January 28, 2008

Growing Your Business: Should you be David or Goliath?

Yesterday morning I had a very interesting breakfast with a friend who called me up and asked for my opinion on a new venture he is undertaking. This gentleman is a former Fortune 500 senior executive, and although he has no experience in the start-up business, he has an idea that he knows would be perfect for Fortune 500 companies such as the one at which he once worked.

My friend and his partners spent a lot of energy, time and money building financial models and PowerPoint presentations and on creating spiral-bound presentations. They went out and found an international vendor to whom they could outsource much of the work, and they are nearly ready to roll out their program. In the course of negotiating with the outsource vendors, who are in Asia, it was clear that the vendors were excited about the opportunity that this gentleman had identified. In fact, an outsource company immediately agreed to advance a substantial portion of the capital needed to ramp up their manufacturing capabilities. They also began to present the business in a way that would leave my friend as a commissioned salesperson to their company.

I pointed out to my friend that he would lose all control if he went into a commissioned situation and that he would be better off if he controlled the business and subcontracted the work to the outsource vendor. He didn't see much, if any, difference between the two. He felt that as long as he was being paid, the situations were nearly equivalent.

I was quick to point out that in one situation, he had all the control and the ability to change vendors if the need arose, while in the second situation, the outsource company had all the control - including the ability to change the salesperson (my friend) if they so desired.

Whenever you're setting up a business situation, you have to decide if you want to be the David or the Goliath. Do you want to be the controlling party or the vendor who could be substituted in - or out - of the deal?

This is a crossroads that entrepreneurs frequently encounter. In a future article, I'll talk about how entrepreneurs can maneuver themselves into positions of power and control, but for now, as you are working hard every day to build your company, or as you're building your career, remember this: It's always better to control your destiny than to be at the mercy of someone else. After all, isn't that why you started your own business?

About Joel G. Block

Well known in the business community, Joel Block is a best selling author, speaker, and business strategist. Frequently a principal in his transactions, Joel has raised tens of millions of equity dollars for his ventures, which have included real estate syndications and privately held businesses.

Joel’s career is highlighted by the launch of a financial publishing company which he grew nationwide and later sold to the Los Angeles Times. More recently, Joel works with scientists, engineers, technologists and others to help them optimize their entrepreneurial opportunities. Would you like to get a private phone consultation with Joel? Visit www.joelblock.com/capital for details.

Go Out And Stake Your Claim!