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> Why did you take a deal where you took such a risk with such a limited return?

Gross margins were far greater than what I quoted. The number I quoted was what I realistically thought we could keep if all went well (defined as "normal"). Also, remember that you don't get to keep all the money you make, you have to slice off a good chunk and hand it off to the government. This is another area where a $2.5 million dollar sale is not a "we are swimming in cash" situation. Don't get me started on that one.

The other reason was: 2008. The economy took a dive. In a lot of industry segments orders evaporated from the books within one quarter. It was a do or die situation. In all honesty, I was looking down the barrel of an ugly gun. I was facing having to lay off a significant number of people. So I did what a CEO has to do under those circumstances. I took off my engineer hat and hit the road to sell, sell, sell. The result is that I landed a nice contract. The bad news is that buyers knew that they could extract very good deals during this weird time when everyone was hurting. In other words, as a seller you had limited leverage. Margins had to be tightened in order to get the deal. Plain and simple. Sometimes your choices are very limited.

> Was that your best option to keep the company going?

At the time, yes. There was nothing else in the horizon of the right scale. It would be a year (2010) before I saw an opportunity of that scale come across my table.

> Maybe I'm hopelessly naive, but would that deal have been impossible to make on terms where the client paid the majority of those up-front costs.

Well, I asked for 100% payment upfront. There was no way I could close that deal. Not even 50/50. It ended up being four 25% installments which, under normal circumstances, isn't bad at all. If you consider supply chain lead times and supplier credit terms (which I negotiated to 90 days in some cases) this would work out fine if all went according to plans.

I did not have the luxury of acting in consideration of payments not arriving on time without being dishonest. What I mean by this is that I could have waited until at least two payments were in the bank before issuing PO's and getting ready to manufacture. This would mean that I would most-definitely not deliver on time. I would have to lie about delivering on time in the interest of ensuring that at least half the cash was in the bank. This could setup a whole array of situations when deliveries end-up delayed by a month or two. I chose to be honest and pull the trigger right away. Bad decision? From hindsight, yes. At the moment the right thing to honor a commitment to deliver on time.

> and thus not half-killing their supplier!

I found that people don't generally think this way. I've had customers knowingly support my efforts because they liked the direction I was taking. Even though they were paying more and had to wait for the results they'd still support me. That is a microscopic portion of the TAM. A few people counted with one hand. The more likely scenario is that people want it for as little as they can get it. Period. At one point I chose to highlight the fact that our products were US designed and manufactured. The effort failed to produce any measurable sales above the noise floor. People don't think that way. They'd happily buy the cheaper Chinese alternative and don't think about the fact that, in doing so, are contributing to the slow destruction of the local manufacturing base. Ultimately you, as a CEO, are forced into an "if you can't beat them, join them" situation. I really rubs me the wrong way when I hear people talk about how companies are taking jobs to China because they are greedy. Thinking like that only reveals deep ignorance.

> I'm a new CEO: please help me learn from your experience!

Talk to people who actually run businesses. For the most part ignore those who do not. I say "for the most part" because I have long time friends who have always served as a "bring balance to the force" input, particularly during tough times. However, these people are few and far between and, in my experience, you've known them for quite some time. A lot of the people posting on sites like HN have never even run a cookie baking operation yet think they understand business.

To that end I'd be more than happy to speak to you off-list. My email is in my profile.

If you are a technical CEO (EE or CS major) I'd urge you to put a lot of time into understanding business. If you can, enroll in an MBA program. MBA's are, in my opinion, useless without context. However, if you do have context --for example, you are an EE and have experience in the industry you are addressing-- an MBA can probably save you from lots of pain and suffering. I wish someone had pushed me in that direction.

Beyond that, at some level nobody can teach you everything you need to learn. You have to hold the cat by the tail [1].

Learn to sell and market. It's an art. And you'll need to know how to do it with your eyes closed if things ever go bad. Selling isn't sitting at a desk waiting for phone calls or emails. It's a contact sport. It's finding business rather than business finding you. Very important. The "Little Red Book of Selling" [2] is one of a possible range of books you could use to get started.

[1] Mark Twain: "A man holding a cat by the tail learns something he can learn in no other way"

[2] http://www.amazon.com/Little-Red-Book-Selling-Principles/dp/...

About the MBA: Good lord yes! You don't even need to get an official MBA, if you're an autodidact do something like the personal-MBA, which is basically a reading list covering all the different aspects of business. And for all the newly minted MBAs out there, go and work in an industry before trying to run it. You'll get a lot more respect from other business leaders if you've spent time in the trenches and know the domain you're talking about

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