Ripcord Clause

I was talking with my good friend, Alan, this week.

A surveyor by trade, he’s contemplating taking a job as a subcontractor for a company that’s pursuing him.

He would have already said yes, but he’s concerned about the company’s tendency to overload their surveyors.

So, I told him about initiating an up-front agreement that includes a ripcord clause coupled with DEFCON levels.

In case this would be useful to you, here’s the email summary I ended up sending Alan. (Just swap the word “surveyor” for whatever industry you’re in.) ————————————————– 

Here’s in writing what I mentioned earlier about the up-front agreement and having a plan that makes everyone happy.

Define your ripcord clause and set the DEFCON levels.

Your ripcord clause is the maximum number of surveys you’re willing to process in a month. There is no amount of money or begging that can convince you to personally do any more than that.

Obviously, if you wait until you reach your ripcord level to enact a plan “b” it’ll be too late without scrambling and extra stress. Thus, the DEFCON levels.

(Real DEFCON levels count down to 1 so we’ll follow suit.)

For example:

DEFCON 5 – 50% Capacity: Note the point in the month but no action. (Are you halfway through the month when you hit 50% capacity?) 

DEFCON 4 – 60% Capacity: Start pro-rating the days of the month left against the month’s workload to that point. (Is it tracking or will you clearly hit the ripcord level? Do you need to start planning?)

DEFCON 3 – 70% Capacity: Yellow Alert. Depending on where you are in the month either start lining up help or actively shuffle/disperse workload. 

DEFCON 2 – 80% Capacity: Orange Alert. Should be handing off 60% or more of all incoming/current surveys.

DEFCON 1 – 90% Capacity: Red Alert. Should be handing off 95% or more of all incoming/current surveys.

The goal is to actually never hit your ripcord number. If you do then reevaluate the DEFCON percentages and adjust.

This is based on the principle of always having a guy in a truck with not enough to do. (Which is the key to business growth.) 

For any service based company, you cannot grow unless you always have at least one person with not enough work. This allows the company to say yes to incoming new work. As soon as the “one person” has a medium-full schedule you hire the next person.

The only companies that grow are the ones willing to counter-intuitively always pay one more person than the workload dictates.

The numbers I used and DEFCON levels are just examples. You’ll have to run your own math to make it work.

 – Zac Smith, VC