I have 3 weeks of cash and our updated product (we burned through our angel money on the first product which was well received by the press by didn’t get traction with our hoped for business base) going live in 2 weeks. I’m trying to raise some more but I may have to fire half the staff to keep the burn rate down. My co-founder says let’s fire now but I worry about the impact on morale. Am I just being indecisive or deluded that I will raise enough to avoid a crisis.

I would be as open as possible with your staff. Lay the cards out and let them know that you’ve got 3 weeks of cash. That one option is to layoff. You may be surprised to see them pull together and offer consessions just to keep it a flout for a little more as you try to get more funding. If not enought do, then at least you’ll learn who’s a team player and who gets cut.
-FR

Anonymous says:

March 20, 2014 at 1:33 am

Do just that! We went through a similar situation with my co-founder. At first, when we saw what was coming, we decided not to get a salary any more (we were paying ourselves symbolic salaries of like $500 before that), but it wasn’t enough. So we were honest with our staff, and most had no problem in staying for far less money. What’s surprising is that this actually boosted morale within the team. A few months later, we haven’t raised any money, but we have a growing clients base which has allowed us to retain everyone (but one, who chose to leave on her own), to pay them what we were paying them before, and to even get our salaries back (this time with a 20% increase to $600, still low, but enough to survive while we pull this off).

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Anonymous says:

March 20, 2014 at 1:34 am

Yea. Sometimes employees will take pay cuts or even no salaries at all for a short period to help the company get out of tough times. Being open and honest with your employees creates trust with them. They probably know that the company is in bad shape, so it won’t be a shock to them once you approach them.

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Absolutely agree with the above comments. We had a similar situation and speaking to the team really helped us. We had to let go of some part time staff and all full time staff agreed to pay cuts for a period of 6 months.
I would speak to them immediately. You need to get this pressure of your back or you and your co founder will crumble from the stress. Nothing takes out more stress than halving your monthly burn rate and you may need the little money you have for the weeks and months to come.
We are now 18 months down the line and doing well. We were lucky not to lose a single core employee, despite the pay cuts.

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