Philly CEO: Yikes, I'm almost out of money

Gut-wrenching -- that's the feeling many entrepreneurs have when all of a sudden, they see the cash running out, but there's payroll to make and rent to pay. In Michael Rappaport's case the moment came just a few months after he started Chariot Solutions, the Fort Washington software development company.

"We’d just got into the business," Rappaport said during our Executive Q&A interview published in Sunday's Philadelphia Inquirer.  "We were so overwhelmed with work. 

"Our first week in business we had a job for Rosenbluth International.  They wanted more people than I had in my company.  We were kind of working around the clock. But we had trouble five months later.  First of all, raising money was not fun for me.  I did not raise much.  My mentor said it was not enough.  I said,  `I can’t stand raising money.'  So, I just raised a certain amount.  After four or five months, we were growing much faster than I thought.  We were running out of money.  We were going to run out of money. 

Why?  Because of cash flow?

Absolutely, working capital, because it cost you money to grow.  I’m putting out all this money.  I don’t even bill my client for 30 days, much less get paid 30 days after.  So, it’s purely working capital, but when I started this company, you couldn’t get any money.  It was right after 9-11.  This was 2002.  It was immediately after 9-11.   I couldn’t get anything.

You had your angel investors looking behind their sofas for quarters.

That’s how I felt.  I actually felt kind of sick to my stomach back then, because we were going to run out of money.  This was a horrible time.   I couldn’t go back and ask for more money.  I didn’t feel that way. 

One of my mentors, my original two mentors, he’s also passed away, Vincent G. "Buck" Bell was his name.  He was the co-founder of Safeguard in the 1950’s.  Buck was up there in years.  Buck was a great, great human being.  Buck missed a board meeting.  He was in Cuba when I had a board meeting when I felt really sick and was showing people we were running out of money. 

I went to Buck’s office in Radnor when he came back and I did the presentation for him and felt terrible. 

When I was finished, he said. `So, what you’re saying is your track record with your customers is still perfect.  Your pipeline, as I evaluate it, looks further and further along than you expected to be at this point.'

He started bringing up all these good things. 

'But,' he said, `it looks like you’re going to run out of money.'  

I said, `Well, you just made that sound much better than I feel it is, because I’m sick to my stomach right now. But yes, I guess that’s it.  He said, `First of all,' and I’ve learned this, I’ve had good mentors -- `there’s nowhere in the book of being a CEO where it says you’re supposed to panic.' 

So, he said, `One solution I have for you to try is I’m part of a group called LORE in Philadelphia, Loosely Organized Retired Executives.'

 It has a different name now.  It’s merged with other groups, but it’s basically mostly retired people that have money that look to invest independently.  They sit in a group and you present, but then they sign up if they’re interesting and you negotiate with them individually. 

So, in January of 2003, we did this presentation.  Buck was actually the chairman of this thing.  He was a very humble guy.  When it was done, he said he had never seen so many people sign up.  But, I didn’t need to raise much money.  I just needed to get over a hump.  So, at least I didn’t have to worry anymore. 

Basically, you needed a loan.

As it turned out, that same week Tracey Welson-Rossman -- she is chief marketing officer today --  closed a deal with a utilities company in Reading that had 15-day payment terms.  We took in, at the time, our largest project, which was for a company in Ohio, a very cash happy company.  It was a great win-win.  We gave them an additional discount to pay in 10 days instead of waiting.  So we didn’t raise that money.  So it got us over the hump. But, to have people like that that are there for us, it was so incredible.

I can imagine that you had nightmares, thinking about how it came to be that you got in the business in the first place.  

To me loyalty is – we may not use the word that much -- but that’s what this place is about.  My job is to enhance the loyalty, value and happiness of our team.  That’s my number one goal.  It’s really important.  It translates and it’s good for business too.  Having people stick around is always great.  This is one of the things about me.  It’s why I had to have my own company.  

Why is that?

I ran a software company for ten years for a parent company -- great people.  At the end, they wanted to sell the business.  It made sense. But I had 35 people working for me and how we handled it with them, for the first time in over ten years I really felt like I couldn’t keep my word.  It was a horrible, terrible thing.  I didn’t own it.  I had run this business for ten years.  I said, `That’s not for me.'  One thing I have to guarantee is I can always keep my word, no matter what.  I’ve never been a money-is-most-important kind of person. That's where people run into trouble.