Monday, December 3, 2007

Contractor/Vendor Relations: 101

By:  Tracy Watson, Publisher, Our World Books (WI grad '06)

Tracy_2 If Experience is the best teacher, it is also the most impartial. It doesn't care if the tools are a friend, a foe or completely foreign to you, Experience will find a way to show you what you need to know.

Lady Experience doesn't really want to see you suffer, although it may feel like it, and if she could assume the warm fuzzy voice of your High School nurse, she would probably say to you, "Alright now, this might hurt a little bit! But it's for your own good."

The Friend-or

They say "Never do business with friends." and after my experience, I wondered if they were right. But the truth is the lessons I've learned from doing business with a friend were more than worth the burn.

My Mistakes, er, Life-Lessons:
  • There was no contract - I placed an order for 50 units on the phone, sent my specs by email and confirmed the deadline, without once asking for a contract.
  • I paid for the entire order up front - I wanted to put my friend at ease, and assumed that meant paying for the entire order before a single product was produced.
  • I didn't ask what their refund policy was! - I didn't think I'd be returning anything, this was my dear friend, and of course everything always goes off without a hitch when it's a friend!!!
  • I didn't check the order before I took possession of it, so it wasn't until I got home that I found out that 3 out of 4 of the units were damaged - YIKES! Which meant .
  • I had a very unnecessary battle to remedy the problem.
Without a clear contract or a refund policy, I had no leg to stand on, and friend or not my friend did not opt to refund me for the damaged product. Turns out "damaged" is a very subjective term that can often be confused with "artistic". After several discussions, in which solutions were proffered and then retracted, he offered to refund part of the cost and replace the rest. But to say that our friendship was strained for the month leading up to this, would be putting it mildly.

The New Vendor
That Hadda' Hurt!:
  • Keeping my mouth shut - When I saw that my deadline for a project I had contracted out was approaching and the project seemed to be nowhere near completion, I thought, "I'm sure it will be done in time. I don't want to insult them by asking about it."
  • I didn't get the deadline in writing - I told the principal of the firm my deadline for the project, that contracting them was contingent upon their ability to meet this deadline, to which he agreed, and I thought that was sufficient. Wrong! When the deadline passed and they were still working on the job, I brought it to the project manager's attention and asked if they could rush it. They replied, "Is the deadline in writing anywhere?" They denied all knowledge of the deadline and promptly dropped the job mid-stream! Oh, bloody hell!
The Offshore Contractor
Wake Me When It's Over:
  • I didn't ask what forms of payment they would accept - doesn't everyone accept Paypal?!? Apparently not. It wasn't until we had been working out the details of the job for two excruciating months, that this oh-so-déclassé point came up! Oh, bloody hell!
  • The prep work alone had taken about two months of blood, sweat and tears on all sides, but for me, a huge hunk of money + wire transfer + new/offshore vendor = a seriously risky proposition! Eventually we reached a concession and they agreed to setup a Paypal account, but ...
  • Just because a company or an individual has a Paypal account doesn't mean they can transfer funds from it to their bank. If they try to receive money from you via Paypal and it doesn't go through (as in this case, where their bank didn't accept Paypal transfers), you could end up paying a fee for a transaction that was never completed, which is what happened in this case.
What I Learned and Live:
  1. Assume nothing.
  2. Get all the details of any order or contract in writing and make sure your important clauses and stipulations are included, like the project deadline, what penalties they will pay if they do not complete the job on time, at all, or as you specified, etc. If they have a template, and you decide to use it, don't hesitate to scratch things out and pencil things in - make it work for both of you!
  3. Never pay the entire contract amount before the order is done and checked for quality. The most any contractor should ask for is a 50% retainer or deposit. Only agree to payment terms that sound right to you.
  4. Ask what the refund policy is up front and don't do business with people if their policies aren't in writing and/or if they don't suit you.
  5. Don't take possession of your product from a contractor without checking the quality and never let anyone strong arm you into to accepting something that isn't what you agreed to or paying for something that isn't right.
  6. Speak up. If you have a concern, it's your job to make that concern known. Doing business with people isn't a popularity contest - it's a transaction and you are the best person to make sure that it goes according to your plan.
  7. Don't do business like a charity, putting your money out there and hoping it'll come back to you! In business, everyone's equal, the same standards for contractors/vendors apply to strangers and friends alike.
  8. Be clear how your vendor/contractor expects to be paid before you invest precious time and energy on a project.
  9. Know your non-negotiables and if a contractor or vendor can't accept your terms, don't hesitate to walk away, there are plenty of folks out there who want your business and can work with your terms! Better to spend a little extra time up front finding the right person than a whole lotta time doing damage control with the wrong one.
The moral of my story: whether it's a friend or a perfect stranger, follow these golden rules of good business and everyone will be happier in the end! I hope this cautionary tale will make you laugh, make you think, but most of all, I hope you'll stop laughing at me and take notes - this stuff is priceless!

Much continued success to you!


Michael N.M. said...

Tracies advice is excellent! I love my friends and doing business with them as well as meeting new people for business.

One thing that can always screw up a relationship though: money. money. money.

The best thing to prevent this: absolute clarity. I am happy to see good, concise writing that reminds me of this.


Original Post: December 13, 2007 at 10:43 AM

Women's Initiative for Self-Employment said...

One thing I'd add to that: the MOU or Memo of Understanding. This is a non-legally binding document that simply lays out what was agreed to.

It's not a contract and not legally binding so it's non-threatening, but it does help clarify things if someone tries to deny that they signed up for X, you can show them that they agreed to it.

This is if you're not willing to go so far as to draw up a contract, or if a contract is inappropriate.

Original Post by: Claire | December 13, 2007 at 11:51 AM