This month’s post on Silicon Bayou News shares some important lessons learned by both investors and project creators in a failed Kickstarter project. Head on over to Silicon Bayou News to read the full story.
Goodbye 2012, hello 2013. After my first full year as a business attorney in New Orleans, I’ve compiled a short list of New Year’s Resolutions for a small business owner. Generally, each of these recommendations is based on my conversations with business owners about how to avoid trouble, or be in a better position to handle trouble when it arises.
Keep an Accurate Accounting of Income and Expenses
Keep an accurate accounting of your business income and expenses. This year, I’ve been dealing with many business owners who want to file claims in the BP Oil Spill Settlement. Some have the documentation they need to show their losses, and they’ve been able to make significant recoveries. Other businesses do not have any financial records, and it’s harder for them to make claims because they can’t prove their income or expenses.
The BP Oil Spill Settlement isn’t the only reason to keep track of financials. If someone wants to buy your business, or if you need to plan for litigation, you need to know these numbers. Quickbooks will only set you back about $150, but having a clear financial picture of where you’ve been and where your business is going is worth well more than that.
Organize your Business Documents
Some business owners have documentation all over the place. All your business docs, such as leases, insurance forms, employment records, corporate minutes, and any other thing related to your business should be in one easy-to-find place. Also, someone else business the one business owner should know where these docs are, or how to find them, just in case something happens to you.
Put it in Writing, and Have it Reviewed by an Attorney
Without a doubt, the biggest issue I’ve faced this year is business owners who made an agreement without putting it into writing. It’s very hard for an attorney to help you if something goes wrong with that agreement. The second biggest mistake is not having that agreement reviewed by an attorney. Sometimes, the business owners do have contracts in place, but the contract doesn’t spell out their rights properly, or puts the client at potential disadvantage. Although all those “boilerplate” clauses at the bottom of contracts often seem unnecessary, they are there for a reason, and it’s important that your contact spell them all out.
So, that’s my suggestions. Keep your books in order, organize your legal documents, and put everything in writing (and make sure it’s in your favor). These steps do require a small investment of time and money, but they’re just that, investments. If trouble does arise, you’ll be glad you made them.
Happy 2013, Everyone!
1. Contracts protect both parties
A contract is a negotiation and an agreement between two parties where each party defines their expectations and obligations. Do not sign any contract without first asking how that contract protects you. If the contract does not protect you, it may be time to renegotiate your contract.
2. Never start work without a contract
This one may seem obvious, but sometimes people are anxious to get started on their new job. Do not fall into this trap. Never put the cart before the horse and begin work prior to signing a contract with the other party.
3. Never blindly accept the other party’s terms
We all sign contracts without reading through them. In business, this is a bad idea. if you do not understand something in the contract, ask. If there are terms that you do not agree with, try to negotiate better terms. If the other party refuses to negotiate, take some time to consider whether or not you really want to sign that contract.
4. Anticipate negotiation, and know your key points
When you present a contract to someone, expect that they will want to negotiate. When this happens, you need to know your key points. These change from contract to contract, but in general, you want to define when the customer will receive the product or service, when payment is due, what happens when the customer wants to terminate the contract, and any liability that might arise out of the contract.
5. Know when to lawyer up
If they show you their lawyer, you need to show them yours. Any time the other party wants to get their lawyer involved, make sure you have a lawyer representing your interests as well. A lawyer who knows that the other party is unrepresented, may try to take advantage of that person. This happens more often than you may think.
6. Always be specific and confident about money
When someone asks you how much something will cost, be confident and tell them. Never say that you’re not sure. If you do not know how much it costs, tell them you’re going to find out and will get back to them as soon as possible.
Next time you need to sign a contract with a customer or a vendor, follow these six key points, and you will be less likely to run into trouble down the line.