How to Prevent Failure of a Small Business (Things I've Learned)

Updated on February 23, 2019
Glenn Stok profile image

Glenn Stok acquired strategic management skills with organization, planning and policy development from his employment and his own business.

With over 35 years of running my own business, I've learned certain strategies that help a business owner stay clear of problems that can destroy a business. I'll give you examples of mistakes and solutions to avoid the consequences.

Tips and Strategies to Avoid Ruining Your Business
Tips and Strategies to Avoid Ruining Your Business | Source

Enforce Clear Business Policies

One of the first things taught in business school is policy-making. I learned how useful having policies can be when I made my first mistake...

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 fell for that! 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.

Avoid Saying the Wrong Thing That Can Breach Your Legal Rights

When you say things without realizing the legal meaning behind it, you can end up breaching your own legal rights. This is known as Breach of Convention Rights.

Saying the wrong thing can backfire. Even if you think it's a positive statement, it can be used against you.

Saying certain phrases can have legal meanings that are completely different from what we had intended, as displayed in the following example. I thought I was being kind when I told my client that I took the liberty to work on Saturday for him.

"I took the liberty of working on Saturday."

"Well, in that case I don't need to pay you."

The following 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.

Avoid Inadvertently Working for Free

Once 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, so 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.

Always Get 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.

Don't Create a Binding Contract Unintentionally

Did you know that acceptance of an agreement is implied and binding when you simply perform a task? 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.

The following true story will show you what can go wrong:

It all started when two fellows told me that they wanted me to create an interactive pay-per-call dating service and they needed my help.

Pay-per-call services allow people to dial an interactive service and interact with a touch-tone driven menu to get information over the phone. The phone company charges for the call and the revenue is shared between the phone company and the service provider.

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 radio DJ and could create radio ads for the business. However, they needed a computer programmer who could create the application. That's where I fit in.

The idea for the application was to allow men and women to record a personal profile in their own voice. Other callers would select from a menu to listen to profiles of people of the opposite sex and by selected age range. As they browse through recorded profiles they could 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 people could leave a callback number. 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 accept the one-third share instead.

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 a computer on which I had installed my software. I helped them hook it up so the phone dating service would be online, and they started running radio advertising.

I lost my rights by letting my client use my software without a signed agreement.

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.

"Pay me or I'll pull the plug!"

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. I created a legally binding contract by putting the wheels in motion.

Keep Good Records to Prove Interactions

If people are not clear in their own head what it is that they want done, then it's next to impossible to do anything right for them. You may have run into this problem in life, but it can be disastrous in business.

This is why it's important to keep records of requests and correspondence.

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. If they are non-listeners, they don't accept what you say 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 types of people. It helps to keep clear and precise records of events that take place, as well as keeping copies of correspondence. This is especially important when dealing with difficult people.


Here's an example of 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…


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. I even 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.

Provide Search Friendly Information on a Business Website

Provide Answers to Common Questions

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 to share with all other customers.

Today clients can visit a company's website for support. When I have discussions with customers, I get ideas for adding online content that could help others too.

Use SEO Techniques to Attract Customers

In the early 1980s when I began my business, the only way to get customers was to place printed ads in magazines and trade journals. This became more and more costly over time.

The Internet saved me once 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 advertisements did.

Adding useful content, rather than just listing products for sale, is a powerful way to optimize for search engines (SEO).

Since the Internet gave me an alternative, I never had any more advertising costs.

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 in so doing, they 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.

Review of the Basic Lessons

With any business you just may need to deal with silly things from time to time. You can handle those situations professionally by having clear strategies.

  1. Stick to pre-planed policies so you don't get sidetracked.
  2. Keep a record of troublesome situations in case you need to reference it later.
  3. Create written agreements before getting involved with new endeavors.
  4. Always focus on what people want in every way possible!

These simple methods will help build a better vendor-customer relationship and it will bring you more business success as time goes on.

This article is accurate and true to the best of the author’s knowledge. Content is for informational or entertainment purposes only and does not substitute for personal counsel or professional advice in business, financial, legal, or technical matters.

© 2012 Glenn Stok


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    • Glenn Stok profile imageAUTHOR

      Glenn Stok 

      17 months ago from Long Island, NY

      Kathy Burton - Sounds like you recognized his con game early, even though you were through a lot already. It's good that he is now serving time.

    • KatWin profile image

      Kathy Burton 

      17 months ago from Florida

      Many good examples in here. I suffered through the mischief of a con man once when I was doing some real estate business. He is now a disbarred attorney and serving federal time as he grew his con game large after dealing with me. I was lucky - caught him early and pulled the plug on our dealings.

    • Glenn Stok profile imageAUTHOR

      Glenn Stok 

      4 years ago from Long Island, NY

      brakel2 - It's true, there are always people who are on the lookout to get someone to slip up so they can take advantage. Thank you, Audrey, for your kind thoughts.

    • brakel2 profile image

      Audrey Selig 

      4 years ago from Oklahoma City, Oklahoma

      Hi Glenn _ This is a well written hub, filled with interesting information. It is a little scary in that you must take care and need legal advice for every step you take. It seems like some folks know how to take advantage, if you miss a step. The information makes me realize that we must always protect ourselves. Thank you for your willingness to share your own mistakes to help others. Congrats for HOD. You deserve it. Sharing, Blessings, Audrey

    • Glenn Stok profile imageAUTHOR

      Glenn Stok 

      4 years ago from Long Island, NY

      ktrapp - Absolutely! It sure is interesting how lawyers can pick out legal meanings from what others perceive as casual statements.

    • ktrapp profile image

      Kristin Trapp 

      4 years ago from Illinois

      What a great source of business advice with real world examples. I've done some contract work for several law firms in the past; glad I never used the phrase, "I took the liberty" and had it held against me. Anyway, congratulations on a well deserved hub of the day.

    • Glenn Stok profile imageAUTHOR

      Glenn Stok 

      4 years ago from Long Island, NY

      RTalloni - True indeed. This is what gives attorneys the business, unless we know how to avoid these traps. Thanks for reading my Hub of the Day.

    • RTalloni profile image


      4 years ago from the short journey

      Congratulations on your Hub of the Day award for this useful post that shares what you've learned via experience. It's always difficult to believe that "friends" would be devious, that when you do business decently and in order others would use your courtesies and throw your good faith in them away, but attorneys stay in business because it is all true (and more).

    • Glenn Stok profile imageAUTHOR

      Glenn Stok 

      4 years ago from Long Island, NY

      StephanieBCrosby - I don't mind teaching friends who want to learn something. But giving away services in business is a different thing altogether. Thanks for the congrats.

    • StephanieBCrosby profile image

      Stephanie Bradberry 

      4 years ago from New Jersey

      Congratulations on your Hub of the Day!!!

      Your last point resonates the most with me. I am often told to stop inadvertently giving my services and advice for free.

    • Glenn Stok profile imageAUTHOR

      Glenn Stok 

      4 years ago from Long Island, NY

      Omeva - These experiences are never forgotten. But hopefully for most, each is a learning process to help avoid similar scams.

    • Omeva profile image

      Omar Jackson 

      4 years ago from Lisbon, Portugal

      Hey Glenn,

      That part about them taking the software and and your one third of the company made me the most livid. I have had some misfortunes happen to me at times, but it doesn't come close to what you experienced. It makes me feel like when I was scammed.

    • Glenn Stok profile imageAUTHOR

      Glenn Stok 

      4 years ago from Long Island, NY

      Buildreps - That's a very good additional point you made, and it's also a very useful policy to follow. Give a time limit to a new endeavor, and move on if it doesn't happen so that you can apply your resources to something more promising. That's my take on what you said and I could've used that idea decades ago. I was too patient when I first began my business and I spent a lot of time with useless things.

    • Glenn Stok profile imageAUTHOR

      Glenn Stok 

      4 years ago from Long Island, NY

      Kristen Howe - Thanks, I just discovered it too, via an email, that HP selected this Hub for Hub of the Day. Thanks for your kind thoughts.

    • Buildreps profile image


      4 years ago from Europe

      Wow, this is seriously a great Hub. You really learned your lessons the hard way. You wrote it very honestly, clear and open. I never had any serious troubles with money as an entrepreneur. I used mainly one rule: good things come quick, and when they didn't I immediately unhooked all further involvements. No matter how tempting the promises were. Bye bye! You perfectly described this with your own experience with this blah blah story about the board meeting.

      Congratulations with your HotD!

    • Glenn Stok profile imageAUTHOR

      Glenn Stok 

      4 years ago from Long Island, NY

      agvulpes - That's a terrible loss. Sorry to hear about that Peter. I wonder if the auction house would have been able to sell the item if you had put a lean on the equipment and had paperwork to show that it was not paid for.

      I once had the experience that a dealer sold plagiarized copies of my phone system software. My lawyer was able to locate several of the end users who purchased from him and sued and collected payment. Stolen equipment can be confiscated even if one paid for it. But in your case I guess they can argue that it was not stolen, per se.

    • Kristen Howe profile image

      Kristen Howe 

      4 years ago from Northeast Ohio

      Glenn, thanks for sharing your experience and pointers on how to be successful in business. Congrats on HOTD! This is real useful and helpful for those who want to do well in business.

    • Glenn Stok profile imageAUTHOR

      Glenn Stok 

      4 years ago from Long Island, NY

      Jay C OBrien - Thanks for adding your experience. You have shown a good example that lending money should be done with written paperwork to prove the transaction and clearly define the collateral and terms.

    • agvulpes profile image


      4 years ago from Australia

      Yes there are many 'quirks' in the law! As someone who was in business for some 40 years I reckon that I was 'stung' a number of times! I lost a piece of equipment worth over 4000$ because I trusted my Salesmans judgement ! We had 'sold' it to a new business who due to some wrong doing on their part were not allowed to open! The business was put into 'liquidation' and all the assets were 'auctioned'! We went to the auction to bid but nothing went cheap enough to buy back!

      From memory we recieved about 100$ :(

      Lesson learned :)

    • Jay C OBrien profile image

      Jay C OBrien 

      4 years ago from Houston, TX USA

      Very good article. I made the mistake of lending money to public servants. I thought it was a good risk because they were employed with civil service. Well, these peace officers did not pay me back. I thought I could trust peace officers.

    • Glenn Stok profile imageAUTHOR

      Glenn Stok 

      6 years ago from Long Island, NY

      Millionaire Tips,

      Sorry for the delay in approving your comment and replying. We had a severe hurricane here in New York and I had no power, no Internet, and no phones, for two days.

      Your experience with that professor is definitely a lesson learned. I've had a number of those types of experiences too. We tend to trust people too much. I decided that in business I will no longer trust. I can't. I'll still trust my friends. But in business I have to make rules and set policies. If people don't follow the rules, well, that's business.

      It's a shame that your professor got away with that. But you are right when you said you were too busy to shame him. I handle things the same way. When someone screws me I just stop dealing with that person. And I stop thinking about it. Dwelling on it or trying to get some satisfaction out of it serves no purpose and only wastes my time. But there are times when they come back for more help and then I feel good when I refuse.

      Thanks for your comment and for sharing your experience.

    • Millionaire Tips profile image

      Shasta Matova 

      6 years ago from USA

      Wow - it is amazing the greed of people! The dating service story is crazy! I can see if you would have to agree to their terms about the splitting of shares after death, but the terms were clearly 1/3 for each.

      I agree with the importance of making policy. I thought I could come up with the right decisions on the fly, but it is hard to do that when people present their desperate situations.

      A professor had translated a document, and needed me to type it up for him - back in the day when typewriters were used. I had a word processor, and typed it for him. He gave me the work in disorganized batches and his handwriting was terrible and the subject was incredibly boring. When it was finished, he needed it right away and wasn't able to pay me right away. Since he was a professor and his situation was so desperate, I left it in the mailbox for him, even though I knew the smart thing to do, and I didn't normally give the typed document without exchanging it for cash. He never paid it, saying that he had turned it in past his deadline, and he was a poor professor. I guess I could have made a stink and at least given him some public shame, but I was busy trying to make ends meet and decided to chalk it up to a hard learned lesson.

    • Glenn Stok profile imageAUTHOR

      Glenn Stok 

      7 years ago from Long Island, NY

      Charles, yes, it's true that there are dishonest people in the world. When I first started my business 30 years ago, I was taken advantage of a number of times by games people played. But that is where I got my education about making policies and sticking to them. People can't play games so easily when we stick to policy and insist on it from others in business. Thanks for stopping by and commenting.

    • Charles James profile image

      Charles James 

      7 years ago from Yorkshire, UK

      Yes. Just because you are honest does not mean everyone else is. Or their perception of honesty is different to yours.


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