Getting screwed

For the second time. The first ime, I’ll talk about later.

But this time really held some lessons in entrepeneurship for me, so here it goes.

First, I need to explain something. In my country, but no doubt also in other countries in Europe, consultants doing assignments for the government are often hired through brokers. Why? Simple, European procurement rules. They are extensive, and any contract that may cost more than 50.000 euro’s within 4 years has to go through these processes, which are a lot of work. And as you can easily tell, this counts for the hiring of any consultant longer than 12 months.

So, what do they do? They hire brokers. Brokers are hired to deliver people whenever the govenrment organisation needs them. They obviously get a fee for doing so, typically by the hour of the consultant doing the work. And those fees range between anything of 2,5 euro per hour to 15% of the hour rate of the consultant.

So, brokers are a given, sadly. But, often, the same assignment can be found through different brokers as usually 3 to 5 brokers are hired to do the same job. Hence, still a bit of competition.

Brokers, obviously, make a huge margin, even with the low rate. All they do is shuffle some contracts and send and receive invoices, for a couple of thousand euro’s a month. Nice.

So they grow, become inhuman, and a pain in the ass. I got into a conflict with mine. We have two employees and, thanks to other legislation, for the contract of one, the money should be split over two accounts, one of which is a ‘blocked’ account (meaning the money received can only go to the tax office), and the other is our normal account. For the other employee, all money should go to the normal account.

Now, I know this sounds complicated, but it’s only to show you what can happen. Due to circumstances our buffer was low.

So, when our broker decided to mess up the payments and put all the money to the normal account, we warned them. We shouldn’t have. Suddenly, they needed to ‘repair’ what they had done, eventhough we already paid our taxes. The next month, without any consultation, the wrong was ‘righted’. Not by any calculation, but just by putting ALL the money due on the blocked account.

And that was the end of our cashflow.

Now, you might think that a huge company like that would care, and try to solve the problem they caused. But they didn’t. Litterally they told me that ‘a million dollar company’ would not change it’s ways because of some small company. Even though that was their client.

So, how to solve this. First, I had to borrow money obviously, for requesting money from a blocked account is possible, but takes at least six weeks, too long for salaries.

Next, I hired a lawyer. Even though the money we could claim wasn’t too much, and I spend more on the lawyer than I could ever get back, the fact that I signalled I was dead serious at getting back, made them buckle. We disbanded both contracts as soon as we could, and changed brokers (getting a better deal as well).

The big guys don’t care about the little guys. Find other little guys that you can trust to build a lasting, mutually beneficial relationship. And if you have to deal with the big guys? Have a war chest and be ready to fight immediately. The guys you’re dealing with are the small fish in the company. They have no guts to help you, but at the same can lose a lot when their contacts turn into money-losing afairs in court.