Mistakes to Avoid When Starting and Running a Service-Oriented Business
In this article I'll share with you some important lessons I had learned in over 35 years managing my business. I’ll show you some real-life examples of mistakes I've made and strategies to avoid problems.
The Importance of Having Business Policies
A Powerful Control Mechanism
One of the first things taught in business school is policy-making. I learned quickly how powerful policies are, and how they can make business life much easier.
Best explained with this example:
One day, on a Friday, when I was ready to close up for the day, a customer called and wanted to place a last-minute order.
He didn't have a credit card and asked me to ship him my product with an invoice. I told him that without a credit card he would have to prepay.
He told me that there was no time to send a prepayment since he was having a meeting with the Board of Directors on Saturday and needed to present my product to them at the meeting. He needed it shipped overnight.
I offered to ship COD, but he told me that the accounting department was already closed and that he couldn’t get a check prepared for Saturday’s delivery.
I tried to offer other solutions, such as charging it on his personal credit card and having his company reimburse him. However, he kept coming back with the right answers to keep me on my toes.
Eventually I fell for it and shipped with an invoice. As you might guess, it was never paid and I never was able to collect. I never got the product back either.
His company claimed that the order was never approved and that he had no right to place the order since he was not a buyer for the company. They also said that they never received the merchandise and that I needed to take it up with him.
If I would've known the idea of policy-making at that time I could have simply told him "It is our policy to ship COD or with a credit card. There are no exceptions. That is our policy.”
Having a policy to abide by would have ended the discussion and would have saved me the hassle of rushing out an order and never getting paid.
Breach of Convention Rights
... by Saying the Wrong Thing
Be careful what you say. Saying the wrong thing can backfire. Even if you think it's a positive statement, it can be used against you.
I took the liberty of working on Saturday.— me
Well, in that case I don't need to pay you.— client
How can this happen?
This example will make this clear:
I did computer programming for a customer of mine who was an attorney. I worked Saturday to get the job done for him. One day I told him "I took the liberty of working on Saturday."
I sent him my invoice, itemized with the days and hours that I worked.
When he sent his payment he deducted the amount I charged for the work I did on Saturday. He claimed that he didn't have to pay for Saturday's work because I had told him "I took the liberty."
In his eyes from a legal standpoint I had beached the convention of working normal hours without his prior approval.
I learned that certain phrases can have legal meanings that are completely different from what we had intended.
Unintentional Contract of Agreement
This can have undesired results.
I learned something really important and it was a costly lesson. Acceptance of an agreement is implied and binding simply by performance. It does not have to be a signed contract.
If you go ahead and do an assignment before all the details of a contract are worked out, you are creating a binding agreement to the present state of affairs.
Here's an example: One time, two fellows came to me and told me that they wanted me to create an interactive pay-per-call dating service.
With pay-per-call services, people would dial an access number and interact with a touch-tone driven menu to get information over the phone. The phone company would charge for the service on their phone bill. The revenue would be shared between the phone company and the developer.
As for these two fellows who came to me... One of them was an investor in start-ups and ran a company that sold radio advertising. The other fellow was a DJ and he had the voice talent to create radio ads for the business. They needed someone to fill one other position. They needed a computer programmer. That's why they came to me.
The idea for the application was to allow men and women to record a personal profile in their own voice. Other callers could select from a menu to listen to profiles of people of the opposite sex, and by age range.
As they browse through recorded profiles they could press a key on the phone to leave a private message for anyone they liked.
The profiles were public but the private messages were voicemail that only the recipient could receive, so interested people could leave a callback number to touch base. Callers would be charged by the minute on their phone bill.
Okay, so that's how it works. Let me get back to telling you what happened and how I lost my rights by letting these fellows use my software prematurely.
These two fellows told me that I had a choice of being paid for the development, or sharing one-third of the company proceeds. I knew how big this could become, so I chose to waive payment for development and go with the one-third share.
I lost my rights by letting my client use my software.
While I was working on the programming we were also working out the agreement details for the contract. There was one clause that we were having difficulty agreeing with and it never was resolved.
They required that if any of us dies the other two would get the share of the deceased. I preferred that if any of us dies, our third share should pass to our wife.
Even though I wasn't married I still looked ahead. I wanted to be sure that anything I did would benefit my future wife in case I didn't survive. Hey, you never know!
Well, the day came when I finished the programming of the system. We never finalized that one last detail in the agreement. One of the fellows came to me and said,
"Listen Glenn, you're finished with the programming and we are ready to get started with the business. Why don't we start running the system and if we still don't agree on things in another month, we'll shake hands and walk away as friends."
I fell for that and gave them the software installed on a computer. I helped them hook it up so the phone dating service would be online, and they started running radio advertising.
The service was an overnight success. Soon the first check came in from the phone company. I saw the check. It was for $100,000.
I asked for my third, but they told me that since this is the first check we should put it back into the company. That made sense to me, and I went along with it.
A month later another check came in for roughly the same amount. I know, because I saw that one too. Again they came up with an excuse for not giving me my third.
The third month they didn't show me the check. I insisted that I get my third of the proceeds now, or else I'll pull the plug.
I created a legally binding contract by putting the wheels in motion.
They told me that I couldn’t do that. They said if I pull the plug on the computer that I will be disrupting a million dollar corporation. $100,000 a month is a million a year. They explained to me that if I disrupt that kind of income that they would sue me.
I asked my attorney if that was true. Could they actually sue me even though I never signed the contract? My attorney told me that I actually did sign the contract. He explained that by turning over the software and the computer and hooking it up for them,
I had shown agreement to, and acceptance of, the contract as it presently stood. I had agreed to the contract by my conduct. That was legally equivalent to having signed the agreement.
My attorney went on to explain that if I pulled the plug they could indeed sue me. However, if I don't pull the plug then they cannot do anything against me and I could sue them for nonpayment.
As you can guess I left the system running and initiated a lawsuit. The suit dragged on for a whole year. After several months one of the fellows came to me and said,
"Glenn, you can keep us tied up in court forever. We have the money to fight you."
I told my lawyer that "I created a monster I cannot fight and I need to discontinue the lawsuit."
My lawyer did something else for me. He worked out a settlement to pay me for the development of the system. What a shame. That was nothing close to what I would have had sharing one-third of a million dollars. Every year!
Lesson learned. When you do something, even without pay, you are showing agreement.
Avoid Inadvertently Working for Free
I was doing a project development for a client and he delayed making the agreed weekly payments. My lawyer told me to stop working. He said, "Just stop! If you keep working you are agreeing to work without pay and he'll never have to legally pay you." That came from the mouth of an attorney. You can trust it.
After my prior lesson I understood what he meant. I never completed that job. My client lost out because he made initial payments and never got a completed system because he didn’t continue with the agreed payment schedule. He created his own demise. I understand that now. That's business!
I hope these stories will help you with your own business. How do you feel about this? Let me know in the comments below.
Dealing with Difficult Customers
It can be difficult to keep customers satisfied when providing service or support. This is and example of a personal experience.
I've learned a lot with giving customers the service they expect. Unfortunately, there are rare cases were almost anything you do is fertile, especially if the customer is a none-listener.
Dealing with the public, providing service or support, is sometimes difficult. This discussion of my personal experience provides some suggestions with keeping customers satisfied.
The Importance of Keeping Good Records
You can’t give people what they want if they don’t know what they want and they are too stubborn or too busy to understand. That makes it really difficult in a service-oriented business.
Some people aren't going to listen, no matter what you say. You can explain in detail what the consequences are, and you can tell them what's important to their own benefit. Yet, they don't see it, and they blame others for their problems.
There are people in this world who seem to just make their own lives more difficult. There usually is no satisfactory solution when dealing with the type of behavior.
It's important to protect yourself when dealing with these people. It helps to keep clear and precise records of events that take place, as well as copies of correspondence. This is especially important when dealing with difficult people.
An Example of Failed Support
In my earlier years in business I found myself wasting time trying to provide support to people who could not follow instructions.
As an example, here's an incident that happened to me…
I once had a customer who told me he wanted his voicemail service removed from his phone system because he didn’t want his callers to be able to leave him messages. He told me that he just didn’t have the time to return phone calls.
Being in the phone systems business, I felt the need to give him an education on proper voicemail usage and business ethics. However, that's not what he wanted to hear, so I just explained to him that if I remove his voicemail, any messages he had would be lost forever.
In order to be sure there was no misunderstanding I asked him if he had any present messages before I remove the voicemail service. He became frustrated and upset that I was questioning him, and he shouted...
Just Do It !!!
I later sent him an email stating that I will remove his voicemail that evening and that if he has any messages he should listen to them before the end of business hours since they will not be recoverable afterwards. He once again became upset and shot back a quick angry email saying…
“JUST DO IT !!!”
Okay, so I did it. Reluctantly I might say. Once I removed the voicemail service the messages are gone!
The next day he called, yelling at me “Where are my messages?”
All I could say was that per his request I removed his voicemail. He said he just wanted me to remove the voicemail service and not the messages. I tried to explain that I confirmed with him that his messages would be gone along with the voicemail.
He didn’t accept that. He became extremely irritated, yelling and cursing, telling me that I destroyed his business because he had important messages from people and now he didn’t know whom they were from. He even threatened to sue me.
He sent me an email telling me to expect a call from his attorney. Therefore, I sent him back a copy of the email with my final request to listen to his messages before I remove them. In addition, I included his reply where he confirmed... “JUST DO IT!!!.”
I asked him to provide that email to his attorney so that he or she will know how to handle the lawsuit that he was proposing. I never heard from him again, or from his attorney.
The Importance of Signed Agreements
Contracts and agreements have to be clear and signed before starting any work. It will help avoid disputes that might otherwise arise from misunderstandings.
I've had occasions where all I had to do was refer a client to our original agreement and that shut them up. For example:
I remember a client who was a reseller of my software. I gave him a 50% discount as long as he continued selling every month. After six months of inactivity he came back with an order and expected the 50% discount. I refused to accept it. He argued that we had an agreement. However, when I showed him the contract that he signed, he paid me the higher amount.
Keep a Business Website Updated with Answers to Common Questions
It helps to repeat yourself. I never hesitate to explain things over again when someone asks the same question more than once. It shows that they truly have an intent to “get it.” That’s a good thing.
When you deal with lots of people, however, your time can easily be abused. You can’t give them what they want if you don’t have the time to do it. For a good business structure you need to free up time for your own creativity and keep everything else running smoothly.
In the early days (before the Internet) I used to keep track of the answers and explanations I gave when people asked questions and included them in updated user’s manuals for my products. After all, I figured any question one person had may be on the minds of other customers too.
So what better place to put those answers? To include them in the user’s manual makes it a better guide because it addresses known issues and questions that came from real-life usage.
Today it’s easier since customers can visit websites to do their research. It helps promote customer loyalty since they tend to come back when they want to review something on their own.
For that reason I constantly keep my website up-to-date by constantly making changes to various sections, sometimes immediately after hanging up the phone with an inquiring customer.
Almost all discussions I have with people enlighten me to something that is missing on my website that could help others. In addition, I discover something that is misunderstood and I go and update my website to improve the clarity of the misunderstood section.
How the Internet Saved My Business From Costly Advertising Fees
In the old days (prior to Internet) I had huge expenses paying for advertising on radio and in trade magazines.
When I started my business in the early 1980s the only way to get customers was to place printed ads in magazines and trade journals. This became more and more costly over time. It almost didn't pay to advertise since the cost of becoming greater than the results.
Then came then Internet. It saved me as print and radio advertising began to skyrocket in the 90's.
I created a web site. In addition to using my site to display my products, I also wrote articles related to my niche. I quickly discovered that useful content attracted customers better than trying to pull them in with advertisements.
Ever since the Internet gave me an alternative, I never had any more advertising costs. Zero! Zilch! Nothing!
I got all my customers by way of their own web search. People look for solutions for their business and that is a powerful magnet. There was no longer a need to look for customers. They looked for answers and inadvertently found me!
I discovered that giving the reader content that benefited them actually caused people to discover my site as search engines became popular. It was free advertising because once I got the eyeballs the sales happened without effort.
The Basic Lessons
With all the affairs of a service-oriented business you just may need to deal with silly things from time to time. That’s business, and it can’t always be avoided.
Just handle those situations as professionally as you can, keep a record of troublesome situations in case you need to reference it later, and create written agreements before getting involved with new endeavors.
Always focus on what people want in every way possible! It will build a better vendor-customer relationship and it will bring you more business success as time goes on.
© 2012 Glenn Stok