When I was a young lad of about 19 years old and was working in my first corporate job, I saw one of those shifty but convincing late-night get-rich infomercials. This particular one was on investing in heating oil options. For half an hour, the host of the show presented very compelling evidence (at least compelling to me as a wet-behind-the-ears 19 year-old) that if you invested in heating oil options right now, you’d make a killing.
All the economic factors clearly indicated that heating oil option prices would soon skyrocket. Or at least, that’s what they said.
The only catch? You needed a minimum of $5000 to invest in their program. But wait! That was not a problem! I had been working very hard and saving my money and had about $10,000 stashed away in my savings account. Dude! I could totally do this!!!
The next day at work I was pumped. I called the 800 number I had pulled off the TV the night before. The guy I got on the other line was a very smooth but very pushy and high-pressure salesperson. (Big surprise, I know.) He wanted me to invest “right now”. I had a few questions first.
Some of the questions he had answers to, some he did not. I asked him for a prospectus. His answer was “We don’t have a prospectus per se, but if you give me your fax number I can fax you over some information I have on past performance.”
No problem so far. I gave him my fax number, told him to fax over all the info and I’d take a look at it. He said that would be fine, and then immediately said, “So it sounds like you’re ready to get started!” I’m sure he was robotically following some stupid sales script.
“Uh, no,” I said, “I’m not ready at all. I need to see more info in writing before I make a decision like this.” He hated that answer, but I was adamant. Even at age 19 I was not reckless with my hard-earned money.
Eventually he reluctantly got off the phone, promising me he’d fax over some info ASAP.
He actually did fax me something. When I excitedly went to the fax machine, expecting pages and pages of information, instead there was one page of a single graph with barely any numbers on it, showing a trend line moving upwards.
As you probably already know, if you go to a real investment firm like Fidelity and ask for a prospectus, you actually get a booklet of about 25 pages, per investment. This one one page, one graph, with zero information.
He called me back several times. I didn’t take the call. I’m not positive, but I’d place the odds at about 95% that if I had “invested” that $5000, I would have never seen it again.
Another true story…
Many years a ago a very good friend of mine merged his business with another gentleman. My friend urged me to do the same…merge my business with the same guy, so all three of us could do business as one big company. I was interested so I spoke with both of them regarding the deal. It was very compelling. As a larger firm, I would have access to resources I would not normally have easy access to.
Finally I had a one-on-one meeting with this third gentlemen, and I laid out how everything would need to be structured if I were to actually go forward with this. He spent most of the meeting nodding his head and agreeing to everything I said. So far so good. I told him all he needed to do was to write this all up in some kind of easy-to-read agreement. I’d read it and sign it, have him sign it, and we’d be good to go. He said “Great, I’ll get right on that.”
One week passed and I heard nothing. I called him to remind him. He said he was busy but he would “get on that ASAP”.
Another week passed and still nothing. I stopped calling him. He never gave me anything in writing, so I never did the deal.
My friend who had already merged with him did not get anything in writing from him. About two years later this third guy fired my friend over a minor disagreement and confiscated about $40,000 of business equipment from him, which my buddy never saw again. They never had anything in writing, so my friend had no recourse other than to start all over again.
Those two stories are just two tiny examples. I could fill the next few pages of real-life examples of how my adamant rule of get it in writing has saved me from all kinds of massive problems. It’s too easy to do business deals on a handshake, especially in the small to medium business market.
People forget that the smaller your business is, the more important it is to get it in writing, not less. Huge corporations can easily afford to lose $50,000, $100,000 or even $500,000 on business deals or investments that go bad, but I doubt you can. The amazing part is huge corporations won’t do anything unless it’s in writing (too much writing), whereas smaller companies and individuals are the ones often doing handshake deals. Not cool.
I don’t care how good things look, how well you know the people you’re dealing with, or how nice the people are involved. Get it in writing, or pass on the deal.
I know some of you are thinking “But I hate contracts!” or “I hate getting attorneys involved!”. Hey, I understand, believe me. All you need is a very simple, non-legalese one-page document writing up your agreement, with your signature and the signature of the other party.
If the deal is worth more than about $1000, I’d also get a notarization at your local bank, which many banks will perform at no charge for existing customers. That’s all you need…no attorneys or complex contracts needed. Trust me, that simple piece of paper with two signatures on it is going to be far better than “He told me so Your Honor!” if you ever need to go to court, especially if the other party doesn’t have anything in writing themselves (which they probably won’t if you were the one who insisted on getting it in writing).
Don’t let this one get past you. You’ll regret it.