Control Freak

Release The Hostages

Stripped of social niceties, business is war, and every deal is like a hostage exchange. In that moment between the giving and the getting, you are most vulnerable. So, depending on which side you're on, time your deals so you can get (or hold on to) as many marbles as soon as (or for as long as) you can. That's how you get what's coming to you. For examples, let's talk about money:

Money sooner is better than money later. Simply put, money upfront completely eliminates the risk of not getting paid. Also, deposits, advances and front-loaded payment schedules test whether the other side is reliable.

Get your money at the source. Paul could wait for John to get his money from Peter, but if I were Paul, I'd rather deal directly with Peter. The names may be confusing, but the lesson is simple: Go upstream.

Get the best money you can. There's money . . . and then there's money! Cash is safer than a check, a certified check is safer than a personal check, and anything is better than a verbal IOU.

Don't spend money you don't have. If your project involves third-party financing, don't make outside commitments before you've got the green in hand.

Don't throw good money after bad. If you're the money man, you've got to reserve the right to pull the plug.

The right to "offset" is closely related. Savvy buyers won't pay everything at closing. Instead, they insist on the right to reduce or hold back money to cover themselves against future problems. Insurance, the impound accounts for taxes, and assessments in real estate deals are good examples.

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This article was originally published in the September 2000 print edition of Entrepreneur with the headline: Control Freak.

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