Avoid These Fatal Small-Business Mistakes (My Personal Experience)
With over 35 years of running my own business, I've learned specific strategies that help a business owner stay clear of problems that can destroy a business. I'll give you examples of mistakes I've made, and solutions to avoid the fatal consequences.
Enforce Clear Business Policies
One of the first things taught in business school is policy-making. I learned how useful having policies could 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 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 reasons against each option.
Eventually, I fell for it and shipped with an invoice. The company never paid, and 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 would have told him, "It is our policy to ship COD or with a credit card. There are no exceptions. That is our policy.”
Having the 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 lawful rights. That is known as Breach of Convention Rights.
Saying the wrong thing can backfire. Even if you think it's a helpful comment, the other party can use it against you.
Saying specific phrases can have legal meanings that are entirely different from what we had intended.
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. 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."
"I took the liberty of working on Saturday."
"Well, in that case, I don't need to pay you."
In his eyes, from a legal standpoint, I had beached the convention of working regular hours without his prior approval.
I learned that specific phrases could have legal meanings that are entirely different from what we had intended.
Avoid Inadvertently Working for Free
Once when I was developing a project for a client, he suddenly delayed making the agreed weekly payments.
My lawyer told me to stop working. He said,
"Just stop! If you keep working, you show that you agree to work without pay and he'll never have to pay you legally."
That came from the mouth of an attorney, so you can trust it.
After my previous 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.
Many times, I just had to 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 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 voice. Other callers would select from a menu to listen to profiles of people of the opposite sex and by age range chosen. 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 that people could safely 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 already programming, we were working out the agreement details. There was one clause in the contract that we were having difficulty agreeing with and it never was resolved.
They required that if any of us dies, the other two wil 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 if 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 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 obstruct that kind of income, they will sue me.
I asked my attorney if they could sue me for that since I never signed the contract? My attorney told me that by turning over the software and the computer and hooking it up for them, I agreed to the contract even though I never signed it. 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.
Therefore 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. 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 a client is not sure what it is that they want you to do, 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.
That is why it's essential 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 make their own lives more difficult. There usually is no satisfactory solution when dealing with the type of behavior.
You must 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. That 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 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.
To be sure there was no misunderstanding, I asked him if he had any existing 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 afterward. 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 were 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, and now he didn’t know who 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
One thing I often see as I browse the web is business websites that are entirely out of date with useless, and sometimes inaccurate, information. That is one mistake I've never made, possibly because I'm a programmer and a writer. So I know how to keep my website fresh with pertinent information that customers crave. So here's my bit of advice for you:
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. That became more and more costly over time.
The Internet saved me once I created a web site. In addition to using my website 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 web search. People look for solutions for their business, and that is a powerful magnet. There is no longer a need to look for customers. They look for answers, and in so doing, they find me!
I discovered that giving the reader content that benefits them causes people to find my website. It's free advertising because once I get the eyeballs, the sales happened without effort.
Review of the Basic Lessons
With any business, you may need to deal with silly things from time to time. You can handle those situations professionally by having clear strategies.
- Stick to pre-planed policies, so you don't get sidetracked.
- Keep a record of troublesome situations in case you need to reference it later.
- Create written agreements before getting involved with new endeavors.
- Always focus on what people want in every way possible!
These simple methods will help build a better vendor-customer relationship, avoid fatal mistakes, and will bring you more 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.
Questions & Answers
© 2012 Glenn Stok