“In business a reputation for keeping absolutely to the letter and spirit of an agreement, even when it is unfavorable, is the most precious of assets…” Lord Chandos
Often I get this question from my entrepreneurial friends: “How do you avoid getting into a bad business deal?”
My smarty-pants response is “Don’t sign deals with the wrong people!”
But here’s my long, respectable answer:
Before entering into a deal with someone, do your homework.
Because if things go wrong down the road, well, don’t come crying because I’ll tell you what I tell myself: it’s probably your own fault.
Like the situation I have with Start Mobile. We signed a contract to use Drew’s images for mobile downloads. But they weren’t sending us payments. There were always excuses which sounded good at the time. But after months of this, I made a final attempt to straighten it out, and got an explanation that didn’t feel right to me.
Frustrated, I called two other artists who also had a deal with this company and they both told me the same story; they hadn’t been paid. My call was over a year too late; had I contacted the artists BEFORE signing the contact, I wouldn’t have entered into it.
I promptly canceled the contract and Start Mobile was legally obligated to remove all downloads from the web.
So imagine my surprise this morning when I did a search online and found that they are STILL selling Drew’s art, without authorization!
I have no one to blame but ME. Why, you ask?
Every one of us is responsible for all that happens to us, good and bad. (I love this belief because it gives me greater control over everything in my life.)
In this instance, I should have done my “vetting” BEFORE signing the contract and handing over the art in the first place. (Lesson learned)
Sometimes we get so excited about an opportunity that we forget to do our homework.
Luckily, I’ve only had a few deals go bad over the years, each for a different reason, and looking back I see that sometimes the problem was lack of doing detective work BEFORE going into it.
EXAMPLES OF DEALS GONE BAD
1.) NON-PAYMENT: The client just doesn’t pay you. I’ve avoided this most of the time by using a 50% down or Advance required policy. Read my post called How to Never Get Ripped off Again to learn more about this wonderful policy.
2.) CONSISTENT LATE PAYMENT: The client pays 60, 90, 120 days late, consistently.
3.) CLIENT GOES OUT OF BUSINESS after you did a lot of work for them (before they paid you): An advance or deposit prevents this as well.
We once did a deal with one of the oldest and largest (and secure) toy companies in America and they went bankrupt 2 months later. Luckily, we had required a $5,000 advance so we got paid for our time.
4.) CLIENT DOESN’T RESPECT THE TERMS OF THE AGREEMENT or they butcher your work: A good written agreement will prevent this.
PREVENTION IS THE CURE
The best way to deal with bad situations in business is to prevent it from happening in the first place. It’s up to YOU to make sure you aren’t “taken advantage of.”
Practice “SAFE DEAL MAKING” with the following precautions:
1.) MOST IMPORTANT FIRST: DO YOUR HOMEWORK: This is your greatest and easiest tool. Contact others who have done business with this person/company, and call them for a referral.
Before going into a deal with Nirve Sports for Drew’s beach cruiser bikes, I called Paul Frank Industries, who had been doing business with them for years. They gave a positive referral, and we are now in our 6th or 7th successful year with Nirve Sports.
2.) LISTEN TO YOUR GUT AND FIRST IMPRESSION: My gut often warns me if someone’s not legit. However, your gut is not always fool proof. That’s why doing your homework is number one.
3.) IF THERE’S FRICTION FROM THE BEGINNING WALK AWAY: If a deal or relationship is difficult from the beginning, it’s a great indicator that it is only going to get harder with time. Walk away.
4.) USE WRITTEN AGREEMENTS: You don’t have to be an attorney (or hire one) to put something in writing. I’ve written about the Three Reasons to Use a Contract to help people understand that you should put every agreement in writing, even those with friends and family members.
The magic of writing down what you agree to is that when both parties see it in writing, they know exactly what they are agreeing to.
This prevents misunderstandings later. The agreement, in writing, will come in handy later should someone “forget” what they agreed to.
“A verbal contract isn’t worth the paper it is written on.” Sam Goldwyn
Some people make the mistake of TRUSTING EVERYONE, and others make the mistake of TRUSTING NO-ONE.
The problem with blindly Trusting Everyone is that you don’t make decisions based on logic, but rather on impulse.
The problem with Trusting No-One is that you miss out on great opportunities by being paranoid.
Find the middle ground instead. Use your head.
I’d say that 90% of the people I’ve worked with over the years have been enjoyable to deal with. There have only been a few bad apples.
I never start a conversation with a new client with a negative thought in my mind. I always begin with enthusiasm and excitement, but still do my homework and take precautions.
Choosing who to work with is like finding the perfect DSLR camera. You do your background checks, you go online and see what others are saying about it, and you make a decision based on the evidence you gather.
And if you do fall into a “bad” deal, don’t let it bother you too much. Instead, learn from it, analyze how you ended up in that situation, and then never make that mistake again.
Here’s to your success! Maria xxoo
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