“I paid someone $5,000.00 to build me a website (along with $150 per month to maintain it), now that I want to look after the website myself, the guy tells me he owns my website and was only loaning it to me.” – Anonymous
This scenario may not be identical to one that you’ve experienced, but the underlying theme may sound familiar! Did you complete work for a client who never paid, have you hired a developer that never wrote a line of code, did a supplier forget to share really important details, did a JV (joint venture) partner simply not do what they promised, or did your manufacturer fail to build your prototype to spec?
What do you do when you’ve been duped in business? Getting screwed over in business is frustrating — to say the least. Besides reacting in lunatic fashion, many entrepreneurs are left feeling jilted and gun-shy when the next opportunity crosses their path.
Instead, consider it a lesson learned, move on and conduct business more wisely than you did before. And thankfully there are specific steps you can take, in the future, to not get duped!
“Fool me once shame on you, fool me twice shame on me!” Here are ten practical steps you can take to protect your downside in business (i.e. limit potential loss that would result from things not going as planned):
1. Expect the best, but plan for the worse.
If you are like me, you may have a higher than normal propensity towards altruism, but this shouldn’t masquerade as a free pass to lose sight of due diligence. Should you expect the best in life and business? Absolutely. But be wise and plan for the worse — undesirable outcomes and situations that will be out of your control. This is what active risk management is truly about in business. If proverbial **** were to hit the fan, how would you protect your downside?
2. Remember: a verbal contract is not worth the paper it’s written on.
Do you feel really good about Sally’s promise to do the work? Are you simply in love with David’s sense of humor and commitment to your business? That’s great. You really do want people in your corner that you like, those who foster trust, but life happens. Sally may decide she’d rather jet set to Indonesia in lieu of finishing your project. David may over-promise and put your plans on the back-burner.
Once upon a time, a handshake would seal the deal. Sadly, this is no longer the case. Generally, most people do have good intentions, but you shouldn’t let expectations guide your engagement strategy. “Life does not obey our expectations. Life obeys our intentions, in ways we may not expect.” (Author unknown)
So, before you engage new partners or opportunities put expectations in writing. Consider it your new modus operandi.
3. Do your homework.
Never let time constraints or warm and fuzzy feelings prevent you from doing your homework. Vet suppliers, check partnership references, and remain informed. If you hire a company to develop a mobile app, it would be wise to know what a mobile app “is” and to learn the basics so you can carry on an an intelligent conversation.
I never conduct projects without first gaining a basic understanding of what I want to accomplish and what it will take. Candidly speaking, when you are informed no one can spit in your face and call it rain.
4. Create a scope of work (SOW) document.
When you become an entrepreneur you become a project manager. One of the easiest ways to protect the downside of your projects is to set clear expectations. This is where a SOW document comes into play. For all intensive purposes a SOW a) addresses the work to be done b) ensures its performance and c) reiterates everyone’s comprehension.
A well-crafted SOW can force clarity, eliminate gray areas, simplify a large project by phases, keep things on track (with milestones) and prevent a ton of back and forth. Most importantly, it will keep everyone accountable.
5. Develop requests for proposals (RFPs).
Large corporations utilize RFPs and so should your small business. An RFP represents your solicitation, often through a bidding process, when interested in procuring a service. It’s a great way to standardize incoming proposals, consolidate data, compare vendor information and gain greater industry insight.
Issuing an RFP can also keep cost centers in check. However, RFPs shouldn’t be used to institute bidding wars, but they will help you make more informed business decisions.
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