Customer BaseFor the new company striving to showcase its reputation for quality and innovation, the need to build a reliable customer base is a necessity that cannot be understated.  The acquisition and retention of valued customers is the blueprint for years of future success, but one must be cautious of the risks that are involved.  The youthful start-up is predominantly naïve, and the desire to hit the ground running is an alluring temptress that often invites unnecessary risk, and urges high-risk/high-reward gambles to make a dramatic splash.  History continues to teach us that a careful evaluation of the client, company status, the project, and projected outcomes is the assured way to achieve long-term success.

Despite every new company’s insatiable desire to show the world “we can do it,” the companies that more often survive history’s tempestuous waters are the ones that follow a clearly defined policy that protects a company from itself.  As important and celebrated as it is for a company to recognize and secure a good deal, it is equally important (though less celebrated) to recognize a bad venture or a circumstance where a company is likely to over-extend itself before achieving success.  Every company in its unique field must come up with its own guidelines, but the following are some suggestions that should be universally useful.

When Clients Abruptly Withdraw or Cancel Contracts

Every new company has glimpsed it, and most won’t hesitate to run toward it – the big fish.  Invariably, every new company will cross paths with that one client or contract that dwarfs all their previous work and promises tremendous reward.  The hungry, young company might stretch itself in unprecedented new directions to meet the requirements of the project.  New office space is leased, additional staff are hired, existing projects are given secondary status, and the company as a whole bends to commit itself to the big fish.  The world is unpredictable, though, and change occurs with deadly suddenness.  Markets change, deals collapse, and interests are redirected.  What happens to the eager, young company when the big fish announces that it must cancel the contract due to “unforeseen circumstances?”  Were assurances made to the new company that it would be compensated if the project fell through?  If not, the new company might suddenly be left in a precarious position, stretched beyond its limits, saddled with possibly non-transferable work, and at risk of alienating its existing clients.  As the big fish swims away, the new company may be left permanently bent out of shape.

When the Demands of the Project Exceed the Company’s Resources

“Double it and add ten.”  This is an all-too-common expression when performing cost estimations.  The smart, young company would do well to always be prepared for cost uncertainty and variances.  If an excavation site requires the young company to remove 100 yards of soil, production should not grind to a halt if the task reaches 110 yards.  If a finance report is expected to take 500 man-hours to complete, the smart, young company must be prepared to deliver the report on time, even if it takes 600 man-hours.  Meeting the deadline and completing the task is always the primary goal, and one must always be prepared to find or commit an extra 10-20% to get the job done.  In the long run, as many jobs will require 10-20% less to be completed, and it’s the anticipation of this fluctuation that will keep the smart, young company afloat.

When the Competition Comes to Play

It’s a big world, and very few fields are ruled by one company with exclusivity.  It goes without saying that all young companies must be prepared to be underbid.  How far a young company is prepared to compete for a project depends on a number of factors.  Mostly commonly, a young company should ask itself: 1) Is there profit to be made? 2) Is there a potential for repeat business? 3) Is this project likely to boost our reputation and credibility?  Every company must evaluate the worth of each project.  If there is little or no profit to be made, one would hope that it boosts credibility and/or leads to future business ventures that do promise a profitable return.  Not every project is a good fit, and sometimes the smart, young company makes a better move by giving way to the competition.

The Value of Reputation

As much as finding a means to an end has its merits, the world is becoming increasingly sensitive to a company’s principles and values.  Social media can circulate negative feedback around the world with explosive suddenness, and companies can ill-afford to let their questionable practices dominate the airwaves.  Substandard working conditions, underrated materials, and policy circumvention are practices that might shave a dime off of every dollar, but such dirty laundry is likely to be discovered and could lead to the outright loss of future opportunities.  No one should undervalue the worth of their reputation.

For all the world’s unpredictability, opportunities will always arise, but one mustn’t assume that every opportunity is meant to be secured.  Every circumstance is different, and the smart, young company will find greater success by carefully evaluating the pros and cons, as well as the risks and potential rewards of every circumstance.