At the verge of bankruptcy

The reality of being in business is that very few business counterparts (be it vendors, clients or strategic partners) can be counted upon when you are the verge of bankruptcy. This is regardless of how close buddies you have become or have been in the past. Sad to say but true as a fact. When you need favor the most from these business counterparts, very few will be able to lend a hand.

I have learned this the hard way. There are few who would last it out with you by not pressing you too hard for money. But they will never say "forget about it", no matter how down you are or how much losses you have suffered.

Don't want to sound like a cry baby but this in under the circumstance where my client (developer) refuses to make good on his payment and hence all under me / below me (in terms of my vendors) suffer the same fate.

Lesson learnt : Think twice when you are absorbing losses in your business thinking that you will be able to make it up in the next future deal. That you are doing the other party a favor and believe that they will remember you for it and return that favor when you are in trouble the next time. This is rarely the case.

Does that mean there is no favors in business. Answer is "Yes" and "No". Every favor still falls back on whether it make financial sense for the other party to help.

Bottom line : Business is still business. There is rarely a charity mindset. Hence, think twice when you think you are doing someone a favor and expect something in return.

True Story #2 - taken for a ride

I had another experience of a being recommended for a project referred to me through a family friend who was on board the project as a consultant. On my own merit, in being the lowest bidder, I secured the project. However, soon the project ran out of financing and all were left without payment. All were given assurance that things will be back to normal once the finances was sorted on the side of the developer. We were asked to continue nonetheless with faith and believe that things will be ok. Stupid enough, we did just that. Fortunately in 3 months everything was back to normal. A few payments were made and as we were nearing 80% completion of the work. Just when all the materials and equipment were shipped into the site, the project ran out of financing again. I wondered till this day if it was truly planned for. Hence no payment were made for all the equipment and materials supplied which makes up about 70% of our contract value.

Again, we were asked to continue while the developer worked out their internal resources. 2 years passed and no payment was made. Our Overdraft facility which helped financed the purchase of the material grew significantly over the 2 years. Soon the project was called to start with the promise of payment after being abandoned for over a year. However, there were to be no settlement of past dues until work started again and even then payment were to be made in stages over several months. It is only logical to think from the sound of that, if they even have enough to settle the past dues and what more additional work. The math just didn't quite make sense. Either we had to be a bank or a finance company or a company with just too much cash lying around, to agree to these terms.

For fear of what was already owing to date, contractors were just too afraid not to agree. Yours faithfully, ME, disagreed. For that, we were then asked to terminate ourselves at a settlement of a measly 35% of what was owed to us. Either that or a law suit which would take 7 years before we see any money.

Lesson learnt : Practicing Faith and Believe while stepping deeper into a financial pithole is a very stupid thing to do no matter what is at stake. Better to cut losses that to step deeper and lose more. A famous quote by Air Asia CEO, finish each day in your business with a positive cashflow. Not yearly, not quarterly but everyday. A healthy and positive Cashflow is the key to a successful business.

True Story #1 - taken for a ride

I had an opportunity once to help a friend build a factory. I saw it as an opportunity to build my business to become a turnkey contractor. I invested a significant amount of money to hire professionals to study all aspects of the construction drawings and estimated the cost of the construction according to the specifications. Over several months my quotation were compared to the cheapest among the lot who were also quoting for the project (but not according to the specification). Each item were scrutinized and compared with the lowest bidder according to every single unit rate. After several revised submission, and repeated comment of being expensive, a meeting was called to have us sit down to tell them how we would propose to reduce the cost of our construction. Stupid enough, thinking that honesty would always be the best policy, we bared all cost and all ideas to reduce the cost of construction. All details were properly proposed and explained. Soonest that happened, the project underwent a major revision by the architect. Job was re-tendered out and our original exercise became fruitless and the project was awarded to someone else. All investments were wasted plus the time in traveling and investigating the actual site.

Lesson learnt, not always a good idea to mix up friendship with business especially if the final decision making does not lie with him or her.