Most of us are quite familiar with the old saying that the “devil is in the details.” For many harried entrepreneurs this is the result of too much to do and not enough time to do it. Unfortunately, it is also a dangerous trap, one that can cost an owner his or her business.
Picture this scenario: A client has been courted by a small business for a period of time and a resulting Request for Proposal, or RFP, is issued. The RFP is for a fixed price bid and specified around a customized capability that only the small company has. The entrepreneurial owner then analyzes his resources and pulls together a best guesstimate of time and materials, adds a little profit and then submits the paperwork, confident that his working relationship and proprietary knowledge will carry the day. And it does!
So far, so good. But as the project continues to develop and progress payments are made, the client becomes more specific in exactly what the former broad generalities were intended to cover. Usually this increased specificity correlates directly with increased costs and usually these specificities were totally overlooked in the initial proposal and response of the entrepreneur. So to protect his economic position, the entrepreneur initiates a conversation about additional costs therefore the need for additional compensation. And now the problem. The client pushes back and says, “I don't understand. These refined expectations were always in our definition of the scope of the project. Based on your proposal we only budgeted x amount and we expect you to live up to your part of the deal.”
So what can you do? Many assume, given the elephant and the ant nature of the relationship that there is nothing you can do except simply take your financial lumps and try to make it up on the next deal. The problem is, depending on the magnitude of the revisions, there might not even be a next deal. But with some creative thinking a win-win solution can still occur.
The first step is for the entrepreneur to recognize and accept the responsibility for this dilemma. At the initial step of the RFP, it was incumbent upon him or her to ask and obtain as much specificity from the client as possible. The next step was to submit the bid directly in accordance with each included performance item and address these in writing. This would have provided a basis to head off future misunderstandings regarding details of anticipated performance.
Interestingly enough, this same activity needs to be performed now if there is any hope of positively resolving this gap in expectation. Only by credibly establishing these initial benchmarks and their related costing can any productive discussion ensue regarding adjustments. This reconstruction, while tedious, has the opportunity to move from implication and innuendo to a common ground.
Getting to this common ground is very important and is the basis for salvaging the project. Just remember that the client purchased the solution based on an economic benefit for the company and this rationale still exists. Focusing on the cost and most importantly the additional benefits of the expanded specifications should ease the heartburn of the additional costs for the client and maybe keep the entrepreneur above water at the same time.
John F. Riddell Jr., director of the Center for Entrepreneurial Growth-Hamilton County, writes each Tuesday about entrepreneurs and their impact on companies and the marketplace. Submit comments to his attention by writing to Business Editor John Vass Jr., Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN 37401-1447, or by e-mailing him at business@timesfreepress.com
John F. Riddell Jr., director of the Center for Entrepreneurial Growth-Hamilton County, writes each Tuesday about entrepreneurs and their impact on companies and the marketplace. Submit comments to his attention by writing to Business Editor John Vass Jr., Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN 37401-1447, or by e-mailing him at business@timesfreepress.com.
