Tuesday, June 24, 2014

Lessons Learned: Always use 50/50% Payment Model

Dumping the words "lesson learned" into my business knowledge I have acquired section of my so-called "management manual," there is a good one all small business owners should apply. Never pay contractors their fees all upfront. Either do payments or 50/50. Wanting to be a trusting person, I've stumbled and fell on my face a couple of times after "trusting" the wrong contractor -- someone I should have been able to trust. The rules should apply like this:

No. #1 Don't do anyone any favors out of strict kindness and pay them in advance of work. Motivation to do the work sometimes requires a carrot and a stick. If the contractor eats the carrot before commencing the work, the motivation is now gone. Leverage is now gone, too. Outside of legal recourse, that contractor can hold you hostage to his/her whims or lack of work ethic.

No. #2 Trust is earned ... period. I'm never one to suggest not to be trusting. Trust is a beautiful thing especially when you place it in the care of capable, dependable and trustworthy hands. Trust though is not automatic or should it automatically be given to someone who has not shown through trustworthy actions that it should be given to him or her at all. Even with a trusted worker, the 50/50 payment system or payments should still apply -- just keeping everyone real.

No. #3 Contracts might seem archaic and even annoying at times, but they sure are great when one or both parties is being contentious.  Some people really don't like contracts or contractual obligations. It's paperwork, and the thought is, it's only as good as the paper. Now I do like contracts because is covers my derriere to have one, and it's a "keep 'em honest" reference point.

Here is the real lesson learned. You think you know somebody, and you think they would NEVER do this or do that -- they're good people. Well, truth is we only know what we know. And it's what we don't know that can bite us in business. So, my practical advice: don't use the honor system. A strict honor system is only as honest as the client or contractor. And since that percentage is sketchy, the great and steady fallback system is to keep it writing, don't pay all upfront, and keep all agreements filed away for future reference.


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