This is the third in the series of dumb things I see small businesses say or do. First one was about being proud of ignoring business opportunities: We don’t do that.. Or do we? Then I talked about the poor taste small business owners and managers have when they blame their staff in Internal Beatdowns – Who takes the fall? Now, let’s talk about hopes and wishes.
“If we only land this big account… we’ll be set.”
We all love shortcuts.
There is nothing sweeter sounding than a really big account that will bring us a ton of money and let us get to that next level. It’s like winning a business lottery. Big client. Big project. Can you taste it?
Now.. stop. You just lost that big account. What are you doing now? Firing staff. Cutting back spending. Looking at your contracts trying to get into a smaller office. What are our contract termination terms? It sucks.
I remember my first big account.
It was a very large car dealership.
It had a lot of very important people. All of whom were extremely diligent and interested in every detail of how things were going to work.
They also needed an assurance that they could move a few hundred users onto our system overnight.
Their level of detail request was always met with their sense of urgency, asking for a more and more unreasonable level of documentation and support while seemingly holding the pen on the contract.
After I finally told them that we were not comfortable making further adjustments to the contract because our SLA was based on us implementing a predictable process, the talks broke off and I lost what by todays standards is thankfully a laughable amount of money. But if I caved in and kept on pursuing that contract, things would have probably played out far worse for Own Web Now.
The partner who owned that account eventually came clean to me and explained how these folks worked. The principle behind it is very simple:
“They pit all their suppliers against each other and do everything they can to make it seem like there is “just one more thing” standing in a way of a contract that’s pretty much signed.
What eventually happens is that the vendors will make any concession they can just to land the deal, even if they lost money on it. They spent all this time trying to win that walking away from the deal, no matter how unsavory, would be the ultimate defeat.”
In case you’re wondering, that partner went out of business and took a network analyst job after being broken by this very same client.
In business, you meet a lot of people. You learn the most from @#%holes.
The Willing Victim
Now, while I still have a bit of scorn over this big account and telling this story doesn’t make me feel good at all, it’s important to note that I chose to pursue the bidding process. I willingly subjected myself to this protocol because “a lot of money was at stake” – in retrospect I was lucky to learn early enough that this is not a way to build a sustainable business.
I also willingly broke the cardinal rule of service delivery – the vendor always defines the service that will be delivered. You as the service provider are ultimately responsible for delivering the service level you are promising to the client. The amount of money on the table should not affect the service definition and terms because it will open additional problems:
- Will I have to hire additional staff to provide this service?
- Will I have to take existing staff off their process and train them on a new process?
- Does the new process fit in to the way we work, track and manage profitability?
I would offer this for your consideration: If you think the above points are difficult when you are trying to bring yourself to the level of providing the service for the big account, imagine what happens to your business when you lose that big account?
What is risk?
I have frequent debates over what is better – lots of small accounts or fewer big accounts.
First, let me acknowledge that I like and understand the notion behind having fewer small accounts. The idea of knowing every client, on aligning yourself with their business processes sounds very intimate and probably very satisfying.
This is kind of where the debate ends. You don’t run a business for emotional fulfillment, you run it to turn a profit: and profit hates risk. Emotional return better come from the satisfaction of running a solid businesses that provides for the community, for it’s stakeholders and employees.
Part of writing a business plan is identifying opportunities and surrounding them with a process that is repeatable, consistent and thus profitable. If your business plan is doing anything and everything then you have no chance of repeatability without exposing yourself to errors.
Risk is bad.
To sum it up..
Small business owners spend too much time worrying about a big project and a big client and a big deal.
This focus on the “dollars only” takes focus away from where it should be: repeatability, low risk, predictable process and scalability.
It is easier to scale up when you are making business decisions based on the same service levels you deliver today. It is also easier to adjust to harder financial times when you lose business due to attrition.
The risk vs. reward and # of clients vs. opportunity is also critical. Few larger accounts create an enormous risk, even with a higher reward. Larger number of independent companies create a larger portfolio for new services, projects and deploying more predictable processes that yield more profit per user.
Ultimately, it’s your decision what kind of business you run and what fits your comfort level. What is important is that you need to be aware of your opportunities, associated risk and the overall impact to your business.
Now, in the next post I will explain to you why I actually wrote this 3-part blog series.
