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9 Ways to Know When to Jump Ship at a Startup

Posted in Startups and Business, Technology, Workhacks and High Tech Life by engtech on January 11, 2008

Workhacks

For the last couple of months I’ve been plagued with wondering if I should stay at my current startup. I’ve been approached with a few different job offers that I haven’t followed up on, and maybe it’s time I pursued greener pastures. In the words of the Clash: should I stay or should I go now?

Indecision

Changing jobs is a big, life altering decision and if you have my knack for risk avoidment it can be a horrendous see-saw of uncertainty. It’s this state of uncertainty that is ultimately the cause of the most unhappiness in your life. Leaving your options open is always less satisfactory than making a firm decision.

Compensation

When comparing offers from other companies, you need to compare the full package which is a lot harder than it looks.

  • Health benefits / Health insurance
  • Overtime compensation
  • Pension plans / Pension matching
  • Stock purchase plans / Stock discount
  • Stock options / equity
  • Travel allowance / food allowance
  • Raises

In particular it’s very hard to figure out what stock options are worth, if anything. The best advice I’ve read is that your stock options aren’t worth considering in any compensation comparison unless you are a founder.

This wiki page does a very good job of explaining how any employee can figure out what their pre-IPO equity is worth. What’s most important is to figure out the percentage of total options and how much funding the options are worth. Don’t forget to include capital gains tax (eg: 40%) when figuring out how much those options are worth.

More information on equity dilution

Business Plan

When will the startup be profitable? How much money has been invested in the company? How much more funding is needed until the startup can stand on its own legs? The more you can find out about this, the better off you’ll be, because you can’t accurately evaluate your monetary compensation and the future of the company without it.

At my previous job I was making more money than I am now, plus there was an average of a 5-8% raise per year. Startups often have no salary increases until they are profitable, or at least have revenue on the books. When you look at the roadmap to profitability you need to factor this in so you can evaluate if the potential payoff if the startup does well comes close to matching the potential revenue lost working at another company.

Bankruptcy

Most startups fail. The most likely outcome of working at a startup is showing up to work one day and finding the doors locked. There may be no compensation package for the newly unemployed workers until they land another job. Waiting for a golden handshake from downsizing is a worse idea than acting on an opportunity that has presented itself at a different company.

Technical Debt

Startups cut corners. You may not have the best tools available to get the job done. You are always squeezed for time and money, which means quality suffers. Poor quality can throw a monkey wrench into schedules, forcing crunch time in order to meet the delivery dates. This technical debt is just like any other debt in that it requires interest payments and you’ll have to pay it off eventually — although project managers often ignore it completely. Steve McConnell covers technical debt in more detail.

Signs of Success

Success should happen early. If things are always running smoothly then the work environment will be enriching and enjoyable. If things never work properly the first time then it can create a big cloud of doom that hangs over the head of everyone in the company and curses the new work being done.

Positive Reinforcement

How are employees reinforced for good work? In a startup, it usually won’t be monetary but that’s ok because one of the best rewards is the time to work on pet projects. Interesting work is its own reward.

Work Experience

Monetary compensation might pay off the bills, but it won’t make you feel as satisfied as a job well done. What makes me happiest is learning/improving new skills and knowing that I’ve done a good job. Having to constantly return to the same project that never works properly is one of the most soul-sucking experiences I’ve ever had. It’s like a bad relationship that drags on and on. You’re trying to make things work, but there’s always something new that comes up and drags you back into old issues that you thought were worked out a long time ago.

“Will I enjoy the work?” is the one of the most important criteria for evaluating a job change, because passion can’t be faked and it’s the only way a job will enrich the rest of your life.

People

Jeff hit the nail so squarely on the head when he said that the most accurate predictor of job satisfaction and success is if you like the people you work with. No matter what the problem is, it’s a people problem and if you don’t enjoy working with your coworkers then you’ll never enjoy your job.

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  1. Support this story on Stirrdup said, on January 11, 2008 at 2:35 pm

    9 Ways to Know When to Jump Ship at a Startup

    This story has been submitted to Stirrdup. Your support can help it become hot.

  2. Brian Buck said, on January 11, 2008 at 3:31 pm

    This is a great post with awesome advice. “Will I enjoy the work?” is so important.

    I think a lot of people go to startups for the excitement factor but don’t think about the actual work. Coming from a corporate background with clearly defined roles and responsibilities means culture shock in startups usually.

    I just discovered your blog and enjoy it very much. You are in my Google reader. I am excited to read more!

  3. Webomatica said, on January 11, 2008 at 6:10 pm

    Welp, all I can offer up is that options are worth = 0 until you can excersize, vest, and sell – and after taxes and the amount of time it takes for all that to happen it’s really not realistic to consider them in the job equation. Point taken about being a founder, but, well, most of us aren’t that.

    This is my roundabout way of saying that these days, I’ll take a higher base salary over a low salary and tons of options.

    Still I did enjoy the startup experience immensely. If you have the chance to do it once in your life go for it. It’s just being honest with how much risk you can manage.

  4. staffitright said, on January 11, 2008 at 6:22 pm

    Not _all_ startups fail, they just may not do what you expect them to do, for your benefit. I have been at 8 startups. Even the ones that actually had a bit of “business success” still did not make me internet startup rich! In fact, I’ve made more money from a public company than at almost 80% of my startup cash, COMBINED!!! :)

    I’ve gotten pretty good at reading the “tea leaves” and choosing to jump to a new gig. I believe that everything you’ve stated are all factors I too have used to make my decision. Sometimes, one or two have had a stronger influence on my desire to jump … take a subset and just pull the trigger.

    Here’s one level of risk I’ll give you in comparison: jumping ship from a public company to a startup (a startup without a shred of street-cred), and you have a 6 month old … :)

    There’s some nerve-splicing not many would do.

    Life of us technology junkies, eh?

    Take care, and work your LinkedIn and Plaxo contacts like mad!!!

  5. askbusinesscoach said, on January 12, 2008 at 10:55 am

    I think you may find the top 16 Lies of CEOs real good reasons. This was taken from Guy Kawasaki’s Blog “how to change the world”

    1.

    “Working together, we’ve established our goals.” In other words, these are the goals that the CEO decided will make him look good. Few managers believe that these goals are doable, and yet they are the ones who are going to have to accomplish them. But that’s what working together means: the CEO decides and the workers do.
    2.

    “It’s like a startup around here.” This could mean that the place lacks adult supervision; capital is running out; the product is behind schedule; investors have given up, and employees are paid below market rates. Sure, it could alternatively mean that the company is energized, entrepreneurial, making meaning, and kicking butt, but just be sure to double check.
    3.

    “Your project will be a skunkworks reporting directly to me.” This means that no one else at the management level buys into the idea. The CEO might protect you—as this lie implies. Or, you may be fighting for your life against the naysayers when the CEO moves on to the next brilliant idea du jour.
    4.

    “I wanted to do this, but the board wouldn’t let me.” This is a cop out. A good CEO tells the board what she wants to do. She doesn’t seek permission—forgiveness maybe, but never permission. So this statement means one of two things: the CEO didn’t really try her best to get something approved or the board is losing confidence in the CEO.
    5.

    “I expect you to figure this out.” This is a loaded, supposed backhanded compliment. It’s supposed to mean, ”I have such confidence in you that I know you can do this.” Sometimes it does means this. Most times, though, it means that the CEO has no clue and is praying that you can save his butt.
    6.

    “Our sales pipeline looks good.” This means that the vice president of sales leaned on the regional sales manager who leaned on the regional sales rep to pump up the forecast because the CEO doesn’t want to look bad to the board of directors.
    7.

    “We will be profitable soon.” After leaning on the sales organization and it “came through with a great pipeline,” the CEO could then ”reliably“ predict profitability. He never did check with the CFO, though. If the company isn’t profitable, then it’s the fault of the vice president of sales or CFO anyway.
    8.

    “The stock price is not important; what’s important is building a great company.” There are handful of visionary CEOs who mean this when they say it. However, you don’t work for one of them. If one could get an honest answer out of CEOs, most would tell you that they’d rather have a rising stock price than a great company. Very few have the courage to build a great company and trust that a rising stock price is a natural outcome of this accomplishment.
    9.

    “I’ve never worked with a better group of people.” The career limiting comeback to this is, “Well, I have—starting at the top.” This can be a legitimate morale boosting statement when it is infrequently made. However, if a CEO spouts this off more than once every five to ten years, and you know there are clearly bozos on the team (often protected by the CEO), then you know that he’s playing you.
    10.

    “I’m open to new ideas.” The CEO must have recently read a book by a management guru. She’s certainly open to his own new ideas. She’s probably open to new ideas from the consultants that she hired at $10,000/day. Maybe she read a new idea in a blog, God help us. The relevant question is whether she’s open to new ideas from the rank-and-file employees who really know how to fix the company.
    11.

    “I want to hear the truth; I don’t want yes-men around me.” Maybe this is the truth: he doesn’t want yes men around—he wants yes women. But I doubt it. It could be that he’s so arrogant that he believes that he’s always right so there’s nothing to disagree with. But I doubt that too. The most likely situation is that he’s just lying, and he wants people to always agree with him.
    12.

    “I will gladly step aside when the time comes.” Sure, with a $10 million severance package, who wouldn’t be glad to step aside?
    13.

    “This is how we did it at (name of previous company he was fired from), and it worked.” And that’s why the company let him go. And that’s why the employees at the previous company rejoiced when the news spread. And, unfortunately, that’s why the directors of this company hired him: because he was a senior-level packaged goods guy who was available, and the board thought that your tech products should be sold like laundry detergent.
    14.

    “I don’t need to understand all that whiz-bang stuff to be a good CEO.” Absolutely. Your customers aren’t that smart. Neither are your employees, vendors, and partners. The CEO just needs to stand there: tall, white, and gray haired, and let everyone kiss his ring.
    15.

    “I don’t need to rehearse my speech.” This is because he’s not to going to gauge audience reaction since his limo is waiting to whisk him away. He’ll simply ask his handlers, Trixie and Biff, how they think he did. And they will tell him that the emperor has very fine clothes indeed.
    16.

    “We are a customer-focused company.” If only the CEO had appended two additional words: “this quarter.” Because next quarter the company will be an innovation-driven company. And the quarter after that a Six Sigma driven company. And the quarter after that the company will be producing purple cows. And the quarter after that it will be evangelistic (depending on whether the CEO reads my book or Seth’s first).

    Bonus: “I can telecommute and still keep my house on the golf course in Carmel.” The CEO should be living and dying with the company. If anything, he should be there more than anyone.

    Rather than these lies, here are four things you’d like your CEO to say:

    1. “I don’t know.”
    2. “Thank you.”
    3. “Do what’s right.”
    4. “It’s my fault.”

  6. Sandy said, on January 15, 2008 at 6:26 am

    Wow, the comment is bigger than post :)

  7. [...] Should He Stay Or Should He Go? [...]

  8. [...] 9 Ways to Know When to Jump Ship at a Startup When is it time to hit the open seas? When is it time to stick to your guns? [...]

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