Midway: Hiring a new CEO
With the business quickly expanding, the Hippo board decided an experienced chief executive officer should be hired to help run the day-to-day operations as well as put systems and processes in place that would take Hippo to the next level.
James concedes that with a CEO on board, he took his finger off the pulse. “It was during September – six months we’d been in business – and I was looking at the accounts one day when I remember being shocked at how low on cash we were,” he says. “I left the office and called an emergency board meeting to discuss the matter; we needed to decide a course of action, and quickly. The board decided to raise additional funds through convertible notes issued pro-rata to existing shareholders. I learnt two things at this time: one, to keep a detailed and constant watch on the financials of the business, regardless of what you have in place; and two, as an entrepreneur I don’t like convertible notes!”
Shock of a lifetime
November came and with it another board meeting. “During this meeting I was told straight out I was costing the business too much money and that maybe my salary should be cut. In other words, I was being asked to take a massive financial hit for the sake of the business. I was shocked,” says Masini. “This method came from the highly paid CEO as a way of reducing the business’ cash burn, knowing as the young entrepreneur I would stick around anyway. I felt they wanted my ideas, they wanted my opinions and they wanted my knowledge of the market, but because of the financial situation, they did not want me paid for the work I was doing.
“I was distraught, physically and emotionally exhausted. To sit and think of the amount of time and energy I had put into this business, yet here I was as good as out on my ear.”
After some soul searching and advice from mentors, close friends and family, Masini started to push back and subsequently pressured the CEO and board about fixing the situation; a situation that was not going to just be fixed by reducing his wages. Following a series of frank discussions, it was agreed all parties would set aside their differences and work together to make the business work.
As Christmas neared, Hippo ended its office lease and moved into the Boost Juice head office in Glen Iris. “This was probably the best decision we made because not only did it save us some money but it put me in close proximity with the amazing people at Boost; as a young entrepreneur, such support has been invaluable,” says Masini.
But while he had a new lease on life, Hippo’s growth was still a concern. November’s revenue dropped, so did December’s. “The equation just didn’t add up,” says Masini. “We had got off to such a fantastic start and were growing exponentially month on month, only to hit a wall six months later.”
Analysing the business carefully, Masini says it became apparent growth had come solely from a focus on closing off on deals with existing clients, but there had been no strong enough pipeline of new client leads to maintain this growth. “Having identified the problem, we started back in January with renewed vigour and pretty soon we saw a fantastic increase in sales.”