I'm in favor of paying one's debts, have a credit record which would do a Lannister proud, and would not incur any obligation which I did not have the good faith intention to repay as agreed. It's just that I feel an extra special obligation to employees, on account of their unique relationship to their employer, their (presumed) degree of dependence on that relationship, and a heritage as both a Catholic and a Japanese salaryman which suggests that not paying an employee their due wages is a crime which cries out to heaven for vengeance. (For those folks in the peanut gallery who aren't Catholic or Japanese salarymen: that's a thing for both, and it is a thing called exactly that by Catholics. I'm aware many HNers don't necessarily believe in it, but that doesn't make me believe in it less.)
Vendors do not enjoy this status, although I'd make all reasonable efforts to have a business which I control pay them as agreed. Reasonable efforts includes things like cash flow juggling, taking out debts in the name of the business, or reducing the size of my distributions. They do not include my family experiencing hardship on your business' account.
Vendors are not assumed to be as vulnerable as employees. They typically have far less concentration of income and far higher savvy with regards to the necessity of, e.g., keeping a cushion against the risk of receivables going sour.
I run a small company. I work with lots of other ones. Of the entire set of them, nobody is one invoice from death. If we were, we'd be dead, because we're well aware that individual invoices go missing all the damn time. That's baked into running a business with businesses as clients.
That's also part of the reason why, when I do business with companies as a vendor and not as an employee, I charge a significant premium to what I'd earn as an employee. The possibility of your business going belly up prior to paying my invoice exists. I already priced it into my weekly rate (or your monthly rate for services or whatever). If one of my clients was unable to pay due to their business ceasing to be a going concern, as a responsible businessman, when apprised of that I'd say "Wow, sorry. OK." and write off the debt. It happens. My accountant could probably tell you how much it cost us last year.
If the business owner said "I'd really feel better paying you out of my own pocket for this." I'd literally refuse their money. It's not their family's responsibility to backstop my business' cash flow management. That's my job, and part of the reason why I "earn the big bucks", for values of big which are pretty modest.
(Prudentially speaking I'd probably treat a solo freelancer on a long term contract as an employee for the purpose of "Should I reimburse this guy out of my own pocket?", but as a former consultant, I'd advise any of my freelancing friends to structure their affairs such that they don't depend on payment of every invoice.)
A big question in this is what constitutes a vendor.
People who are experienced enough to price the risk into contracts, manage cashflow and not put all eggs into one basket won't get burned from a customers' insolvency.
But that comes from experience. Young people or the typical specialist such as a carpenter or electrician, are not necessarily this experienced in business.
In my view there's no line between such a vendor, and an individual who happens to be on the payroll. There might be legally, but they are equally entitled to payment for their work.
I'm sure neither you nor Thomas are ones to screw people over. But I think there's too much self-absolution of responsibility in startup circles, and your posts initially seemed to talk that point of view.
It boils down to being a decent person and stopping a venture before puting other people in financial jeopardy. Don't cry over the venture capitalists losses. But do make whole the people who have worked hard for you, whether employed or not.
Vendors do not enjoy this status, although I'd make all reasonable efforts to have a business which I control pay them as agreed. Reasonable efforts includes things like cash flow juggling, taking out debts in the name of the business, or reducing the size of my distributions. They do not include my family experiencing hardship on your business' account.
Vendors are not assumed to be as vulnerable as employees. They typically have far less concentration of income and far higher savvy with regards to the necessity of, e.g., keeping a cushion against the risk of receivables going sour.
I run a small company. I work with lots of other ones. Of the entire set of them, nobody is one invoice from death. If we were, we'd be dead, because we're well aware that individual invoices go missing all the damn time. That's baked into running a business with businesses as clients.
That's also part of the reason why, when I do business with companies as a vendor and not as an employee, I charge a significant premium to what I'd earn as an employee. The possibility of your business going belly up prior to paying my invoice exists. I already priced it into my weekly rate (or your monthly rate for services or whatever). If one of my clients was unable to pay due to their business ceasing to be a going concern, as a responsible businessman, when apprised of that I'd say "Wow, sorry. OK." and write off the debt. It happens. My accountant could probably tell you how much it cost us last year.
If the business owner said "I'd really feel better paying you out of my own pocket for this." I'd literally refuse their money. It's not their family's responsibility to backstop my business' cash flow management. That's my job, and part of the reason why I "earn the big bucks", for values of big which are pretty modest.
(Prudentially speaking I'd probably treat a solo freelancer on a long term contract as an employee for the purpose of "Should I reimburse this guy out of my own pocket?", but as a former consultant, I'd advise any of my freelancing friends to structure their affairs such that they don't depend on payment of every invoice.)