3 simple ways to identify an unsound business proposition

An unsound business venture can be a drastic drain on time, peace of mind and money. It is therefore prudent to filter out potentially unreliable partners as quickly and efficiently as possible.

1. Probe their goodwill with (pointed) questions

One of the major giveaways of unsound business practitioners is their impatience or the narrow ’sale, sale, sale’ perspective. There’s nothing wrong with advancing and closing deals, but this is different. It runs against the business understanding of an unsound practitioner to spend more than a very limited amount of time on answering your questions or addressing your concerns. This is due to a number of reasons.

Firstly, there is a lack of genuine interest in their product or service. Accordingly, they do not view questions as a chance to promote and improve their product or to understand their counterpart’s needs and build up a solid foundation for their business. Instead, they view questions, i.e. interaction, as an annoying feature of selling and aim to get it over with as quickly as possible. Secondly, they don’t want their counterpart to spend too much time assessing the venture. Thirdly, in some cases there is a shoddy work ethic and a lack of commercial awareness.

Correspondingly, a good way to screen a potential problem is to ask a number of product-related questions. This does not mean “bothering” your potential partner just for the purposes of “testing” them. It means asking questions to fully understand what you are about to commit to or acquire. Carefully observe your counterpart while they are answering your questions. Are their answers getting shorter and snippier? Are they becoming annoyed or giving you the impression you’re doing something inappropriate instead of accommodating you? Are they trying to limit the discussion to a “permissible” amount of questions? Repeat your question if you do not understand something and watch their reaction. Are they giving you the impression that it is your fault for not understanding something? Are their answers competent?

A big warning sign: Your partner is aggressively pushing you to commit to a (short-term) “deadline.” Another old but astonishingly often applied sleight-of-hand is the narrative of other candidates pining and waiting to snatch away your deal if you do not act fast.

If in doubt, consider walking away and finding an alternative rather than wasting time, throwing away money and accumulating regrets. Alternatively, politely thank them, say that the offer is too expensive for you at the moment and watch your phone and inbox explode with improved offers.

2. Carefully listen to their arguments

Give careful consideration as to how your partner argues. Are they trying to address your concerns in an accommodating, cooperative way or are they selling to you? Are they promising a lot of useless features or features of dubious value to you? Are they being evasive and vague when asked specific or critical questions? Do they explain to you the proverbial “why”? Does their line of argument address the circumstances of your case? Or are they using blanket and cliché statements—for example, “it’s our policy,” “we can’t make exceptions,” etc.? In other words, are they pushing you or are they working with you?

Another prominent feature of a dud is condescending behavior. If you sense this, write off the deal. On top of other things, arrogance is often an outward sign of anger and insufficient competence. Don’t burden yourself with other people’s issues. Aim for fresh, unburdened beginnings with considerate partners interested in long-term, mutual growth.

3. Look for big and small inconsistencies; rely on your impressions

As a rule, take the time to give your counterpart’s narrative at least some consideration. Observe the reaction of your partner when you tell him or her that you need time to reflect. Does their friendliness suddenly dissipate?

Often when people are trying to sugarcoat facts, there is simply no other way for them than being inconsistent or having gaps in their narrative. This is also one of the reasons why cross-examination in court can be a very potent truth-finding tool in the hands of an experienced lawyer. Some try to disguise inconsistencies by giving off the impression that you just do not understand something. Therefore, take your time to ponder and look out for inconsistencies, big and small. Do you have that particular feeling that something is "off"? If in doubt, trust it; more often than not this impression is accurate. Again, It’s better to walk away and find an alternative than to be burdened with wasteful commitments and regrets.

If it nevertheless happened…

Not all is lost. Consult your contract documentation. A well-drafted contract is one of your major tools for the battlefield. In the beginning of any worthwhile venture, pay attention to the act of concluding a well-thought-out and well-drafted contract. It will pay for itself over and over and in many cases you’ll be ahead of the competition.

In my experience, peace of mind is the most important “ingredient” for consistent work ethic. So even if an unfortunate event has already taken place, remember what the great Marcus Aurelius said: "When circumstances force you to some sort of distress, quickly return to yourself. Do not stay out of rhythm for longer than you must: you will master the harmony the more by constantly going back to it."