In business, when can you say you have made a deal with a prospect?
When he or she hears your proposal and says okay?
When pen meets paper, and someone, or both parties sign a proposal?
When you have started performing the duties you agreed to?
In contractual terms, all of the above can constitute or signify the creation of a binding agreement. So, technically, you do have a deal.
But if you've been in business for any period of time, you realize you could be fooled, or you could be fooling yourself if you take these signs as being conclusive.
Dun & Bradstreet, the famous financial company, offers a different, and many might say, a more practical definition. It says:
"The deal isn't made until the money is paid!"
Well, they would say something like this, being in the credit and collections business.
Of course, what they're pointing out, with this memorable phrase, is we're all in the credit and collections business, unless we devise a way to get our money, up front.
The new client you put on the books with smiles all around, is really a debtor the moment you begin performance, until he has paid. Before you see his check you're his creditor.
I don't have to tell you there are risks and problems in this arrangement.
(1) He can stiff you, entirely. You've performed, you're out of pocket, and if you're in the service business, your time and effort can't be repossessed.
(2) He can be a "slow-pay." Yes, he's doing his part, but reluctantly; and you have to constantly hound him for your dough.
(3) If a number of your accounts are in arrears, you could get yourself into a real cash flow crunch.
(4) There are financial costs, because you're floating clients with credit, and generally not receiving interest or late fees.
(5) On the one hand, you want business, but on the other, you're constantly second guessing the wisdom of having accepted theirs.
(6) There are emotional costs to you; the uncertainty is a pain in the neck.
There is no perfect answer, because sooner or later most of us have to trust our customers to do the right thing, if only to appreciate that what goes around, comes around, and their flakiness is making it tougher for all of us to prosper.
One more thing: stereotypes don't work. You can't predict who will be a stand-up client or a flake. Big companies can string you along, seemingly forever, until they release checks, using your float as a profit-making tool. And the smallest companies can be the most diligent in meeting their obligations.
But do keep the Dun & Bradstreet definition of a deal in the back of your mind, and act, accordingly. At the first sign of lateness, note it and communicate promptly.
And stay with it, until you get back on track. Also, communicate the idea that you expect promptness, and if they don't comply, you'll have to suspend your further performance, until they do.
Dr. Gary S. Goodman, President of www.Customersatisfaction.com, is a popular keynote speaker, management consultant, and seminar leader and the best-selling author of 12 books, including Reach Out & Sell Someone® and Monitoring, Measuring & Managing Customer Service, and the audio program, "The Law of Large Numbers: How To Make Success Inevitable," published by Nightingale-Conant. He is a frequent guest on radio and television, worldwide. A Ph.D. from USC's Annenberg School, a Loyola lawyer, and an MBA from the Peter F. Drucker School at Claremont Graduate University, Gary offers programs through UCLA Extension and numerous universities, trade associations, and other organizations in the United States and abroad. He holds the rank of Shodan, 1st Degree Black Belt in Kenpo Karate. He is headquartered in Glendale, California, and he can be reached at (818) 243-7338 or at: gary@customersatisfaction.com
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