Whoever coined the saying, 'if it sounds too good to be true, it probably is' was no fool. How many times have you rushed to the [door, webpage, phone] to snag that deal-and-a-half you just had-ta-have, only to later regret what now retrospectively seems like a perfectly preventable, awful purchase? Well, from a business perspective, it's not all that uncommon either.
I have been handling storage and networking equipment for around 13 years now. In this niche world of buying and selling, the thrill of the catch is what motivates a majority of us on a daily basis. It's not surprising then that so many get caught up in the whirlwind of a deal and overlook what should be the most obvious and significant steps. As some of you may know, I have been part of an ethics committee for almost two years which oversees complaints within the secondary IT industry. We see everything from the 'They Won't Pay' to the 'They Won't Refund' and the 'They Never Even Shipped What We Paid For' cases on a monthly and sometimes weekly basis. Having watched company after company fall victim to the persistent trappings of unethical businesses and individuals of the world, I have concluded that one thing is resoundingly imperative: You need to protect yourself, and your company, in every transaction you enter. Based on my experience, I believe the following 5 points can significantly help to safeguard your deals:
1. Get it in Writing.
Who loves to chit-chat on the phone about the weather, the Red Sox, Tom Brady, the vacation I need to take...? Me. Silly question. Yes, I do enjoy having a personal relationship with clients, but my #1 rule still when formulating a 'deal' is to get it in writing. That doesn't mean you have to hang up on your client mid sentence, but you should insist on a follow up confirmation on the record. Get every possible detail of that deal in writing. Even the conversation leading up to the deal. If some of the agreement unavoidably happens over the phone, confirm it with a follow up email, or an IM that gets logged on your computer. If that person is unavailable by email or IM, type out a synopsis of the telephone conversation with prices, dates, etc. Date it, and email it to yourself - a co-worker - your boss, whatever. When it comes to protecting yourself later, the details are important. Being able to substantiate your claims with written evidence is crucial. There should be no feelings hurt over a simple request that helps protect both parties in the long run.
2. Do your Due Diligence.
There is nothing wrong with doing some digging. Research the current state of the person or business you wish to work with before you make an agreement. Get trade references from them. There are several websites at your disposal for access to public information. D&B, Hoovers, Duedil for the UK, BBB, state SOS systems just to name a few. Get on it! If you enter a business name plus the tag 'ethics' into a search engine, you may also uncover some vital background information. And don't be afraid to ask a few of your trusted business contacts for their experience with a particular company. The more information you have about the other company going into the deal, the better equipped you will be to set terms and conditions that work in your favor.
3. Give it a Test Run.
ODS has had a general policy for years now that we will not extend credit terms to a business before we've completed 5 successful transactions. I think this concept is brilliant. Whether you're buying or selling, chances are if this other company is viable and is going to stick around for a while, there will be room to test out a few small orders before committing to larger ones. This gives you an opportunity to analyze the payment structure, shipping consistency, and overall accessibility of the staff. Any company pushing for the world on your first transaction should be carefully reconsidered.
4. Cash is not King.
Sorry, Cash, but you're too risky. You are untraceable, and you do not come running back when terms of the deal have not been satisfied. Instead of wire transfer or company check, consider using a safer payment option that offers protection against deals gone bad. Yes, you may have to pay a small fee, but considering an Escrow service, PayPal, or even credit card as the payment method could end up saving you thousands. IF a deal goes south and you need your money back, you can issue a chargeback or dispute and hopefully within no time have it safely back in your account.
5. Heed the Warnings.
I recently entered into a transaction with LOTS of them. I'm still trying to decide if I went along because I knew it was doomed and wanted to prove it, or if I genuinely wanted to close it. A new company I'd never done business with before was offering product for sale that I normally deal in, and the price was fair. I quickly set into my list of rules above, beginning with due diligence... RED FLAG. This company appeared to be run by someone with history in multiple states. They had established and dissolved 10 or more businesses in the past 15 years, and had an ethics complaint about unrelated services popping up in the searches as well. Knowing the risk, I continued on. Unsurprisingly, this gentleman always wanted to talk on the phone. As I said before, I love to chat. But, when every question I ask about our deal is returned with a phone call answer... RED FLAG. At this point, I carried on, assuming the worst, but making sure at every turn to protect my company from the potential loss. I pushed for all details in writing, I never made any uncomfortable commitments just to progress the deal, nor did I let any unanswered questions go to the wayside. I required pictures and appropriate packing (and re-packing). When it came down to the terms, it was all clearly stated in my PO. They wanted full payment up front, of course. I would never agree to that, but I did agreed to do a small deposit (10%) upfront, only by PayPal, and the rest of the balance by Net 1 upon satisfactory receipt of product. The rest of the story is as you'd expect, peppered with issues like 3 failed freight pickups, sudden issues with payment terms, and the product not actually being owned by this gentleman. As you may have guessed, we never received the product we ordered. I ended up cancelling the PO and filed with PayPal to get our deposit returned (make sure you do this within 60 days). It was an unsuccessful deal, but in the end it wasn't a devastating one. Generally speaking, there are red flags and warnings that present themselves throughout most deals destined to turn sour. Do yourself a favor and heed them.
Around here we use the term 'cost of doing business' a lot. There are certain losses that every legitimate business will eventually incur. Sometimes we make costly concessions in order to keep productive and stay above the fray. Make no mistake, falling victim to bad deals is not synonymous with 'the cost of doing business.' You cannot always avoid problematic companies. Heck, you may purposely run straight into one like I did! But you can always take the time to avoid major losses by being smart, thorough, and aware at all points of a deal.