Riddell: When an offer seems too good to be true

Riddell: When an offer seems too good to be true

April 20th, 2010 by John Riddell Jr. in Business Diary

"Caveat emptor," or "buyer beware," is a well-known slogan of advice for prospective buyers of just about everything.

Just keeping this admonition in mind allows us to cast a justifiably wary eye on those offers we just "know" are too good to be true. Yet for many first time entrepreneurs, their warning antennae are not sufficiently calibrated to separate the good folks from the bad.

While there are certainly a fair number of liars, cheats and downright scam artists out there, the fact is that most business people are reputable, fair-minded individuals. While the occasional "rip-off" garners the sensationalism of the press, the instant awareness of electronic communications gives the mistaken impression of widespread malfeasance. Because of one bad apple, the millions of honest business transactions that occur daily get painted with the same brush of suspicion. This having been said, the statistical argument supporting ethical business practices goes out the door when you are the victim. Let's take a look at a few easy practices to put in place to minimize the potential for victimization.

First off, probably the single most important point to remember is that scam artists succeed only when they play to your wishes. If you are in a startup company and have the real desire to minimize your costs for startup, and if your real desires do not match up with the realities of the marketplace, then the right offer at the right time will hook you every time. So the first point is to have a set of realistic expectations. These might have to do with payment terms, rental rates, commercial space, etc. And the best way to establish a set of realistic expectations is to talk to others with experience. Ask them what you should expect to pay for commercial space, how flexible are landlords with today's leases. Understand the various types of real estate agents and understand who these agents work for.

Another good point to remember is to buy only from reputable firms. I recall a time in a previous business life when our CEO participated in a sales call that actually was a cleverly designed scam. As we were a Swiss company, the salesman introduced himself as being recommended to call on the CEO by a top executive in Switzerland. The scam artist knew the names of the major players, their spouses and nuances that supposedly only "an insider" could access. The offer consisted of a large supply of office supplies such as pens, white-out, copier paper, etc. The quantity offered was so large and the cost so relatively low that it played directly to the CEO's frugal nature. The only catch was that travel schedules required a payment with the order and the delivery would take place within one week. Trusting the apparent references and not feeling the need to check them out, a deal was struck, a check was cut, and one week later about one year's worth of office supplies duly arrived. Unfortunately, the ink was dried up in all the pens, the white-out had the consistency of cement, and single sheets of copier paper had to be pried apart. Oh, and the check had been cashed.

The vast majority of existing business owners sincerely want startups to succeed. Startup entrepreneurs just need to remember that the words "vast majority" do not mean "all."

John F. Riddell Jr., director of the Center for Entrepreneurial Growth-Hamilton County, writes every other Tuesday about entrepreneurs and their impact on companies and the marketplace. Submit comments to his attention by writing to Business Editor John Vass Jr., Chattanooga Times Free Press, P.O. Box 1447, Chattanooga, TN 37401-1447, or by e-mailing him at business@timesfreepress.com.