Sameer Dholakia | Crain's Denver

In this ongoing series, we ask executives, entrepreneurs and business leaders about mistakes that have shaped their business philosophy.

Sameer Dholakia

Background:  

SendGrid is a cloud-based email platform for delivering transactional emails and email marketing campaigns. The company sends 30 billion emails every month for 120,000 companies around the world.

The Mistake:

We had no plan to get on a path to profitability [at another company before joining SendGrid].

At my first CEO job back in 2007, the company was growing fast. We were executing our strategy well. Things were going great. We were “investing in the business,” as they say, at a fairly aggressive clip.

We didn’t even have a thought about profitability at that time, but it was the go-go days. The market was at its peak and things were rolling. In the fall of 2008, Lehman Brothers happened and we entered the Great Recession.

If you are not profitable, and you don’t have a self-sustaining business, you need to find money to cover your losses every year. During a recession, the people giving you money to run your business – through venture capital or access to debt – go away. It gets very difficult to raise that money. Unless you have a giant war chest or a plan to achieve profits in short order, a recession will put you in a very difficult place.

For us, in 2008 and 2009, there were some dark days. We had to cut costs, and we weren’t sure how to manage it. Ultimately, we were able to close a strategic deal, and we got through it.

There’s one mistake in business you can never come back from – running out of cash. Don’t assume good times will last forever. You have to prepare to weather the storm.

There’s one mistake in business you can never come back from – running out of cash.

The Lesson:

You want to control your own destiny.

Data from the National Bureau of Economic Research shows that the average economic expansion period is five years. So if we mark, from the end of the last recession at the summer of 2009, we are two years overdue for another recession. Averages are just averages, but it’s not a question of it [happening], but when.

To all the 20-somethings in the workforce who have never worked through a recession, I would pass along a lesson I learned from one of my mentors: “Profitability is a choice – a decision – not an outcome.”

I didn’t learn that lesson well enough the first time. Maybe someone reading this will be able to learn it better than I did and get ahead of the curve. When I arrived at SendGrid, I assured myself I wasn’t going to make that mistake again.

When I joined, we were burning through a lot of cash. We were very unprofitable. On a percentage basis, we were around 30 percent negative. In terms of absolutes, we were burning around $13 million per year. Going from losing $13 million per year to being profitable is hard. There were lots and lots of things we had to change.

I’m proud to say we are now profitable. We are not at the whims of the external markets or venture capital sentiments. We can continue to build this awesome company forever, and that’s pretty exciting. 

Follow Sameer on Twitter at @spdholakia and SendGrid at @SendGrid.

Photo courtesy of SendGrid

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