It sounds adventurous…
There’s an allure, a prestige…
But big game hunting in the business start-up world is more often than not a bad idea.
But don’t we all want to “bag the elephant”, as Bud Fox called it in the movie Wall Street?
Won’t it solve all our cash flow problems and afford us a well-deserved vacation?
And the answer, of course, is: it depends…
Here are 3 reasons why it’s a bad idea:
- Firstly, big deals with large companies typically have long sales cycles and a small chance of success. However, the payout can be huge which is why so many companies go for them.Here’s the first question you must consider: How urgent is your cash need? How many months if not days of runway do you have?If you have enough cash for the next couple of months then you can move forward and chase big game otherwise go after small deals that put food on the table.
- Secondly, big deals are great to win initially from a cash flow and PR perspective. But the loss of a disproportionately large existing contract can be catastrophic.So the second question to consider is: What percentage of your total revenue would this customer represent?Anything above 10-15% of revenues will create a large risk if you were to lose all that cash flow down the road. Furthermore you will face unemployment claims from people you had to layoff, and possible excess equipment and inventory that is no longer being used.
- Thirdly, big companies are brutal negotiators. They will squeeze your profit margin until there’s barely anything left. As my mentor says: I can’t eat prestige.So the third question is: How profitable is the deal and could there be follow-on deals in a potentially long-term relationship? If your company is ready to win 7-8 figure contracts, then go for it.
Keep in mind though…
John Maxwell talks about ‘The Law of the Big Mo’ in his book “The 21 Irrefutable Laws of Leadership”. It states that Momentum is a leader’s best friend.
Leaders always find a way to make things happen. They get lots of small wins and build momentum.
At some point you’ll be able to ‘bag the elephant’, but probably not until your company has reached a critical mass to absorb it. It’s up to you to know when that is. Until then, you should keep hitting singles and winning deals. It’s the best way to scale a company.