Good morning, everybody, this is Bradley Bailyn. This is Episode #16 of the #ThinkLikeALawyer small business podcast. Today, we’re going to be talking about a way that entrepreneurs get themselves into trouble, which is borderline inexcusable: failing to do any due diligence whatsoever before getting into a very serious business relationship. This is 2020. That’s right. It’s 2020.
There is something called Google out there. There’s something called the website for the court system. There are credit checks that you can order directly over the Internet. It’s never been so easy to sit down and without even needing to stand up for a minute. You can do a more thorough background check on a person than was possible for a million dollars a few decades ago. So all right. What can you do?
The first thing you need to do is use Google. That’s right. Before you get into a relationship with somebody, you might want to Google their name, Google the name of their company. Just see if there is any particular bad press or anything that you need to know. Now, keep in mind, again, this is 2020. Almost everybody has some kind of stuff written about them, which is just totally not true, inaccurate and false. And they just have no way to do to defend themselves… to answer it. So just because you find something bad does not in any way mean that the person is anything less than excellent, but at least it will give you a general sense.
My general attitude is if most people are happy most of the time, then that’s reasonable enough for me. Because you can’t make everybody happy. So if somebody has twenty five star reviews and one one star review I’m going to say this person’s probably on the up and up.
So the first thing is Google. Second thing is you can just go to the court’s website and search for their name and the name of their company. And you can see how many lawsuits they’ve been involved in. This can be important because there are some people who just sue everybody. Like they are just professional filers of lawsuits. And if that’s the case, you might not want to be doing business with them.
Third, you can see how long their company has been around and when it was formed by going to the New York State Department State, Division of Corporations. And you can pull up their corporation or their limited liability company and just see, is this someone who forms a new LLC every week because they ripped everyone off under the name of their old LLC? So they need to keep creating another and another and another, in which case doing the court check may not be that helpful to you because you’re not going to be checking the right organization. If the LLC has been around for 20 years and it’s clean that’s a better indication that this person is a relatively solid business owner. I shouldn’t even say 20 years. If it’s been around 10 years that’s something, too. If it was formed four years ago, then I might even say to the person, “what business name were you working under before you formed your current organization? I’m trying to do a little bit of due diligence and I’m having a hard time accomplishing that.”.
Next thing is you can order credit checks. You’ve got to check the law because sometimes you’re not allowed to fully do a credit check for whatever the reason is. So you should consult with an attorney before doing credit checks. But generally speaking, you are allowed to ask for personal guarantees and check people’s personal credit. If you’re selling something, you’re allowed to check their business credit. You’re allowed to ask for their financials. You’re allowed to ask for a little bit of proof that they’re capable of fulfilling their end of the bargain. So don’t forget that you very well might want to order a credit check online or go do one of the other things you can do to complete your financial due diligence.
And lastly, something that a lot of people overlook is just good old-fashioned references. Believe it or not. And this may sound ridiculous to you because most of the people who watch my videos are very legitimate business people. But your typical shyster cannot find one solid person to give them a good reference because they’re addicted to ripping people off and they’ll produce references that are not themselves reliable in any way. But usually when I ask for references, I ask for established businesses as references, businesses that I can do the kinds of things that we just talked about and see that they’ve been around a while, that they themselves are legitimate players. And if they are and they give me a reference, then I’m going to believe it.
So usually I’ll ask people for three recent, relevant references. Quality organizations or or quality individuals. Give me a CPA who’s been around for 10 years and that that’s OK, that’s a reasonable reference to me. But just Joe from the block over there, his next door neighbor. I don’t consider that to be a very high quality reference. But again,the kind of people you’d never want to do business with, they usually will not be able to do this. And when I represent clients, that’s one of the first things I tell them to do. And a lot of times, the person says that they don’t want to bother their clients, they just have a policy of not to ask. Not giving people references.
Really? You can’t find one person to give you a reference? I’m an attorney and I never even in the past would have thought to ask attorneys for references. But on a regular basis before people hire me they say, “Brad, you sound fantastic, but could I just speak with a few references because I found you on the Internet and I just don’t know you personally.” I have no problem with that. I have so many clients who are so happy to give me references. Anyone who tells you I just have a policy of not giving references, you better run. That’s a red flag the size of China.
So if you want to ask me a question or suggest something that should be covered on this podcast/blog you can do that.
For the standard disclaimer that I always have to give. Don’t rely on anything that I say in this video, anything that I write, or basically anything that you read that’s not specifically created for you by someone who’s licensed and competent to be providing you with that information or advice. In your particular case it may be completely wrong, even though under a different set of circumstances, which are not yours, it’s right. That’s what attorneys do for a living. If you have legal questions, consult with a competent attorney. Thank you and have a wonderful day.
