Lessons from a New Entrepreneur Vol. I- Tempering Optimism with Realism

In June 2018 I was fortunate enough to "take the leap" and transition into running my own business full-time. This momentous occasion was met with excitement and encouragement by my professional network as well as friends and family!

Within a week of the move a friend of mine from high school (who is doing quite well in her career I might add!) reached out and asked if I would be available to help her company on an immediate project. The project would have required some travel the following week and also a solid investment of time leading up the on-site visit. My friend went to her boss, got his buy-in to consider working with my firm and coordinated a conference call between us all.

I was flattered, honored and extremely humbled to have even been thought of for a project of this magnitude. During the conference call my friend's boss asked me about my rate to take care of these critical matters and I quoted a figure I knew was not only fair but really an absolute bargain for them. That being said one man's bargain is another mans opportunity to negotiate. The boss came back with a counteroffer that was less than half of what I had quoted. Seeking to understand the value (or lack of) that this key decision maker was placing on the proposed work I asked for a little more clarity as to why he felt this would be a fair level of compensation. He replied that I was only going to be on-site at their offices for less than a whole day and only presenting to their hiring managers for a 2-3 hour period; so to him my number sounded inflated.

What this Decision Maker wasn't seeing in this scenario was quite a lot. Let's look at the matter; here are a few key points:

• To create a 2-3 hour presentation of any value is going to require 10-15 hours of pre-work; information and intelligence gathering, compilation of information into a coherent presentation, etc.
• Travel time and expenses- Sure I would only be on-site for one day but unfortunately there are no direct flights from Nashville, TN to the city where I would be traveling; so I was going to spend an entire evening on Monday traveling there and an entire morning and afternoon on Wednesday traveling home just so I could present at their desired time slot on Tuesday. Additionally, the conference call was on a Wednesday and they were asking me to travel the following week; with no advanced notice the price of the airline tickets alone swallowed up literally 60% of the fee he had proposed to pay my firm.
• Opportunity cost is the loss of potential gain from other alternatives when one alternative is chosen. As we all know you can't be in two places at once and when you commit to one deliverable (depending on the size and scope of that deliverable) you often must completely forsake your other commitments in order to meet or exceed your clients expectations. At the time of our conference call I had already committed to another project with a healthy profit margin that was taking up more than a fair chunk of time and energy; to have committed to fulfill this new project would have meant dialing it back on a profitable initiative in order to spend my production energy on something with a very poor rate of return (or even a loss).

The conference call concluded and within an hour my friend called me back and officially offered me the engagement at the rate her boss had quoted. We chatted for a few minutes and I expressed my concerns. My friend strongly expressed her desire to have my help and committed to support my business in any way possible if I could take care of this for them. Who can say no to that?! In that moment I happily accepted the engagement.

As the hours passed my mood became more and more gloomy. The numbers were spinning in my head and they were all coming out with negative signs in front of them. I went back and asked for just a little more money to help with my expenses and they obliged but it was still not near enough to turn a profit or at least break even after it was all said and done.

Early in the morning between 1:30-2:00 am I sat straight up in bed. My legs swung to the floor and I made my way to my computer to send an email. I had been restless and completely conflicted between having given my word to work with them and the realization that I was going to lose big-time financially. Now the decision had been made and I simply could not take this project on at the rate they were offering; I didn't ask for more money AGAIN though......I just turned the project down cold. Funny thing is that when I went back to bed I slept like a baby, my mind was at ease.

My friend called me the next morning and we had a good conversation but I could obviously tell she was frustrated with me (and I don't blame her). She and I had a little chuckle as we had both found some learning experiences through the whole episode; I let her know that my optimism had gotten in the way of realism and that, as a new entrepreneur, I was not in a position to start my venture out by taking a loss. She said she learned that when working with friends in the future she would hand them off to someone else within her organization; her job was to get her boss "what he wanted when he wanted it and at the rate he wanted it at" and she had no desire to be caught in the middle again between her boss's needs and her friends. I thought both of our take-aways showed a glimmer of wisdom.

Fortunately there were no hard feelings and I even had the opportunity to grab lunch with this long-time crony while on a recent business trip. We laughed off the whole thing; but it could have been otherwise! I shared with her my idea to write this article detailing the experience and she fully encouraged me to do so.

So what did I learn?

• Never accept an engagement on the spot; always look at the numbers and mull it over before accepting or declining.
• Go with my gut. Those butterflies in our stomachs are there for a reason.
• Always temper my optimism with realism. You can be highly optimistic all the way to filing for bankruptcy (and even afterwards). It is far better (and safer) to be realistic in an optimistic way.

As I pursue this adventure called a "small business" I will continue to share the punches to the gut that I receive and how I respond to them. Certainly these lessons may be of value to people in similar situations and someone else may have the opportunity to learn from my mistakes. I am also certain some new as well as more seasoned professionals will leave their own insights in the comments and I can learn from them. Basically, we can all keep sharing and learning together!