Business people like to talk about “doing due diligence,” but in my experience, actual, intensive due diligence is more often honored in the breach than the observance.
It’s human nature, when presented with a deal or opportunity that seems too good to be true, to engage in wishful thinking. Sure, it seems too good to be true — but what if it is true? You don’t want to miss out.
This kind of wishful thinking is just as common in big corporations as it is in small or midsize businesses. So don’t feel bad, it can happen to anyone.
Regardless, it’s imperative to take responsibility for doing your own homework. You need to answer the Five Ws: who, what, when, where and why.
This is one more reason to network with people both inside and outside your channel. It’s good to know people — and to know who and what they know. Think of it as your own whisper network you can tap when you need intel.
I lean on my network to find out things I need to know. For example:
When someone who has previously shown no interest in doing business with me suddenly wants to talk, it makes me wonder what went down with their last vendor. Is this a fantastic opportunity, or am I walking into a trap?
Fortunately, in this business, everyone knows everyone else.
As I’ve said before, this industry runs on dirt. Someone, somewhere, knows something. So it’s usually not hard to find out the scoop with a few phone calls.
Sometimes, it’s even easier than that.
Once, I visited a mall location of one of my retailers. The store was gone.
It was just … gone. Like it had never been there.
So I went to the mall map and found the property management office. When I asked the person at the desk about the store, they rolled their eyes and said, “Oh, them.”
That answer alone spoke volumes. Turns out the retailer was behind on rent and bailed.
What was weird was that it wasn’t a traditional “midnight move.” They left their inventory behind.
That fact told me even more — you have to be pretty hard up financially to skip out on rent and abandon your store’s inventory. I mean, that stuff costs money.
I dutifully reported this back to my office and checked with Accounts Receivable to see if they were behind on payments. They weren’t, and their other locations were ordering and paying on time.
Still, those red flags were important to learn. Knowing them helped us stay on top of that account — and avoid getting burned.