Chasing Rainbows

  When marketing our goods and services to other firms and governmental entities, we smaller businesses must be very realistic. Too often we dream big and experience many disappointments before we find the right solution. This is expensive and may jeopardize the continued existence of our companies. Here are just a few ideas for realistically searching for new business opportunities.

Know what happens if you land the new contract. Look at the effect it will have on your staff and operation. Big or long term contracts can require a lot of new equipment, more deliveries, new untested staff, and new or untested procedures. These are decisions that cannot wait until "you are awarded the contract".

Most firms have carved out a niche of expertise and should only venture into other areas very conservatively. There may be a reason for the lack of competition that is providing you the opportunity to submit this offer. If you look for reasons not to enter into this new opportunity, you will make a better informed decision. It is hard to turn down a perceived opportunity, but if you come across any reason to turn it down, then research it fully.

If you have to make changes to make it work for you, then it may not be as good an opportunity as you originally perceived. Yes, it is hard to admit you were wrong, but that is a lot better than being sorry about entering into a bad contract. Be realistic in your analysis and discussions. Plan on small growths and do not jump for a project more than 25% larger than your current business. Even bonding companies shy away from firms trying too hard to expand into bigger markets. Know your current capabilities, and do not rush yourself.

Financing the new project can be a severe headache if you have overstepped your debt reserve and borrowing power. Is this project within your existing business plan?

Who is going to be your contact person? Do they have the personality and the time? What happens if the other side refuses to deal with this person, or your customer service starts to suffer? How will you monitor and later recover?

If there are any doubts, do not chase this rainbow. Wait until you are confident. Check list:

  1. History of the procurement
    1. Quantities of each order.
    2. Amount of time to receive payment.
    3. Initial outlay of investment.
    4. Changes in current procedures.
  2. Hazards/risks
    1. Lower customer service (esteem)
    2. Overtime or more devoted time (learning time)
  3. Expected profit vs. potential risk ratios.
  4. Related benefits.
    1. Experience
    2. Larger quantity discounts
    3. Bigger market share
    4. Expansion capital
Government contracts are not panaceas. Those buyers are also looking at service and the bottom line. They are also governed by meeting strict rules so you should not expect them to help you when you get into trouble.

© 1998 by Donald L. Woods, All Rights Reserved