No Guts, No Glory?

There's an old saying, "If you want something badly enough, you will get it . . . badly enough." The person who wants or needs a deal more than the other person will end up doing the deal on the other guy's terms, as Chris Sardoni shrewdly realized. By promising clients more than his design team could deliver, Chris won important contracts that gave him the operating revenue he needed to hire the extra developers who could get the jobs done. By promising investors a return on investment he knew couldn't be justified by his firm's revenues and profit margins, Chris capitalized on the Internet fever of the time, knowing full well that in a hot market, stocks often rise or fall based on people's perceptions and emotions, with total disregard for the hard numbers that should drive investment decisions. His investors, who were no fools, were willing participants in a con game whose only victim is the next person to buy into the company.

Chris's strategy, while extremely successful, comes at a high price. Even though he's technically a millionaire and has survived two successful rounds of venture financing, he must ask himself every night: "When will the bubble burst? When will people start demanding performance from my company? When will the chickens come home to roost?" While overpromising is sometimes the only way to build a business in a tough market, sooner or later you must live up to those promises. The money that comes from hype is very often a short-term loan--the longer-term financial security a company needs to grow is based on solid performance for customers, investors, employees and other constituencies of a growing company.

The line that separates aggressive marketing from outright fraud is an extremely thin one. As Abraham Lincoln wrote, "You can fool all of the people some of the time; you can fool some of the people all of the time; but you can't fool all of the people all of the time." Sooner or later, someone realizes the emperor is naked, and that's when it all comes undone.

From MoneyHunt: 27 New Rules for Creating and Growing a Breakaway Business by Miles Spencer and Cliff Ennico. Copyright 1999 by MoneyHunt Properties LLC. Reprinted by arrangement with HarperBusiness, a division of HarperCollins.

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This article was originally published in the December 1999 print edition of Entrepreneur with the headline: No Guts, No Glory?.