Businesses With The Power To Say No

7 Mar, 2012

Entrepreneurs tend to be positive thinkers, so saying no does not come naturally to them. However, many founders who have learnt to turn things down admit that doing so has been key to their success.

Tom Nabielec, founder of Perfect Storm Media, claims to say no an average of six times a day to companies that are just too small to justify the expense of his company's "pay-per-sale", as opposed to "pay-per-click", search engine advertising system.

Turning such people down is not easy, not least because Nabielec's own company is itself a small company with an expected turnover of £1.75m this year, albeit one with a list of sufficiently large companies, such as Shop Direct, Lovefilm and Seatwave.

Companies with less than £10,000 to spend are sent an email, explaining why they might be too small to capitalise on Perfect Storm Media's technology and suggesting other alternatives.

"It is important to be helpful, because at some point in the future they might turn into the type of business that could use our services," Nabielec says.

He still takes calls from some small businesses, partly to see if he can give them any advice, but now spends most of his day talking to larger client prospects.

"We don't close the door to small companies," he says. "It is very exciting to be able to grow some very small business to a very big piece of business . . . we have done that with some guys."

Saying no to large contracts can be more difficult. This is what John Gillborn did when his company, iCS Communications, a telecoms system supplier, turned down a tender from a large childrenswear company that would have generated about £70,000 in revenue.

A competitor tried to install the system, but eventually took all the equipment out, Gillborn notes. He estimates that iCS would have lost thousands of pounds if it had taken on the contract.

However, at the time it was not easy to walk away. Although Gillborn admits he felt a "seed of doubt" about the deal, it was only when his wife pointed out the potential pitfalls that he resolved to say no.

Having someone unconnected to the business who can give an independent opinion is useful when you are an entrepreneur and by nature a more positive person, Gillborn says. This does not have to be a relative. It could be other founders you meet through a networking club or your accountant.

Andrew Jardine of Pembrokeshire-based online retailer Atlantic Trampolines decided to say no to a different opportunity: the offer to buy another business out of bankruptcy.

The company on offer, TP Toys, sells wooden climbing frames, swings, sandpits and skateboards as well as supplying trampolines, so there were opportunities for Jardine to expand into new markets.

TP Toys, which had been trading for about 50 years, also offered a greater pedigree than the Atlantic Trampoline brand, that had only been around since 1996.

"We were contacted by a number of [TP Toys] retail customers enquiring about our interest in supplying them," Jardine says. "It was extremely tempting to give serious consideration to these enquiries and we did devote many hours discussing if our strategy of selling direct was the right one."

However, Jardine eventually let the company go to another buyer, having concluded that TP Toys actually had a very different business proposition to Atlantic Trampolines.

Jardine claims the reason his company's online sales model works is that trampolines are not easy to get home if bought from a physical shop. "When it comes to skateboards, anyone can go into a shop and walk out with one under their arm, and I cannot compete with that."

Stephen Ludlow, co-founder of London-based property agency Ludlow Thompson, has made a habit of saying no to offers of setting up branches in the capital's more desirable neighbourhoods.

In this case, it is a core part of the company's strategy, which over the last 20 years, has profited by second guessing up-and-coming districts, where the rental prices for his clients have risen sharply.

Ludlow's rule of thumb is to look for poorer postcodes where new transport and utilities are being developed, and he claims that saying no has become a discipline necessary to the future success of his company.

Saying no is perhaps easier for an established business such as Ludlow Thompson than an early-stage venture, which is eager to get traction with as many client wins as possible.

This is the challenge for Adaptly, a technology business born out of New York's Silicon Alley technology cluster barely two years ago, having developed clever technology to enable other companies to maximise their return from advertising on social networks.

Given the excitement about the medium and the opportunities that sites like Facebook provide to large companies wishing to extend their brand, Adaptly has had many big brands looking to pay for its service.

However, co-founder Nikhil Sethi claims that he and his team now regularly walk away from customer leads because they know the potential client would not be well served by Adaptly's technology.

The first client they turned down was just six months ago, but Sethi estimates that they are now doing this with about half the leads they receive.

Saying no is actually good for business because it shows you are not just looking to take people's money, Sethi insists. "It is a very difficult thing to do because every dollar makes a difference. But at the same time you build a sense that you are acting with integrity, and the whole world revolves on trust."

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