Summary

- The episode discusses the importance of knowing when to walk away from business opportunities.
- Joel shares experiences of receiving proposals that seemed lucrative but were problematic upon closer inspection.
- He emphasizes reading and understanding every detail in proposals to avoid unfavorable terms.
- One instance involved a requirement to purchase expensive equipment, which made the deal unfeasible.
- Another case had deductions and billing terms that were unreasonable and potentially illegal.
- Joel highlights the importance of being treated as a contractor, not an employee, in such agreements.
- He stresses the need to understand labor laws and proposal details to ensure business growth.
- Joel advises against signing legally risky contracts that could lead to business hardships.
- He recommends seeking guidance from experienced individuals to navigate complex proposals.
- Contact information for Joel is provided for those seeking business advice.

Understanding Dangerous Opportunities

Episode 82

In the competitive world of business, knowing when to seize opportunities and when to walk away is crucial. This concept takes center stage in Episode 82, titled “Know When to Run.”

Grasping the intricacies of dangerous business opportunities is mission critical to first survival and then business growth. This is particularly highlighted when commercial cleaning company owners are receiving requests for proposal (RFPs). At these times they must discern when a seemingly lucrative deal might lead to financial and operational pitfalls.

Know When to Hold “em… Sorry Kenny

Please forgive our unscripted song. You can hear why we’re paid to clean, LOL. Those famous song lyrics set the tone for identifying red flags in business proposals. RFPs are often framed by the customer promising opportunities. But upon closer examination, hidden costs, traps and financial demands lie in wait for the unwary commercial cleaning company owner. These conditions and expectations are often detrimental to business growth. And in some cases, they can be fatal to your business.ed work their way, which I would encourage you to do! Each of these steps works to ensure both businesses thrive by focusing on what they do best.

3 Walk-Aways

1. The first involved a proposal for six locations, promising a quarter million dollars in business. However, the fine print stipulated the purchase of expensive equipment, making the deal financially unfeasible. This scenario emphasizes the importance of scrutinizing every detail in a contract, as initial promises can be overshadowed by costly requirements.
2. In the second case, a proposal for a lucrative one-million-dollar-a-month contract was very tempting. Yet, the contract contained clauses allowing the client to dictate billing rates and impose deductions for unmet hours. This scenario underscores the necessity of understanding the financial implications and potential legal issues embedded in a proposal. If you listen to the podcast, I’d appreciate your comments. Especially if you’ve faced this one.
3. The third example involved a national retailer. The proposal dictated unviable hourly rates that did not align with New York state labor laws. In this case, my experience serves you as a cautionary tale. You don’t have to know everything. But you DO need to know what important. Among those are state-specific regulations and realistic market conditions when evaluating proposals. The allure of associating with a big brand can sometimes blindside businesses to the financial strain and legal complications that accompany such deals.

Read ALL of It To Identify The Dangerous Opportunities

I can’t stress enough, the importance of thoroughly reading and understanding every aspect of a proposal. I encourage you to have a trusted advisor or attorney to help navigate complex legal jargon and detect unfavorable terms. If you don’t have one, and you’re in New York state, I’d be happy to share my own. The firm is excellent!

Finally, I encourage entrepreneurs to prioritize sustainable growth over short-term gains that could jeopardize their business’s future. By sharing real-world examples and insights we provide valuable guidance for business owners striving to make informed, strategic decisions in an ever-evolving marketplace. You can contact me here or add your comments to this podcast.

 

This Week’s Podcast transcript can be found below.

 

00:08 Ray
Joel, Often times we talk about developing business, building business. Our topic today is a little unique. Knowing when to walk away, know when.

00:17 Joel
Know when to hold ‘em, Know when to fold ‘em. Know when to walk away. Know when to run.

00:25 Ray
We may need to cut that one out.

00:26 Joel
No, I don’t know. I don’t. I think it would be funny. Sorry, Kenny.

00:31 Ray
We have both spoken to prospects who thought they had written a proposal or a request for proposal.

00:39 Joel
That sounds exciting.

00:40 Ray
And when you received it, you realized.

00:44 Joel
It’s not so much. But that’s really reading it and not listening to the bottom line number. Since I’ve owned my own company over the last 13 years, I can name several times that people lead with, “Hey, are you interested in a quarter million dollars a year in business?” Well, that quarter of a million dollars, when you’re a startup business, boom, you, you know, oh my God, yes, I’m very interested. You know, go ahead and send me that proposal.

01:09 Ray
I’m saved. Yay.

01:11 Joel
I’m going to be able to eat. And then you get the scope of work and you start reading through this, you know, 30 to almost 150 pages long. Full of legalese. And it was like, well, I’m not going to pay an attorney to read through it. I might highlight areas I need an attorney to interpret for me. But let me read through them first. And it’s actually reading every page and every word and every paragraph and actually understanding it. So, there’s, there’s three instances that really stand out in my mind. One, like I said, was for like six locations for about a quarter of a million dollars in business. Another one was for one location that was going to be close to a million dollars a month in business. And a third was doing a very well-known national retailer doing all of their locations in the state of New York.

02:02 Ray
Now, in the context of this conversation, the request for proposal did not meet with your satisfaction

02:07 Joel
In these three cases? It did not.

02:11 Ray
Why?

02:11 Joel
By reading through it, if we go one by one and we go with the one that was the six locations and about a quarter of a million dollars. One of the requirements of the building service contractor for the six locations was you had to have a walk behind auto scrubber that you had to purchase and leave at each location. 13 years ago, they were around $40,000 each. So, 40,000 times six is $240,000 just in equipment that the building service contractor was going to have to purchase and put in. And they were going to hold a lien against it as well, you know, even though you owned it. So that was some of the fine print in that particular contract. And there was no way.

02:57 Ray
And I have to think that that was buried.

02:59 Joel
It was. It was somewhere buried in the middle. As soon as I saw that, I called and talked to the individual and they’re like, “Oh, no, that’s a requirement. You have to hold up to that requirement.” Well, if you’re buying a quarter million dollars of equipment and they’re going to hold it as a lien. And that’s your out of pocket up front, and then you still have to clean all these locations.

03:18 Ray
The advantage to me is?

03:19 Joel
That’s exactly what I said. So, I walked away. It did not make sense. And when I told them I was walking away, they were begging me, but it’s a quarter million dollars worth of work. And I said, no, it’s a quarter million dollars of my money allowing me to clean your facilities. That’s going to be tied up. The second one, where it was about a million dollars a month for a certain location. There were a lot of things that were in there that were deductions. Like they got to make a final determination on what your monthly billing was going to be. And if you didn’t put in X number of hours, they were deducted at a certain dollars per hour that they weren’t even going to allow you to bill at.

04:00 Joel
So, let’s say that you were going to bill it at $40 an hour. They were going to deduct it at $50 an hour for every hour or every partial hour that your employees weren’t on site. And that you couldn’t bill them for extra projects. And that if you found a way to cut your labor costs by finding a new piece of technology and placing it in the facility and you could maintain the quality that they wanted, they still based it on the number of hours that your staff worked. And (then) they were going to reduce your bill.

04:31 Ray
Rather than the results of cleaning.

04:33 Joel
Rather than the results of cleaning. And they had biometrics that they needed all of your employees to touch points in their facility as they went around that would read their fingerprints. (Okay.) And if there was too much of a gap between when they went from the one to the next, they were going to deduct a partial hour for every time they didn’t go to the right biometrics. Now, if someone got sick on a floor that’s going to take a little longer to clean up. They may not get to the next station where they have to do. But again, they’re tracking your hour. As an outside contractor. They can’t Track your hours.

05:06 Ray
Legally?

05:08 Joel
Legally

05:09
In that regard, they had written something into the request for proposal that was in fact illegal.

05:12 Joel
That’s correct.

05:13 Ray
Okay.

05:13 Joel
And you know, having a good relationship with my attorneys over the course of the 13 years I’ve been in business, these are some of the things that we’ve discussed. Like who’s supplying the chemicals. Who’s supplying the equipment. If they’re going to treat you like an employee, then they have to start paying you like an employee by hours and they have to pay for the workers comp. And they have to pay for the insurance. But that was not what they were going to allow in this situation. (And) as well as they wanted you to be identified as the company that you were But they didn’t want you to bill them for the fact that you had to purchase uniforms. And you had to itemize your per hour rate as to what each thing was. So, if you were charging a penny for something, what was that penny for? What was that being charged for? And if they found that you were charging for uniforms, they were going to cross that out and that wasn’t going to be the final hourly rate that you were going to be able to charge at. So, there is a part of being transparent as a building service contractor. And then there’s a part where when I go get my oil change on my vehicle, it’s a service. If it takes them 10 minutes, if it takes them an hour, it’s still a service. Did the oil get changed? Did the filters get changed? Did the plugs all get put back? Did they lube everything?

Then okay. That’s the service. It’s, it’s posted. That’s how much it is. When you’re bidding us on an account, you’re bidding on a service, not hours.

06:32 Ray
The person in the pit changing the oil is getting more respect than a person who might have to clean up something verging on a biohazard.

06:41 Joel
Vomit?

06:42 Ray
Sure, let’s go with that.

06:44 Joel
It happens. But yes, indeed. And then in the third case, it was most newer companies are all excited when they can have a big national brand as “Hey, this is who I do work for.”

06:55 Ray
Sure.

06:55 Joel
But again, understanding labor laws and states and things like that also pose when you’re reading through the request for proposal and they tell you, well, it’s only going to take this many hours. And they’re telling you how many hours it’s going to be. And they’re also telling you what the rate per cleaning is going to be. And in this case, I mean, the rate for cleaning was around $21 an hour. Well, we’re in New York State. (Between) minimum wage, Workers comp & insurance, you’re not going to be able to do the work for $21 an hour. And that’s even if you’re paying somebody at or near minimum wage. Oh, when some of these accounts were up to two hours away from my home city.

07:32 Ray
So, you have to account for travel time or at least management time or something.

07:37 Joel
Management time? How are you going to afford management time at a $21 an hour bill rate? It’s really looking at these requests and realizing that they’re not always put together to help you grow as a business. You’re basically going to be paying to have a job is what it comes down to. Because you’re never going to be able to hire somebody to do the work and grow. And there’s, and there are people out there that they’re okay with doing that, and that’s fine. But if you’re looking to grow as a company, these are the types of things you have to look at when you’re reading through a request for proposal.

08:09 Ray
So, Joel, in bringing this to a close as a point of warning for our listeners. This potentially puts your business at a huge risk. You might stupidly sign off on something that can’t be enforced because it’s illegal. But that doesn’t mean you aren’t going to go through the heartache of having to walk that ball back and deal with an irate customer who sucks up your day and you’re trying to save the account. And on and on and on the heartache goes when you realize, looking back, I wish I’d had someone to help me do this right?

08:40 Joel
Correct. Having a coach and talking to someone who’s been in the trenches, who’s been there before, that knows some of the things to look at. Why not send that to me and have me look at it for an hour?

08:50 Ray
Yeah. So, folks, you’re looking to grow your business. You’re looking not to hamstring yourself with what looks like a pot of gold at the end of the rainbow. Call Joel. Contacts are down below. Contact form is down below. He works with cleaning company owners every week. Joel, thank you.

09:05 Joel
You’re welcome.