Post by: Vanessa Merit Nornberg | Inc.com | Published on: 12/20/2016
How a ‘stop, seek, scrutinize, and insist’ approach can make a difference.
Whether you’re starting a new business or taking your existing one in a new direction, structuring deals successfully can make or break your company. While it may seem like taking the time to scrutinize could put the brakes on momentum, slowing down long enough to reflect on these 4 simple things can save you again and from heading down the wrong path with the wrong partner.
1. Always read the fine print. This would seem to go without saying, but in these fast-paced times where we are prone to hit the accept button without ever reading the details of the agreement in question, paying attention can save you money, save you time, and even save your ass. When I was unhappy with the quality of work provided by a law firm we once contracted with, I saved my company $70,000 in legal expenses, and a long walk down a legal path that would have been disastrous for us by carefully reading their letter of engagement and pointing out how their handling of the case had breached their commitment to my company. Our bill was waived and I was able to work with a different firm that was as focused on getting the needed ROI on my business’s legal action as I was.
2. Never assume you have to accept a deal the way it is written. New companies especially, either through eagerness or the erroneous belief that “standard” means unchangeable, often wind up with deals that contain unfavorable clauses in them. Normal commercial leases in New York, where my company is headquartered, for example, are usually 3 years or longer. As a first time business owner, I was afraid to sign off on something so binding. Everyone told me that was “standard” practice and I was unlikely to get anything shorter, so I should just accept it. Instead, I took a few extra days, did some research and found that the landlord we were negotiating with had other spaces open at the time, and thus I figured I could convince him to give me what I wanted in order to fill his space sooner rather than later. I did, and securing only a 1-year lease rescued my company from early extinction because the location turned out to be terrible for our business given that our customers found it inaccessible and too far off the beaten path.
3. Don’t agree to anything for which you can’t control the impact. Even offers that seem great at first glance can turn out to be problematic if you don’t fully understand the terms. A large company with whom we really wanted to do business finally gave us the green light and sent over an order. The quantities were big and we were so elated that we almost signed and emailed the confirmation right back–but then I noticed that the terms were guaranteed sale, meaning we would have to accept anything they wanted to return for up to 180 days. The deal meant that we would essentially be bankrolling their jewelry assortment for 6 months, and then would be potentially stuck with large quantities of outdated styles, long after their lifecycle had ended. I passed on it, and they went bankrupt a few months later.
4. Make the other party put as much on the line as you will in the deal.Certain industries seem to have different ideas about the right and wrong way to do business. My philosophy on that doesn’t change. I want to know that whoever we partner with has a much to win or lose in the balance as I do. When we had our website updated, I insisted that the company doing the re-design commit to a sizeable discount if they failed to deliver by their promised delivery date. They were unhappy, but signed off on it, and when they missed their deadline, every day beyond it caused them to lose money. It was expensive and painful for them and their management team made our completion a bigger priority right away. A deal where you are the only one with something at stake should be avoided like the plague.
Good deals are always about careful planning. Before you sign on the dotted line, you have to know what your company’s best takeaway is, make the potential partner understand and buy into that takeaway, and see to it that the deal leaves you both as winners. Anything less isn’t worth doing.
Reference Article: http://www.inc.com/vanessa-merit-nornberg/4-simple-ways-to-get-the-most-out-of-any-deal.html