Don’t Get Taken in Online Investing

Posted on January 1, 2002
Whether searching for pupil transportation products or services or researching personal investments, it’s important to have a strategy for finding the best online deal for your money. Here are four steps to increasing your odds of success when dealing with Web-based companies: 1. Put in place a strong request-for-proposals (RFP) process — Screen out potential problems by setting up an evaluating committee to review proposals and make decisions. The evaluation process should include a product demonstration and a technical evaluation of the product’s functionality and scalability (ability to grow). Research the financial stability of the companies in question and ask for customer references. 2. Conduct due diligence of the finalists — Before contracting with a Web-based company, call former customers and compare their projects to yours. Ask other customers what problems they’ve faced with the product or service you’re evaluating. Interview the management team. Factors to seek are: a 3- to 6-month contractual backlog; solid, long-term investors; six months to one year of current financing with additional financing in the works; demonstration of prior profitability; rank in top three in market share; strategic partnerships with larger companies; no evidence of imminent buyouts or significant new investors. 3. Use contractual terms to mitigate risk — Build risk management into the contract by having the vendor commit to an escrow agreement. Require the vendor to pay for a performance bond requiring payment in case of default on the contract. 4. Clearly set project expectations and timelines — Clearly define and document what service must be provided when. By managing a company’s adherence to a schedule of events, you will immediately be able to identify warning signs of problems and fix them before it's too late. Source: The School Administrator, January 2002
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