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One of the things that I love to do is talk business. I love hearing about new ideas. I love hearing about new approaches. I love hearing about success stories and lessons learned. And I LOVE talking business with people of different backgrounds.

I have found some of the most unique and interesting perspectives talking with people who are NOT “classically trained” business men and women. And the reason is because of the unique perspectives they bring.

I’m very much a problem solver. Someone comes to me with a problem, and the only thing I want to talk about is how to fix it. And while that approach has led to a lot of success in my career, that approach has also BURNED ME in the past. I’ll break down one such scenario below, and tell you about the one question that, if I had asked, would have saved my company almost $100,000.

The Situation

I was working for a small business, and we were dead set on expansion. We were doing whatever we could to expand our footprint. Expand our revenue. Expand our circle of interest. And generally grown our brand.

Our expertise at the time was in Systems Engineering and Information Assurance. And a company called us up one day out of the blue, with an offer that may have been too good to be true.

The initial conversation is approximated below:

Me: “Hi – thanks for reaching out. Let me tell you a little bit about what we do. We have expertise in…”

Them: “Don’t worry about it, I already know.”

Me: “Excuse me?”

Them: “I have found your IA (Information Assurance) whitepaper online. It’s great. We want to hire you. Like – yesterday!”

Me: …thinking this is too easy, but not wanting to jinx it “Ummm, awesome! Can you tell me a little bit about what you’d like us to help you with? Can you give me some background on the project?”

Them: “We need your company to come in an unf*ck what these other contractors were doing. We hired someone for the IA work. They were awful and we had to run them off. Now, we have 4 months before our contract is up. And we need to deliver so we can make everyone happy. Your our guys, I know it!”

Me: “We…are?!? Yes, of course can do that. Here’s our price….”

Them: “That’ll work. Let’s get started….”

To save you from boring details, at that point our legal teams got involved. Drew up the paperwork. And we got started.

A few things caught my attention throughout this process. Nothing that stood out enough for me to say anything or stop the process, but I did think they were odd. One, this was way too simple. We had been struggling to get traction for awhile at that point. Then this sale came and fell into our lap. At the time, I chalked it up to karma as I believe that if you do the right things, treat people well, and produce a good product that it has to turn around at some point.

The second was they were very particular about the contract. Our contracts were always fairly standard. We were always more focused on the work at hand, then the legal matters. But they really wanted to spell out a few things – including payment details – in a very fine manner. But again, I pushed that aside. I assumed that was because it was the first time we had worked with them and that with proper relationship building and nurturing, future team ups wouldn’t result in such scrutiny. Foreshadowing here – there won’t be any future team ups with this company…

Do they owe us money?

So the work came and went. We dominated on our end. And then, a couple months after it was over – we still haven’t been paid. Terms of the deal were Net 30 (so, they owed us money within 30 days of invoice – whether they had been paid or not), and we would submit monthly invoices; which, oddly enough, they would scrutinize to the tiniest of details. All totaled, we sent 3 invoices worth somewhere around $100,000 of work. And as of 6 weeks after the 3rd and final invoice was sent, none of them had been paid.

Now, the phone calls start. And, as is predictable when you are over 120 days late on a payment, those phone calls go unanswered. Finally, we got them on the phone and they reveal…

…that they are part of a $10+ million dollar lawsuit, and cannot legally pay us.  Even though they only owed us around 1% of what that lawsuit was worth – they couldn’t pay us. And if they lose that lawsuit, they’ll have to declare bankruptcy and we’ll never get paid. .

Ouch!

Do they owe their former contractor money?

So a few months later I was talking with a family member who represents small businesses in other industries with similar matters. And 30 seconds into my story he asked, “do they owe that former contractor money?” I was floored.

“Tim,” I said, “have we had this conversation before? I don’t want to bore you with rehashing old stories….” As it turns out, my story was new, it just wasn’t all that unique. The only thing that made it unique was that we were able to absorb the hit because thankfully we had other paying customers, and the job was fairly small in the grand scheme of things.

Still, we are out $100,000, and that ONE question would have prevented that. If when they were bashing their previous IA support for walking off the job (something that there was probably more to), if we had just asked if they owed them any money. Or taken it a step further and asked to speak with that company about the challenges that were ahead, we could have found out that there was no money there to be paid.

Key Takeaways

So a few key takeaways from this situation.

Take Away #1

Always make sure to keep enough cash on hand to cover you in a rainy day. This has  been a growing trend in businesses these days, as noted in the New York Times Magazine in January 2016. Some experts feel it is a lesson learned from the Great Recession, but for my money, the rationale for keeping a stock pile of cash is for situations like this.

Take Away #2

Make sure you understand the whole situation before agreeing to go into business with someone. When we were negotiating for the job, we took this company at their word. Instead, since we didn’t have a background of doing business with them, we should have spent some time and done some of our own investigating.