When you’re building your business there’ll be times when you’re scraping and scrounging about for contracts to survive. Once you’ve passed the survival phase and have proven yourself in the market every now and again you’ll stumble on an opportunity that’s almost too good to be true. This can take the form of a contract that a supplier has exited mid-cycle and the client is scrambling about to find someone to fill the gap.
I call these opportunities “hand-me-down” or second-hand contracts. The hand-me-downs that you received as a kid were probably clothes, school uniforms and school books. They probably excited your folks a lot more than they did you. Later on you may have had more luck and picked up a Rolex on the cheap in a pawn shop, a first edition of the Dark Side of the Moon in Freebird Records or found an original copy of Graham Greene’s Our Man in Havana in a bargain bucket at your local Oxfam.
Anything hand-me-down or second hand is going to have some form of wear and tear, even if it isn’t readily apparent on the surface. If a client is keen for you to pick up where a previous supplier left off, it’s your job to make a clear assessment of the wear and tear and who was responsible for most of it.
Years back one of my friends, let’s call him Eddie, worked as a service delivery manager for an IT company. They filled the breach for a major multinational when one of their vendors cut and run. It felt almost too easy as they didn’t have to jump through any procurement hoops. The contract was going to add considerably to the bottom line. Within six months they had a big case of buyer’s remorse. They found it impossible to hit their KPIs, contract meetings were full-on battles, staff members were regularly on sick leave and resignations were on the rise. Other contracts were being cannibalised in order to address any personnel shortfalls. Even board members found themselves delving into the weeds to help out. They managed to exit after a year’s hell, but not before causing serious damage to the operation.
In contrast, one of my clients, who we’ll call Ricardo, has been able to grow his business through taking advantage of a number of hand-me-down opportunities. His business is also technical but certainly not as complex or resource intensive as the first example.
What happened?
When the opportunity was presented, all Eddie’s managers could see were dollar signs, and they snapped it up as quick as you could say “server outage.” Later on server outage turned to service outrage. Why?
Well they were already delivering a comparable solution into similar operations which gave them some comfort. What could go wrong? The problem was the client wanted a proposal within a week. They didn’t set out any clear requirements so Eddie’s company were making an offer into the dark. They submitted a competitive price to give them the best chance of nailing the business and were surprised when they got a call the day after submitting the proposal informing them that the work was theirs. They were harried into mobilisation the following week and never had time to breathe until they finally exited.
Eddie knew they had made a mistake as soon as he met the contract manager – who he described as being more Doberman than Dachshund in how he treated people. His approach percolated down to his direct reports who were as aggressive with Eddie and his team.
There was always a crises and the goalposts were constantly changing. Everything seemed to be ad hoc with no clear governance and communication routines. There was a level of complexity about the deliverable that required a new type of hire which would take time. When they began to struggle to hit their KPIs there was no give or flexibility. They were a bad match in every way with no calibration across team, values, process and systems. Later on Eddie discovered that they had been the only company in the running for the business.
They committed the cardinal sin of not qualifying the opportunity and negotiating a fair deal. In fact they never got around to signing a contract.
Who has the power?
When a prospect knocks on your door after midnight with cap in hand and it’s pissing down outside you hold all the power. Eddie’s company didn’t understand this. Ricardo on the other hand certainly did. He had lost out on some lucrative deals to a competitor who was lowballing proposals to the extent that they ultimately weren’t able to deliver what they had committed to.
Over two years Ricardo swooped in to pick up the pieces on three contracts once his competitor was kicked off them. Ricardo had a policy of only pricing for profit and resourcing his work in a way that ensured that they always delivered. On each opportunity he got the premium price he wanted as the clients didn’t want to risk working with a shoddy supplier again. He also nailed down the particulars regarding governance and legal so that everything was clear and that there would be no shifting goalposts.
Qualify the opportunity
If you are presented with an opportunity to take over a gig from someone consider the following areas:
Why?
Why did the previous supplier leave? Was it down to under-performance or did the client have something to do with it? Ask the client to be crystal clear on this and if they’re not, get off the train at the next station. Be sure to pick the brains of the departing vendor. Find the right person and they’ll sing like a canary.
Financial
Will you make a nice profit on the work? Remember, this is a great chance for you to get a premium price as you’re doing the client a favour picking up where someone else left off.
Deliverable
Will you be able to mobilise to the extent that you can comfortably deliver on the requirements. Only take the work if you feel that you are well able to calibrate your business to theirs.
Flexibility
Will the client be flexible and forgiving when you struggle. Don’t forget you are solving a big problem by taking over the work.
Fit
Does the opportunity fit with your overall business development strategy? Do you share similar values with the client and do they have a good reputation to work with. I you answer no to any of these three questions then you should politely decline.
Time
Do you have time to scope out the opportunity that helps you to put together a proposal that is clear around deliverables, helps you make a fair profit and is governed in a way that sets you up for success. Walk away if they client isn’t going to give you the time to do this.
Negotiate the exchange
Finally, nail down all details with regard to governance and the final contract. If you’re not clear here the client will dance all over you. If anything you want to be the one who is in control. If the deal tilts more in their favour than yours you’re better off out than in.
Remember, a nightmare client is like having a rat in your kitchen. And under-qualifying the opportunity presented by a hand-me-down contract is one of the best ways of getting one.
What happens now?
I coach SME leaders on how to build and grow high-performing businesses. If you’re struggling to win contracts or you’ve made some bad decisions that have led to you picking up the wrong ones let’s have a chat. You can email me on dara@lambayprofessional.com or else use the form below.
