American Data Company
Fifteen Cubed—The Goal of Getting to $15 Million
To galvanize his team around the idea of getting to $15 million, Holtzman came up with a catchy concept he dubbed “Fifteen Cubed”. The idea was that his team would help him build American Data to $15 million in annual revenue by the year 2015 and, if successful, he would share 15% of the proceeds of the sale with his staff as part of a phantom stock option program.
Holtzman announced the goal and bought Fifteen Cubed bracelets for each of his employees to wear as a reminder of their collective goal and how they stood to gain personally if they were able to achieve their common goal.
Initially, the program was received positively, but a year after the announcement, American Data had failed to grow. Another year went by, and still, American Data was stuck at $3 million to $4 million in revenue.
Suddenly, the prospect of hitting $15 million looked like a long shot. Ultimately, the only way Holtzman could hit the goal was to merge his company with a much larger one, which is what he did when he swapped his equity in American Data for a minority stake in Magnet 360, a consulting company about five times bigger.
The merged companies exceeded $15 million in combined sales, and Holtzman’s employees were able to participate in Magnet 360’s phantom stock option program, even though their portion of the proceeds was diluted when American Data merged with Magnet 360. It was a good outcome for all involved, but not quite the home run Holtzman had imagined when he first announced the $15 million revenue goal.
Keeping Employees in the Know
Being open with employees can be a great energy boost when things are going well. Employees see the charts and graphs all moving up and to the right, and that can contribute to a positive vibe in the office. But just like using leverage when buying a house can boost results in a good market and magnify mistakes when things turn down, being open has the potential to backfire dramatically if you don’t reach your projected numbers.
As an entrepreneur, you can handle a high degree of ambiguity and probably have an abnormally high degree of optimism. Just remember the people who work for you have chosen not to be entrepreneurs, and for some of them, there may be such a thing as too much information.