Be careful out there....

Article written by Sue Prestney for 'Charter', the magazine of the Australian Chartered Accountant
Sue Prestney is a Senior Partner with MGI Melboune.
Article reprinted with the permission of the Institute of Chartered Accountants in Australia, www.icaa.com.au

There is plenty of advice available for people starting out in business – what registrations you need, which structure to use, legal agreements you need to make, which accounting system is best for you etc.

What are less commonly discussed, but can have drastic consequences to your business, are the dangerous people that you will inevitably encounter – wolves that will prey on your success, take advantage of your ethics and seek to exploit your weaknesses.  If you are in a business that requires you to have professional indemnity insurance you can expect to receive particular attention as wolves are especially attracted to the deep pockets of your insurer.

Wolves aren’t necessarily easy to pick – indeed the most voracious may not even be your competitors; they may be suppliers, business partners, customers or even your staff.  They may not even be motivated by rational objectives.

In the course of your business life you are likely to come across narcissists and sociopaths – people who are egocentric and manipulative, who seek to undermine your confidence in yourself and the confidence of others in you; who subtly sow seeds of doubt as to your abilities and your ethics; who play you against your colleagues and vice versa.  These people only have one aim – to come out on top and they will do absolutely anything to get there.  The rest of the world exists for their own self aggrandisement – it’s always all about them.  They can rationalise any disgraceful act – often they have no empathy and no conscience.  The problem with wolves like this is that they are clever and often charming and therefore hard to spot.  Once you do realise you have one in your midst there is only one course of action to take – get well away and on no account engage with them.

Your best protection is to do your due diligence on the people you intend to deal with.  There is often an underlying reason why people have a history of former business partners, or change their suppliers or employers on a regular basis.  Ask around your industry – if these people are dangerous chances are you’ll find someone who knows about them.

There are other people who will seek to use you to compensate for their own errors.  If you are a professional in practice, clients who make bad investment or business decisions may make a totally fabricated case against you just to negotiate a settlement, knowing that you can’t afford to blemish your professional reputation.  This is why engagement letters, disclaimers and written advice are so important.  At some point in your professional life the clarity of your advice and the terms of your engagement will probably save you money and your reputation.

Businesses are frequently started by people who have worked for similar businesses, then take the knowledge and contacts they have made in the course of their employment to set themselves up in competition.  Being a good employer who nurtures the development of their employees, with above market salaries, mentoring and genuine care may minimise employee disgruntlement but it is not just disgruntled employees who turn into wolves and attack your business.  It’s also the opportunists, the self-promoters and the downright greedy but, let’s be honest, also simply those with entrepreneurial flair, who have a drive to go into business and yours happens to be the business they understand the best.  Having key employees contracted and subject to restraints of trade, while imperfect protection, is better than no protection at all.  From a practical perspective, you should avoid the situation where customers, especially key customers, are tied to your business through only one relationship.

You expect your competitors to try to take away your market share through clever sales techniques, advertising, marketing and even stealing your staff.  You may not be expecting them to copy all your ideas, to set up premises next to yours in your key locations, to mimic your trading name and logo, or steal your Google hits.  There are protection measures available through business name and trademark registrations, and rules against passing off and other uncompetitive behaviour under the Trade Practices Act, although once you venture into some overseas jurisdictions such protection counts for little.

When you have been savaged by a wolf you could be forgiven for coming down with chronic cynicism, start using attack as the best form of defence and lose your faith in human nature.  Or you could treat it as an unavoidable risk of being in business – like economic downturns and currency fluctuations.  Implement all the protection measures you can but then go about your business on the basis that most of the people you encounter will do the right thing by you if you do the right thing by them.  One of the most successful business people I know has encountered his fair share of wolves but is unfailingly generous, courteous and caring with everyone he deals with.  Maybe he could have been a bit richer if he had a touch of the wolf about him, but instead, he is admired, respected and even loved by suppliers, competitors, customers and employees alike.  Wolves may (or may not) become rich but they will never leave such a legacy.

MGI Melbourne is a member of MGI Australasia

http://www.charteredaccountants.com.au/

2009-10-08