In our formative years, one of the vital lessons I had to learn was how to recognize when an opportunity was not a good fit for us. Signing the wrong deal can cost you time and money — two things entrepreneurs can't afford to lose. How can an entrepreneur eager to build their firm recognize when a deal is a bad idea? Here are some lessons I've learned to keep in mind.
1. When there's no escape clause in the contract. When we were a smaller company, a major retailer approached us with the promise of $15 million in business from a huge translation project. At first, our team viewed it as a way to put our company on the map, and we wanted to show how committed we were to winning the business. We formulated a plan to scale quickly, adding new personnel and even a new office location to cover all the work that would be coming in. Not long after incorporating all of these changes, the retailer pulled the plug on the entire project due to economic reasons. We realized that the contract we signed hadn't included any volume guarantee or kill fee, and as a result, we were not able to recover the lost revenue or the expenses involved with the staffing actions. That experience was a cold dose of reality, not only because of the revenue at stake, but also because it brought to light our own naiveté as an eager startup. But looking back, I can say that we learned a valuable lesson about preparation, caution and responsibility, and as a result, our company is stronger.
Read remainder of article at: http://blogs.hbr.org/cs/2013/06/when_your_start-up_should_walk.html