We’ve all heard about the problem of doing bad business right? Entrepreneurs and businesses go to great lengths to avoid it. There are gross profit margin calculations, pricing spreadsheets, project reviews and all sorts of gumph out there to help you avoid the cataclysmic failure of bad business. Well I am here to tell you that they are all calculating rubbish!
If you run a project through a spreadsheet and the calculations show you that you can’t make a margin which will keep your kids in shoes this winter then this is rubbish business. If your potential client wants you to deliver goods or services at below the market rates then this too is rubbish business. These examples do not represent bad business, they represent rubbish business. Really bad business is, by definition, a transaction that looks exactly like good business. In many cases, bad business looks better than most of the business that you do!
So how do you tell good business from bad? How do you avoid being sucked into the mire? The answer is simple. If bad business looks just like good business then the difference between the two has to be how long it takes to start. I have been chasing a million dollar contract for months and now I am going to walk away from it. Let it chase me if it will. The project looks like a fantastic opportunity but it isn’t, it is a gravitational drain on my energy and resources. If I value my own time and money then the opportunity cost of pursuing this piece of business is too high.
I used to say back in my days as a dot com CTO that we would have matured as a business when we knew how to turn bad business away. I have grown up since then and now I realise that you are mature as a business if you know when to turn good business away.
