“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 you’re 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.
6. Call out a business fail early
Have you noticed red flags about a new business relationship? If so, don’t be afraid to call it early. If you stick your head in the sand and hope that it doesn’t happen again, you’re setting yourself up for great disappointment.
Where there’s smoke, there’s bound to be fire. If a project is not going according to plan, make it known. Give adequate time to remedy the situation, but remember time is money. When you communicate honestly you gain respect, and as LeadingInsight.com suggests, “Respect is at the heart of building business relationships. It is the glue that holds together the functioning of teams, partnerships and managing relationships.” This leads me to my next point.
7. Don’t be afraid to set it off!
If someone shows little regard for you or your business, that is indicative of a lack of respect. If they purposefully exhibit bad behaviors it is perfectly okay to “set it off!” Professionally, of course. For those unfamiliar, “set it off” is an urban colloquialism that refers to a fair, but clear warning!
Now, I am not suggesting that you literally declare business war. Instead, don’t hesitate to cut ties. Emotional and mental clarity are essential to the growth of your business – and if a co-founder, vendor, supplier or stakeholder is robbing you of that it’s time to let go.
8. Communicate early and often
Do you expect quality assurance measures from suppliers? They may consider it “out of scope” and charge more than the original quote. Before your head starts to spin, take a breath and consider this:
Many entrepreneurs perceive they’ve been duped because their expectations did not align with a final result. Many of times, a failure to set clear expectations is the culprit. But of course, it’s easier to blame others because it shifts responsibility. Yet the reality is: if you fail to communicate exactly what you want, and get something else … admit mea culpa (i.e. my fault). When you communicate expectations so clearly that a 5-year-old would understand, you set yourself (and others) up for success.
9. Don’t give off airs that you can ‘make it rain’
Even if you’re an entrepreneurial “baller” keep your bank balance to yourself. Many entrepreneurs overcompensate and send the wrong signals. Instead, keep quiet and listen. Don’t give people the perception that you walk around throwing money up in the air. Some people may take advantage of your perceived “money tree” and quote you at a higher price or worse, rob you blind.
1o. Trust your intuition
Never second guess yourself in business. Good or bad, when people show you who they are, believe them. As you interact with more people and build a thriving company, your intuition will improve. But trust yourself through the process.