Swimming with the sharks is not always the primary objective for a small business in a burgeoning information technology marketplace. Awash in a choppy sea of larger competitors, just keeping your head above water can be a major accomplishment. To manage that, it’s important to establish priorities that reflect both your vision and the sometimes-cutthroat reality.
Having spent nearly five years doggy paddling, feverishly on occasion, I’ve learned a few things. And I’ve avoided being swallowed up by some competition that was, well, a tad less than friendly. And there you have lesson No. 1.
You might think the pie is big enough for everyone to have a piece, particularly small firms with relatively dainty appetites, but don’t assume your competitors learned to share in kindergarten. In an industry in which your partner , or primary contractor, on one work order can be an opposing bidder on the next, remember who is most invested in your success. It is not the other guy who wants to look good so he has a leg up on the next contract.
Oh, I know, if you’re the guy’s subcontractor, you’d think he’d want you to perform well and contribute to his good standing with the customer. Wrong. He wants you to perform well and contribute to his good standing with the customer, and he wants to take credit for your quality work.
Though my firm has plenty of letters from primary contractors enumerating our many virtues, more often than not, the primary isn’t singing our praises to the customer.
& #711; Make Sure
You Know Customer
It’s obnoxious, but it has a simple fix: Make sure you get to know the customer. Communicate with him, swap business cards and give him informal updates on the work’s progress. Make sure he understands which piece of the pie is actually yours. Next time, you might get a bigger slice.
Even more obnoxious, is the middle to large company that just can’t seem to process your invoice in a timely manner , “Are you sure you sent it to us, at this address, in this millennium?”
It’s the kind of thing you might expect from a fly-by-night operation, but not, certainly, from a large, reputable firm. Unfortunately, expect it you must, and you better be prepared. Cash flow is the most important part of operating your business. No cash flow, no business. “Misplaced” invoices, no cash flow, no business. Make sure you hire a contract manager with a flair for managing lost invoices.
Worse yet, is not the company that repeatedly loses your 45-day net invoice over a six-month period, but the well-established business that takes the low road. There are plenty of them out there, and small businesses are especially vulnerable to them.
I had one CFO of a large firm tell me, after I was $20,000 into a $200,000 signed contract, that his manager of contracts had no authority to give me the original work order. The CFO asked me if I’d rather be paid the $20,000 and walk, or keep the rest of the contract and earn $180,000 for $200,000 of work.
& #711; Establishing
Realistic Priorities
Now, here’s where that thing about establishing realistic priorities comes in. I have a vision of providing exceptionally high-quality IT services in an ethical marketplace. On the other hand, I’d prefer to eat $20,000 than lose $180,000, and that’s what I did.
It’s one of these choices you’d rather not have to make. But if you want to transition from doggy paddling to keeping up with the sharks, sometimes you have to make unpleasant decisions , then you beat a quick path to diversification. I’ve made sure we have different size accounts with different customers, and plenty of reserves for those bad cash flow days.
I’ve learned that for a small firm to survive and grow, it’s not enough to have an innovative vision and the persistence to pursue it. You must also be prepared to do business with those whose vision is set a bit lower, and chalk it up to a learning experience.
The benefit of surviving all the growing pains and perturbing lessons is that now after five years, I find myself swimming with dolphins. And that’s a beautiful thing.
Yi is chairman and CEO of KES Inc., a small San Diego-based information technology firm.
