by Anthony Noel
The fifth in a series on business relationships reminds custom woodworkers that providers of professional services are vendors, too.
As we've delved more deeply into the 'hows', 'whys' and 'wherefores' of dealing with the businesses that help our companies produce fine custom work, we have focused primarily on those that are selling us products. Hardware, lumber, sheet goods, adhesives, finishing materials - if you have been in business for any time at all, you probably have a host of sales reps from such suppliers calling on you regularly.
Last month, we noted that requiring our suppliers to meet the same standards for service that we hold for ourselves is crucial for getting the kind of quality and service we expect. But what about relationships in which the benefits are less tangible, yet where quality at a fair price is no less important to our profitability?
For instance, most small businesses need accounting help, and all should have at least a couple of basic insurance policies. And some (probably all, at one time or another) will need legal advice. Such services (necessary evils?) can cost big dollars in no time, unless you apply the same standards for judging their value that you apply to your other vendors.
Lawyers, accountants and insurance agents are, after all, vendors, too. They want to sell you something. But before they make their sale is the time to make certain that you will be getting what you want and need, instead of just paying for services that don't contribute to your profitability or peace of mind.
Herein lies the difference between the so-called 'professional services' and the other vendors you deal with regularly. The latter can usually be held to a given standard based on the quality of their goods. If a particular adhesive doesn't perform as you were promised, you can return it, get a refund and let your rep know that his sales pitch was a lot of malarkey.
Professional services, on the other hand, are another kettle of fish. Just because you hire the top CPA in town doesn't mean you won't get audited. Similarly, choosing to fight a bogus negligence claim in court is one thing - winning your case is another. And tales of insurance policies with loopholes which wind up burning the policyholder (no fire-insurance pun intended) are almost legendary.
It kind of makes you wonder why they call them 'professional services' doesn't it? Still, buying the appropriate insurance policy or choosing the right accountant or, when necessary, retaining the proper lawyer need be neither expensive nor harrowing. As with your other vendors, it is really just a matter of determining your needs in advance, then making sure they are being met.
Earlier in the series, I made clear my disdain for car salespeople. Well, I have a tendency to place insurance salespeople just a rung or two higher. It is really not so much the salesperson's fault, as it is a problem I have with what they are selling.
To paraphrase the late Buckminster Fuller (inventor of the geodesic dome), taking out a home insurance policy is like betting against the odds: The overwhelming statistics are greatly against one's house burning down or being burglarized. Nonetheless, we dutifully purchase insurance policies - just in case.
None of which is meant to imply that we shouldn't take steps to protect our businesses. But just as it is with our homes, our focus when buying insurance to protect our businesses must be on exactly what kind of protection we are purchasing and whether our purchase is based on reality.
Insurance agents call it 'exposure,' which is a watered-down way of saying that most reviled of words among sales professionals: 'risk.' Because it is such a negative-sounding word, there really is no place for 'risk' in the discourse of any serious salesperson - least of all an insurance agent. It is much more comfortable for the business owner to hear a word like 'exposure' when the odds of his factory burning to the ground are being discussed.
Whatever you want to call it, however, it is still the critical question when purchasing insurance: 'What am I protecting myself from and, if whatever it is occurs, am I adequately protected?'
Make no mistake: it can be pretty tempting to buy more insurance than you really need. This is where determining your needs in advance comes in. If you're buying fire insurance, what do you want from a policy if the worst should happen?
Take the time to think clearly about your actual needs before you meet with an agent, because he will naturally try to sell you the biggest policy possible. Despite my unfavorable opinions of him, I should admit that this does not make him a bad person, just a typical salesperson.
Buying your insurance carefully can also minimize your reliance on another of the professional services - lawyers. And let me just say here that I'm determined not to bow to the temptation of relating any crude, heartless jokes about those in the legal profession. (Oh, what the heck, just one.)
Q: What's the difference between a dead skunk and a dead lawyer in the middle of the road?
A: There are skid marks in front of the skunk.
Ahh, lawyer-bashing. Is there anything quite like it?
Anyway, lawyers, do have their place and, as far as I'm concerned, it should be as far away from one's business as possible. The trick is keeping them there. I know some shop owners who will sue at the drop of a hat, but I must caution strongly against adopting a similar approach. One of the surest ways to stay out of court (besides being adequately insured) is by writing and following very clear contracts with your clients.
In my experience, there are two kinds of custom woodworking businesses - those which use contracts and those which do not. Mine has always been one of the former. Not coincidentally, I think, I have never spent any time in court.
The minute you decide to take a job without a clear understanding of all the terms and conditions related to that job, you are asking for trouble.
Many contractors have what I can only consider an unfounded fear of what is known as a 'performance contract.' Not me. I write them myself and insist they be signed and returned with a deposit before I will begin work.
A performance contract is one that stipulates a project's terms (how you will charge for your work) and when the project will be completed (that's the performance part). I think that the fears I mentioned on the part of some contractors are borne more out of ignorance than anything else. Most contractors fear locking into any date. Materials shortages, delays on their jobs and any number of other circumstances can force even the best intended of companies to miss a deadline.
But just as a carefully written insurance policy can help protect your assets, carefully written, clear contracts can prove a valuable way of staying out of court (in other words, staying away from needing a lawyer). We will talk more about contracts next month, when we also look at what an accountant should and shouldn't do for your business.
Anthony Noel writes, consults, and teaches woodworking and journalism, along with doing an occasional custom job in his shop in Macungie, PA.
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This article is reprinted by permission of Custom Woodworking Business Magazine.