side stepping landmines

We run into some interesting things as a business. We have a good set of products showing best in class performance, and price performance, not to mention expansion capabilities and localized computing power.

We have partners and resellers. We resell some of their product, providing feedback on opportunities, why we win or lose, and resellers, some of whom do the same for us.

We try to stay out of non-differentiable markets. These are markets characterized by the race to the lowest price, not the best value. Value is not the inverse of price.

Every now and then, someone makes an … well … interesting request. Several years ago, a “partner” tried to get us to give them JackRabbit. Sadly, in the last few days, a reseller asked the same thing.

Someone wants JackRabbit, Delta-V, Pegasus, they are welcome to put an offer in to buy a part or the whole of the company. Until then …

Recently we were asked by a partner to help them promote a sales effort on their part, but they constructed it so that the “sale” would drive business … to our competitors. I don’t see why we would be inclined to do this, and they couldn’t offer up a rational explanation as to why we should, other than our customers might like it (the sale). Driving your customers to your competitors is not a long term survival strategy for any business. We want to offer our customers the same sale, and the partner hasn’t quite gotten back to us on this. Been about a month now, and their sale ends in another month.

C’est la vie.

We see onerous terms and conditions being demanded by various (usually academic) customers, who ignore the information on our quotes about such T&C, ignore the payment term requirements, and issue POs we can’t possibly honor. Imagine, some customer demanding you have Net-90 terms (e.g. you get paid after a 90 day window from submission of invoice), a promise not to charge them late fees when they don’t pay on time (most don’t), and promise not to sue if they don’t pay, as well as give the right to return all the (highly customized) equipment, and refund their cost to purchase, as well as fund their processes to purchase from a competitor. Oh … I forgot … a “customer” once demanded perpetual 24×7 service and support, next day parts, without having to pay for this. Not warranty limited, but truly “in perpetuity”.

Apparently some companies agree to these things. I think they are likely the ones filing Chapter 11, or having their creditors force them into Chapter 7 liquidation.

LNXI died due to accepting ridiculous T&C, forcing it to find alternative sources for capital, and collateralizing these capital sources with its IP. All it required was missing a critical requirement at one point, and they were closed, and sold off for parts. To SGI as it turns out.

There are many reasons SGI died. I can’t list them all. The first bankruptcy could be ascribed to bad execution of a bad plan. The second … well … I won’t go there now. Its over, they are done. Maybe discuss them as an object lesson going forward.

The point of this meandering post is that there are landmines a-plenty for small businesses to step on. There are partners/resellers that are more interested in maximizing their profit than helping both parties win. There are customers who approach negotiations by placing nuclear options on the table to try to impose solutions. There are difficult capital environments (our bank is one that has failed the stress test, and needs to raise more capital) whereby credit is largely not available, and yet customers still wish us to grant them credit (e.g. Net terms).

No wonder 90% of small businesses don’t make it a year.

No wonder, of those 10% remaining after the first year, another 80% get weeded out after 5 years. 2% remain.

We are 3 months from our 7th anniversary. We haven’t stepped on many landmines. We have caught most, some later than others. The trick is to understand what is a landmine, and what isn’t.

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