The B.S. Detection Machine - Get One

Kim Lavine

I constructed my B.S. Detection Machine to help me sort through those pesky negative feelings that clouded my judgment occasionally and left me looking naively to someone who promised he could magically solve all my problems in exchange for significant sums of my money, whether it was a rep, a marketer, or a distributor.

Kim Lavine at Private Equity Summit Kick Off

There are no easy answers to difficult problems, only hard work. Save yourself a lot of hard work and use a B.S. Detection Machine.

The more frustrated you are—desperate to find easy answers to your problems, when there are no easy answers, only hard work—the more susceptible you are to anything the confidence men are selling.

Maybe you’re not desperate at all

Maybe they call you up, and fill your head with all kinds of promises of making you a million dollars. It’s human nature to take shortcuts through our reason and experience to arrive at dumb blind faith in anybody who raves about our product or service and claims to be able to make us rich. That’s why I recommend passing everything through the B.S. Detection Machine before making any decisions regarding the transfer of revenues or especially rights to your idea.

The more somebody promises to make you rich, the more suspicious you should be.

The B.S. Detection Machine

Laugh about this if you will, but you can basically evaluate the wisdom of any decision by asking yourself a few key questions, designed to remove emotion and fear from the decision process and replace it with facts and reality.

What’s in it for them?

Nobody does anything without a financial motive, though they might pretend otherwise.

Get out a pen and paper and look objectively at what kind of financial rewards are in the deal for them. Make sure you understand in specific detail every cost associated with working with them. Are they hiding any? Be very careful of anyone who offers to pay you a percentage on net revenues instead of gross; this is not accepted as the best practice. If you still are willing to accept a percentage of net revenues, make sure you understand in detail and in writing what each cost is that will be deducted from gross revenues to come up with net. Anybody who cannot give you a specific, non-negotiable list of costs that come out of gross receipts is not reputable.

Remember that everything is negotiable, so try to get rid of as many of those specific costs as possible.

What’s in it for you?

Commit pen to paper again and figure out just how many units of your product they’re going to have to sell at your negotiated percentage on net or gross to make the money they’re promising you. How many units do they have to sell to make the $50,000 figure they’re throwing around? Is it achievable? What would your returns look like if you tried to take it to market yourself?

Call your local Small Business Development Center and ask your counselor what the typical margins are for a product like yours. They actually have a huge reference book that can tell you exactly what percent of a return a business can expect to make in net revenues—whether you’re making kid’s toys or auto parts. Margins of 20 percent to 40 percent are considered standard. If you don’t want to take it to market yourself because you want to spend all your time with your kids, that’s a valuable consideration. Just make sure you understand from the beginning what is required of you in making the product a sales success.

Prove it!

Make sure this person can verify successes with other products or services.

Ask for references for other people with whom they’ve worked, and call them; when you speak to their references, have a list of questions ready to ask, like what was the annual gross sales figure on their particular product, and how much money did they get out of it? Ask your potential rep what kind of accounting system she uses and how often you’ll receive sales reports.

Put it in writing

Make sure you get a written contract specifying the exact terms of your agreement. Have it reviewed by an attorney who specializes in contract law. Always make sure you have an escape hatch that allows you to terminate the contract no longer than 30 days from when you provide them written notice of termination.

Do your homework

Trust but verify.

Do whatever it takes to replace fear and frustration with research and information.

Only then will you be in the position to make the best decision, one you won’t regret.

An excerpt from MOMMY MILLIONAIRE

Read more in the newly updated Platinum Version MOMMY MILLIONAIRE Available for immediate download by eBook or PDF. Filled with all kinds of bonus materials including document templates, updated tips and the real skinny on what went down since I wrote this book.

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