Trust Contracts, Not People

Developing Trust In Business Relationships

Written by Andrew Goldman for Gaebler Ventures

Unfortunately, you can't trust everyone in business. There are times when trusting business owners get taken advantage of. Learn a lesson on the perils of trust in business from this entrepreneur's story.

In business, we can get caught up in wanting to be "the good guy (gal)" and befriend those we meet while running the company.

Developing Trust In Business Relationships

While this is a fine attitude to have, it must not lead to naivety.

Unfortunately, there are scoundrels out there in life and in the business world, and the small business owner needs to be aware of this.

Trust should be earned in business and a small business owner who trusts first and asks questions later can really get burned.

Below is a story of how a trustful nature can lead to serious losses. The names and industry have been changed in an effort to maintain anonymity.

I begin consulting for Marcus several years ago with an open mind. Marcus had made a good deal of money in a prior business endeavor and had invested several million dollars starting up a new high-end juice company. Marcus was a good soul with an extremely trusting nature. He trusted everyone who wanted to sell him product or work for his company. In the end, his trustful personality almost lost him everything.

Marcus hired Jason to be his Production Manager. As Production Manager, Jason was responsible for all manufacturing and purchasing. He had control over the recipes, the ingredients and the packaging material.

Jason had refused to use the software system purchased by the company and kept all of his records on Microsoft Excel files. When questioned about this, he gave a cockamamie excuse, which of course Marcus trusted.

Mary was hired to be the director of marketing and new sales development. Mary was also hesitant to adopt the company's system and kept most her records on Word and Excel files. Once again, Marcus trusted her reasoning.

As Director of Marketing, Mary had access to all customers and potential customers, while Jason was responsible for the creation of costing models. Combined, Jason and Mary had about all of the information necessary to run the company.

After about a year, Marcus' company was losing money fast. New customers were no longer rolling in, production was lagging, materials were costing way more than expected, and Jason and Mary were becoming hard to find.

Before the year was out, Jason and Mary had leased a building and some bottling equipment in the next town over and had started their own company. They deleted their files from the company and stole customer contacts. In addition, prior to leaving they had badmouthed the company and ensured that Jason had purchased excess material at an outrageous cost.

Naturally, Marcus was furious and attempted to take legal action. Marcus met with attorneys (at a cost) and was told he had a decent case. The cost of pursuing the matter initially was around $50,000. In addition, since Jason and Mary's company had just started up, he wasn't likely to win much money in a settlement.

Since Marcus had already lost millions the cost of the lawsuit wasn't feasible. He had a company to save.

When I began consulting for Marcus, it was extremely disheartening to hear his story. Marcus was a good man with a good heart and a trusting nature. He got taken advantage of, not just by Jason and Mary, but by many others as well.

His prior success had blinded him to the dark world of business that can bite unsuspecting victims.

Don't be one of these victims. You can be trustful and kind, but make sure people earn your trust first and remember that there are always snakes out there.

Andrew Goldman is an Isenberg School of Management MBA student at the University of Massachusetts Amherst. He has extensive experience working with small businesses on a consulting basis.

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