One of the most common mistakes that new business owners make is failing to recognize a bad business deal. Once you’ve agreed to an unprofitable deal or one where you’ve may have even had your naivety taken advantage of – turning a profit with your business becomes ever so much more cumbersome.
Not only do you waste the time you put into the deal, but you don’t get the results you need which can lead to a domino effect throughout your business. So, if you really want to know if you’re making bad business deals with your contractors, service providers, or vendors, ask yourself the following questions:
Are you really prepared to negotiate?
The most common mistake? Coming to the negotiation table before you are truly ready. You need to be patient and do your due diligence. Remember, when you have a question that isn’t answered at the negotiating table that’s an unquantified value that limits your ability to understand if the deal is right for you.
Research the party you are negotiating with, talk to an attorney you trust about what you should bring to the table, discuss the contractor/vendor/supplier with other businesses who use them. Make sure you know who you are dealing with and what the deal is about before you sit down.
Do you really understand the details of the contract?
It’s important to know that you’ll like not understand the vendor/contractor’s business as well as they will. This means you will likely want to bring in a qualified business attorney to help you examine the contract.
Before you do, go over the contract yourself and identify areas you don’t understand. Have questions ready for your attorney to help facilitate a strong understanding of the contract before you get to the negotiation table. If you find you are at the table and there are contracts presented at that time – be firm in requesting additional time to go over them. Don’t be pressured into signing a contract the details of which you still have questions about.
Additionally, do any sections of the contract look suspicious? (For example auto-renewal clauses). If anything looks off – ask about it. Consider taking time to discuss any such sections with a qualified business attorney as well to give your business as much protection as possible.
Does it look “Too Good to Be True?”
If you see a deal that just seems like it’s so good there is something off – be suspicious! Often times less reputable companies offer deals that appear to be great only to find out there are other fees that actually make using them MORE expensive in the long run.
Look for honest, up-front vendors and contractors that don’t try to pressure you or use too-good-to-believe deals to try to drum up business.
Are you just accepting the first price supplier’s quote?
Instead of asking for a “starting” price when you begin negotiating with a vendor, supplier or contractor, offer a range of what you are willing to pay. This shows you intend to negotiate but also have a clear limit on your budget for what you can spend here.
This should give you more room in your negotiation to get a better price rather than being stuck with the first one they offer – which vendors are very often reticent to change at all.
Are you being pressured into making a deal before you are comfortable with it?
When you get to the negotiation table, do you feel like they are being forth right with you? Do you feel pressured, hurried, or do they in any way appear anxious? All these things can be red flags that this is a bad deal that you should walk away from.
Simply put, always be prepared to walk away from the negotiations table at any time. If you don’t like a deal, don’t sign it. If you are being pressured to sign it, ask for more time or simply walk out. Remember – as a business owner, you have many options on contractors, suppliers and vendors. Protecting your business is far more important than saving a little bit on supplies.
Still have questions?
Please call us for a free appointment with Miami business attorney Yoel Molina in our Miami office at 305-548-5020.