small business

Face it. Your customers and vendors do not read their contracts. And they don’t hear what you’re telling them. And when problems happen, you can waste a lot of time and money fighting with customers. Penny pinchers are prepared to minimize this cost. I learned about this from a customer of mine.

                   We sold a ten-user customer relationship management system to a large man named “Terrell.” Somehow, Terrell has managed to stay in business for more than ten minutes. I’m not sure how he does this, because he has this tendency to agree to things, and sign contracts, without really knowing what he’s doing. Yet for some reason, people continue to do business with him despite this irrational behavior.

                   Being a good penny pincher, we made sure that our contract had everything spelled out in writing so as not to waste any time arguing. For example, section two stated that the software was non-refundable (the software vendors that we represent are pretty harsh about this—let’s save that topic for another time). Section three confirmed that the customer (Terrell) had performed all the necessary research. That means working with the demo software we gave him. That means making sure his computers met the requirements of the software. That means talking to the client references we gave. You know, the kind of things a typical college graduate, let’s say from the University of Tennessee, would do. So we take a credit card number for the software and ship him the box.

Breaching the Contract

                   Two months later, Terrell asks me to meet him on the front lawn of his office building. “I don’t like the software,” he complains between sit-ups. “I want my money back.” When we ask him why, he just keeps saying, “No comment.”

                   Now it’s clear that Terrell signed a contract, but hey man, it’s 2007, and what’s the value of a contract anymore? When I picked myself up off the ground and told him that the software wasn’t returnable, he went ballistic. Apparently, I’m a real jerk, because I wouldn’t give him his money back. Within a few days, I had a letter from his credit card company requesting information in order to resolve the case.

                   So now I had to waste time and effort arguing my case and ultimately persuading American Express that our contract was valid and that Terrell just couldn’t go back and change it.

Arbitration

                   So Terrell takes me to arbitration. More paperwork. More time wasted. More “no comments." Of course, after looking at the contract, the judge laughs him out of the room and dismisses the case. I won, but I definitely didn’t feel like celebrating. In fact, I thought Terrell was about to spit on me on the way out of the courtroom.

Lessons Learned

                   So here’s what I learned, and what every penny pincher eventually finds out. Customers and vendors, particularly rushed small business owners with large egos and naïve advisors, often don’t read contracts. They hear what they want to hear. They read what they want to read. They think what they want to think. And even if customers and vendors are totally and completely wrong, they’ll try to change an agreement if they can.

                   Penny pinchers make sure their paperwork is tight, none the less. And they do a better job than I did qualifying their potential customers. A better look into Terrell’s history may have tipped me off to his erratic behavior. Penny pinchers also reserve a portion of their revenues to confront the Terrell’s that they’ll inevitably run across and consider it a cost of doing business. This way, penny pinchers can reduce the amount of contractual issues they’ll face, focus on the good, and move forward from the bad.

                   For me, I’m sure there are plenty more Terrell’s in my future. After the incident was passed, I did call on Terrell to ask if we could just let bygones be bygones. His response? “Next question!” HBM

Gene Marks is a business owner and author of four small business books, including the best-selling Streetwise Small Business Book of Lists (Adams Media, 2006). Gene's Penny Pincher's Almanac column appears weekly in American City Business Journals. For other penny pinching tips from Gene please visit www.pennypinchingtips.com Copyrighted Material. All Rights Reserved.