[1]. When they get "airdrop" money, these folks tend to pay their outstanding bills or make large purchases that they would otherwise need to save up for. Who's getting that money in the end? Businesses whose services are in demand. This, in turn, incentivizes hiring and maintaining capacity to deliver their services…

It's a hard pill for people to swallow that they deserved to be laid off because their employer was non-essential. In an advanced economy, an enormous number (maybe even the majority) of jobs are non-essential. If they all disappear overnight, we'd have to rebuild the majority of the economy, and we'd extend the economic crisis by years. "Non-essential" businesses that are in trouble under major social distancing inc…

Small correction: auto mechanics are classified as an essential occupation under California's shelter in place order.[1]

It makes sense. Can't run the other essential businesses and services without repairing the means of transportation.

1. https://covid19.ca.gov/img/EssentialCriticalInfrastructureWo...

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