TFT: Some Deals Aren’t Worth Doing
Lessons Learned From my $250MM bust
We’ve all heard the phrase, "If it seems too good to be true, it probably is." That’s exactly how I felt when I landed what I thought was a $250 million contract for my company. Spread over five years, this was going to be a game-changer. However, it didn’t turn out that way. It was essentially just a discount on the existing work we were already doing.
For anyone out there trying to grow their small business, this is an important lesson. Big deals might look great on paper, but they can sometimes be a curse rather than a blessing. Let’s break down why this happens and what you can learn from it.
First a Lesson for Corporate America
If you’ve got an RFP (Request for Proposal) coming your way and a 20- or 30-something kid is handling it, make sure they’ve got proper guidance. When I was handling that massive deal, I had some assistance from the contracts team, but lacked mentorship. I didn’t realize that procurement was playing me to secure a better deal—more on that next.
For small business owners, the takeaway is this: get advice. Talk to people who’ve been there, whether it’s peers, industry veterans, or friends in corporate roles. According to a survey by Harvard Business Review, 85% of successful leaders credit having a mentor as a key factor in their decision-makinge like me and fall into a corporate trap.
If you’re ever in need of guidance for bidding or negotiating contracts, feel free to reach out. I’d be happy to offer advice
Procurement, procurement, Just has one Job
Here’s the thing about procurement: their job is simple—they want the lowest price, period. They don’t care about the technical aspects of the project; that’s not their role. According to McKinsey, 57% of procurement departments are focused solely on cost reduction, with little regard for innovation or added value . If youg with procurement, know that their primary goal is to drive down prices, not necessarily to find the best solution for their internal teams.
In my case, procurement had me believing we were “just about to get phase two approved,” leading me to give further discounts. Guess what? Phase two never happened. Touché, procurement, touché. Always make sure to get everything in writing—verbal agreements mean nothing in the procurement world. Touché procurement, touché.
Put on Your Walking Boots
Walking away from a deal might sound counterintuitive, especially if you’re trying to grow your business, but sometimes it’s the smartest move. I initially bid too high, and we lost the RFP. At that point, I should have accepted it and moved on. But no, I kept trying to negotiate down, hoping to make the deal work. What I should have done was take a step back and realize that not all deals are meant to be.
According to research by Bain & Company, companies that walk away from low-margin deals see a 10-15% improvement in their overall profitability . Sometimes, the you can do is step back and fight the battle another day.
Action Step
Look at your last three bids for work. How could you have approached them differently? Should you have walked away from any? How can you identify that next time?
Additional Reading:
When to Walk Away from a Business Deal”
When the price isn’t right: Using should-costs to reduce does-costs
Entrepreneurial Negotiation Skills For Success: Eight Painful Mistakes To Avoid
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