5 Costly Small Business Mistakes To Avoid On The Internet

small business mistakesWhen you’re doing business online, whether it’s buying something from a website or selling your own products and services, there are five common small business mistakes that could cost you a fortune.

However, you can easily avoid these errors by taking a few minutes to protect yourself.

Mistake 1 – Trusting The Con Artist

There is an old cartoon that shows a dog sitting in front of a computer with the caption, “On the Internet, no one knows you’re a dog.”

Now imagine the word “fraud” replacing “dog” in the cartoon. That’s a fairly accurate description of at least 20% of the people you’ll encounter online when you do business.

Never assume the person you’re dealing with on the Internet is legitimate. Of the small business mistakes you can make in ecommerce, this is the top one.

Intentional Scammers

Some are frauds who intend from the beginning to take advantage of you simply because you’re based in another city, state, or country, i.e. unlikely to be able to do anything when they cheat you in a business deal.

The con varies from the fake doctor selling bogus medicines to the guru who sells “proven systems” that don’t work in practice. If there’s a way to make money online by promising with the intent not to deliver, these scam artists have figured out the angle and are looking for business owners to cheat.

They can pose as surfer dudes, country bumpkins, patriots, environmentalists, devoutly religious, mommy bloggers, reformed convicts, and philanthropists — each is an angle to slip in underneath your radar in order to steal from you in a business transaction.

The Unintentional Scammer

Others are unwitting con artists.

They promise to deliver what you want but they lack the ability to do so even though they might mistakenly believe they can perform the deal to your satisfaction because of self-delusion.

This kind of con frequently involves new entrepreneurs who are starting over after being downsized, fools who spend their lives buying into get-rich-quick schemes (i.e. serial victims of other con artists), or are people who are temporarily emotionally unstable after going through a personal crisis (e.g. such as a divorce or loss of a parent).

They often believe the “fake it until you make it” premise and/or the bogus “secret law of attraction.” If their social media accounts are filled with self-affirmation memes, chances are there’s some unresolved emotional issues that can easily torpedo what might otherwise be an attractive deal for you.

If you do business with them, you will get burned every time even if that is not their intent.

The motive is irrelevant. The results are the same. You’re screwed because you mistakenly trusted the unqualified to deliver what they can’t.

If a potential business deal really matters, i.e. it’s going to seriously hurt you financially or otherwise if the transaction blows up on you, perform due diligence on the other party beforehand to ensure you’re not getting conned.

Mistake 2 – Accepting Flattery As A Diversion

Although everyone likes to receive a compliment from time to time, you will find the person who flatters you to get you to do an ecommerce deal is likely trying to divert attention from one or more key facts that make the proposed agreement a bad one for you and your business.

It’s particularly a red flag when the flattery is excessive in scope, repetition, and from someone who really doesn’t know you.

The type of flattery varies.

For example, the person who repeatedly compliments your business acumen or negotiating skills really believes you can be deceived easily. Similarly, the person who tells you over and over again that you’re honest and trustworthy is likely trying to divert attention from the fact that you should be performing due diligence rather than taking them at their word.

Just because someone who wants to do business with you says you’re honest doesn’t mean you should automatically assume the same is true of the person giving the compliment.

Mistake 3 – Substituting Religion For Due Diligence

There’s nothing wrong with running your business online and offline based upon your religious tenets if that’s important to you.

However, running your company consistently with your religious beliefs is different than relying upon someone’s representations about their own religious beliefs as a basis for doing an ecommerce deal with them.

There are some people online who will make emotional appeals that emphasize they’re honest and trustworthy just because they say they’re religious. More often than not, they’ll claim affinity with you by saying their religion (or sect/denomination within it) is the same as yours. What a coincidence.

It’s a red flag something is wrong if the person keeps talking about how they’re a good Christian, Muslim, Jew, or Buddhist in order to get you to do a business deal. And if you see an email signature that says, “God Bless” or something similar, chances are you’re being manipulated by someone who is misusing religion to build trust they haven’t earned.

In the many years that I’ve been counseling business owners online as an Internet lawyer, it’s been my experience truly ethical entrepreneurs don’t use their religious beliefs as a tool of manipulation. You learn from their deeds, not their words, that they’re good people to do business with.

Mistake 4 – The Must-Do Internet Business Deal

Many ecommerce entrepreneurs believe they have to reach a business agreement once they’ve started negotiating with someone. This is the sunken investment trap of digging a hole and assuming that spending more time and effort digging deeper will put you in a better position than to stop digging.

When it comes to avoiding small business mistakes, no deal is better than a bad deal.

Always know your best alternative to a negotiated agreement (BATNA) and be willing to walk away at any time if the terms can’t be salvaged. Start with an assumption of no agreement and work from there to see if the criteria will otherwise justify saying “yes” to a proposed transaction.

After more than 20 years of practicing business transactional law, I’ve yet to see a must-do business deal – either online or offline. Even if there is a deal you consider as a “must-do,” that doesn’t mean it necessarily has to be done with one particular party.

In the Internet global marketplace, there will nearly always be more than one qualified party interested in doing a deal with you on terms that meet your criteria. If the party you’re currently negotiating with is the wrong fit, walk away quickly and find someone who can give you what you want.

Mistake 5 – Accepting an Informal Gentlemen’s Agreement

There are many people who insist you trust them to deliver payment, product, or services as part of a deal based upon an informal verbal gentleman’s agreement instead of a written contract signed by the parties.

Unfortunately, when it’s time to get what you thought you agreed to, there’s nothing in writing to back up what you intended. It then becomes your word versus the other person’s interpretation of the deal.

In short, a verbal agreement in business is rarely worth the words said to reach it because memories are faulty (and some people are dishonest). If you can’t remember what you had for lunch a month ago, how can you remember all of the key terms and conditions of a verbal agreement (and prove them) you made at that lunch?

This trap is easy to fall into.

Why?

Because there’s a tendency to do business quickly online in an effort to stay ahead of the competition. Written agreements take more time than a simple “Okay. Let’s do it.” (Whatever ‘it’ is).

If any transaction is important to you and your company, you’ll want to protect yourself with a written contract that includes all the essential terms for performance and also covers what happens if the other party doesn’t deliver as promised.

Getting Help To Prevent Or Fix Small Business Mistakes On The Internet

An experienced Internet lawyer can help you avoid these and other costly small business mistakes online. Take the time to do your ecommerce deals right the first time so you’re not cleaning up messes after the fact when things go wrong.

Author Mike Young, Esq.

Mike Young has been practicing business and technology law since 1994 and is an angel investor in startups. He's been an entrepreneur since 1988. To get legal help from Attorney Young, click here now or call 214-546-4247 to schedule a phone consultation.

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