Maxim # 1 – Everything MUST be in writing
This sounds simple enough and you might even say, “Why is this number one?” I believe that if Maxim #1 was followed religiously in the halls of business, many nagging problems would simply evaporate.
Throughout history, all the important documents were committed to writing. Scribes were in high demand to ensure the King’s decrees were properly represented. Remember that different types of media were used to preserve “words.” Ancient Egyptians used papyrus. Moses received the Ten Commandments on tablets of stone. The Declaration of Independence was written on the sands of time in Patriots’ blood.
In business, more relationships are ruined
over misunderstandings than any other single factor. To avoid the “he said, she said” trap, it’s always better to have a written document that both parties have signed. If the concept sounds too simplistic, too formal, or seems like it just wouldn’t work in your case, all I can say is that you haven’t yet been burned.
Take for example, the computer systems dealer responding to a government Request For Proposal (RFP). The sales rep doesn’t carefully read the Statement of Work (SOW) and answers with typical sales bravado, “Oh, of course, that’s all included in our price.” Do you think there’s any room for misunderstanding? I heard of one example that cost a dealer over $20,000 on a six-figure bid because of a salesman’s glib response and lack of thoroughness in preparing his proposal. To that company’s credit, they stood behind their salesman’s “promise” and made it right for the customer. The salesman had already left the company when this came to light.
Why do you think lawyers
are so concerned with the language of a contract? It is because words have meanings. Do attorneys get paid according to the number of words they write? Not in today’s law practice, though to read many contracts, one would believe they did.
Uncertainty has no place in business agreements. Reminds me of the guy who vacillated so much his motto was, “Give me ambiguity or give me something else.”
So, you’re a grocer and think it doesn’t apply to you? I suggest you try having a “buy one get one free” sale without specifically limiting (in writing) the items to which it applies and see what happens. You’re a doctor about to perform surgery. Wouldn’t it be a good idea to explain, in writing, exactly what you are going to do and any side effects that might occur and have your patient sign it? The more detailed you are, the greater your defense in a malpractice suit. You ever wonder in most drug ads why anyone would use their product when the possible side effects are worse than the disease?
Maybe it’s because my wife and I
have been married over 50 years, or when we got married we barely had two coins to rub together, but prenuptial agreements weren’t on our radar. Why are so many of the wealthy preparing prenups? Would you invest money in a CD without knowing, in writing, exactly what rate of interest you would accrue and over what time period? Or buy a house without knowing how many points your loan will cost? I know, some of you are saying, “Nobody would do that.” But they do.
Many circumstances don’t lend themselves to easily putting agreements in writing. For example, a business transaction between friends or family members has the potential to ruin relationships if the understanding is not written down. The potential embarrassment in suggesting it will be more than justified when it saves the friendship down the road. Even though the other party may be offended and feel that you don’t trust them, one possible tactic is, “Carl, it isn’t that I don’t trust you. But what would happen to our agreement if either one of us was run over by a truck?” By including yourself as a possible casualty, you imply that you are also looking out for the other’s interest. You can’t always discern motives in others. If motives are pure, then the parties should welcome the chance to clarify and summarize the “deal points.” When one party hollers a little too loudly about trust, it may be a red flag warning to the other party to insist on a written document.
Many salespeople share a belief
that paperwork scares the prospect, so they hesitate to show a contract. I submit just the opposite is true. Most people want to know in detail what they’re buying. Have you ever sat through a time-share presentation and, when it was over, wondered what you just bought? Have you ever seen a contract with a line item identified as “one lot?” One lot of what would be my question; would that be one lot of hype or one lot of bull? Can you say hyperbole?
Physically handling a contract or sales agreement early in the trial close period lets you know how much more selling needs to be done. If you casually lay the agreement on the prospect’s desk, and he sits back in his chair with arms folded across his chest, then it’s a pretty safe bet you’re not done selling. An even better tactic is to set the expectation at the beginning of your presentation by saying something like, “Mrs. Clow, when we are done, and I have answered all your questions, I’m going to put our understanding in writing for both of us to approve.”
It just makes good sense
to have The Understanding in writing. It’s been said, “If you don’t know where you’re going, any road will lead you there.” That’s true of Maxim #1. If you don’t have it in writing, how do you know when the job is done, when both parties have fulfilled their obligations?
Changes to the original understanding happen so frequently, that there is even a name for it: Scope Creep. It happens even when there is a written SOW. The client says something like “As long as you’re here, can you just take a look at this, too?” It seems innocent enough. But when you realize that the client is really trying to “steal” your time resources, if you have a detailed Statement of Work, it’s much easier to reply, “I’m sorry, but that isn’t covered under the SOW. I’d be happy to give you a quote to add it, or I can come back another time.” (See Maxim #2 for a broader explanation of how to deal with this type of confrontation.)
Another problem
related to a Statement of Work is that one vendor may take the approach that they will bid everything to complete the job in the original SOW. Another vendor may not cover all the bases and depend on “change orders” to make up the difference. This often makes it difficult for the buyer to compare apples and apples. In normal contracting, change orders totaling ten percent or more of the original are not uncommon.
Be wary of the vendor who proffers a lower bid and either implies or states, “We can deal with those details on change orders.” Remember, as a practical matter, once you have signed a contract, you are pretty well locked into that vendor. He can now charge whatever he wants for change orders. The likelihood that you will go out to bid for changes is very remote.
Have you ever bought
one of those toys with the disclaimer on the box that says: “some assembly required”? Sometimes, even with written instructions, those Christmas Eves can be very long. Do you ever leave a babysitter with only verbal instructions? I think you get the drift by now. Getting it or putting it in writing not only protects both parties, but it’s also really the only way to increase your odds of the final product looking like you wanted it to.
Remember the game where everybody sits in a circle and the first person whispers a sentence into the next ear? Each person, in turn, whispers it to the next and so on until it comes full circle. It’s a fun game, but it really drives the point of how easy it is to misinterpret verbal communication.
Think about this.
If putting it in writing wasn’t important, why did Moses have to go back up the mountain a second time after he broke the original stone tablets?
Maxim ‘minder # 1: The dullest pencil is often better than the sharpest memory.