It ALWAYS Takes More
Two businesses are somewhat at logger heads over implementation of a service over the Net. It’s a decent service supported by a transaction based website. The problem is that one company wants this to be the lead product for the second company. The second company sees the value of the web based service, but sees it only as a small part of their total business. The second company uses the web service, but they have reservations about the viability of the first company. Both are small companies. If key people in either company die, both are in trouble.
None of the real business issues between the two companies are difficult to work out their differences. The real problem lies in the fact that the people in each company will not give up their concept about how the service is to be integrated into a sales plan. Each thinks that they have done enough while they each think the other should do a little more. The root of their mutual problem is that over sold each other on the potential for this web based service.
They have to backup and re-evaluate their business plan. If they don’t this relationship is going to fall apart, because they are currently at the limit of their ability to take risk under their first assumptions. The other question is do they want to continue.
The best advice anyone ever gave me about making business decisions is shown below.
Start with your worst case estimates. If you get half the revenue you expect with twice the cost predicted over twice the time you hoped it would take and you can live with that, then proceed.
General Electric used to have a corollary to that. Given the worst case add 25% to the budget. The 25% was to cover the things that you don’t know that you don’t know.
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POSTED IN: Business Improvements, Business Plan, Mindset
1 opinion for It ALWAYS Takes More
hhcv
Jul 20, 2007 at 3:23 pm
A company should never be completely dependant on the performance or existence of another. If this is the case, as suggested by the scenario you have presented, it would make sense for the two companies to merge. Indeed, the value of a whole is often greater than the sum of its parts - there could be worthwhile synergies!
As to your comments about their business plans, this is not an issue about budgeting, but rather, their overall business strategy. The worst case scenario, therefore, is that the other firm does not exist. In this case, as you mention, they would “die.”
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