How one epic mistake in business can cost you almost everything and what you can do to avoid them

A smart man learns from his mistakes. A wise one learns from the mistakes of others ~ Unknown

Business mistakes are not only common when you are starting out, but they are inevitable and for some are a way of life. Entrepreneurs embrace failures and credit them greatly for making them better and stronger. This is all true, but some failures will cost you more than others; while others may cost you everything. One of these epic mistakes often times bring companies and individuals to their knees. This is the story of a mistake I made in my business that brought me to my knees and almost ended up bankrupting me. 

Monumental mistake
It was early Spring of 2008 and the economy was clearly in a deep decline. I had just come out of having an awesome year in 2007 and not much was going on at the beginning of the year. 

A friend of mine referred me to one of his friends who were in need of creating a custom web application for a business they had just opened. 

I was excited about the opportunity and I immediately contacted the potential clients. They had a job that at first glance would cost at least $15,000 to develop. I told them that they needed to define the business rules well in order for me to accurately quote the job. I gave them my overall estimate and they were shocked by it. They told me they could only afford $6,000. They asked me to cut them a break that they would be willing to settle for less functionality. 

I wanted to help them out and decided to go against my gut and accepted to do this job for the price they had put on it. To make things worse for me, I decided to do the job after they refused to sign a written agreement. BIG MISTAKE!

They were mature business men so I thought, who told me they would prefer to do things the old way without much formality. They made me believe they needed a nice looking demo that would help them get clients in the door and that they would definitely invest more in development once they had met the quota for the first 50 customers. This was the first time for me I engaged in development without having a written contract. Did I already say big mistake?

Production time
I started the job and began a process that would take me 6 months of hard work, tons of stress and problems with my family. 

The first demo of the application was completed and live one month into the job. I was excited and felt the job had pretty much ended right there. 

The clients started using the application but came back to me saying it was only a fraction of what they had requested. They made it look like it was me who had not understood their concept from the beginning. I wanted to make them happy so I went back spent 2 weeks of hard work and released the changes. They were already approaching 100 customers by this time. 

They kept coming back for more work and at one point they threatened to sue me. They claimed I was making them lose business by not giving them all the functionality we had supposedly agreed upon, which I had no written agreement for. 

I had already done everything and much more of what they had asked me, but they kept on changing things as they got customer feedback. 

This time, it took me 3 more weeks to make the changes and the same story once more. The kept the same attitude and by then I was getting scared. I did not want to go through court and end up loosing more money because of my mistake.

I kept on trucking and hoping that at one point it would all end. By the 5th month I had already spent $2,000 of the project's money on outsourcing some of the work and had already spent about 600 hours of my own coding time into this job. I had gone from making $50 per hour to barely $6 by the 5th month of working on this project.

I was so desperate that I even went as far as telling them that I would give them a full refund if they would just leave me alone, but they would not budge. 

I had to finally consult a lawyer who helped me draft a written agreement. The clients and I agreed on doing the last set of requests and then this would absolutely release me of all further responsibility. The good thing is that this time I had it in writing. 

I put in one more month of hard work and by the 6th month I released the latest version of the application. They had already approached over 1000 paying clients and things were looking good for them but not for me.

The price I paid
One more month of hard work brought my total profit for the job into the negative. I ended up loosing 6 months of my life I will never get back and this project had impacted my life and my family's in a negative way. I closed my fiscal year the lowest yet at $17,500 for the whole year making 2008 the worst year I have had in my business along with the US economy.

The lessons I learned
I'm grateful for this experience because it taught me invaluable lessons. I am laying this out on the table for my readers to help them avoid these problems in their businesses. It is never ok to let others dictate the price of your work. If something does not feel right then politely walk away from it. Time is our most valuable asset and one resource we can never get back. 

Here are the lessons I learned in a nutshell:

• I never did another project without a business contract. 
• My time and expertise are not for bargain.
• I no longer work based on fixed prices as all my work is paid on an hourly basis.
• I learned to say NO when business deals don't make any sense. 
• I decided that if I want to be nice and do something for someone, I would rather do it for free. 

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