Unfortunately, there’s no “handbook” for entrepreneurship, even if you get an MBA. In fact, most of the people I talk to that do have an MBA have regretted getting it, because the lessons they needed to learn for owning and operating a small business were so wildly different from what they were taught (how to manage 50+ people at a mega-business).
Your business lives and dies by its contracts. You’ll have legally binding agreements with your vendors, suppliers, marketing companies, your commercial landlord, the government, and normally, with your customers directly. Each and every one of these contracts have the power to break your business, should something unexpected occur.
Let’s look at some examples:
Most startup businesses will realize that they need a marketing strategy, early on. I’ve been in practice for over 13 years now, and from what I can tell, there are unlimited “marketing” companies that claim to solve this problem, and bring “leads” to startups. In the wise words of Admiral Ackbar, “It’s a trap!”
In all seriousness, startups do legitimately need marketing – how else would they gain a customer base? But the contracts that these marketing agencies hand you are horrifically one-sided. There is no minimum for leads they are able to generate. Yes, you read that right. You can spend $10,000 (easily) and literally not have a single lead given to you by the marketing agency, and when you complain about this, they’ll probably gaslight you, claiming that it’s because you weren’t patient enough (after 6 months) or weren’t willing to spend enough money! Their agreements have no quality check on the leads they send to you (if any are actually sent). They will say that they did in fact get you 200 leads, and if you take all the time necessary to comb through these leads, you’ll quickly find that the majority of them are fake, made by social media bot accounts, for example. They’ll argue that your brand got a bunch of “brand recognition” or that your money went towards establishing your brand, vaguely, in the market, and that these wonderful benefits cannot be measured. You will find yourself saying “show me the money,” but you’ve already paid them triple your marketing budget, and it’ll take months for you to recover, if you even can.
How does one avoid this issue? Get an attorney to write a contract that’s tied to the actual benefit you’re paying for. Yes, you can do that; it happens all the time.
Similar things can (read: will) happen to your startup with suppliers that fail to deliver quality goods on time, causing you to be in breach of other contracts, so you lose the benefit of the sale. Or, with landlords, you may inadvertently sign their (very one-sided) lease agreement that doesn’t prevent them from getting another tenant that sells the same stuff that you do in the space right next door to yours, cutting your customer base in half!
We could write an entire article on each of these examples, but suffice it to say that getting your contracts correct from the start is monumentally important.
Even if you do get the marketing piece right, it’s all for nothing if you don’t actually OWN the brand you’re marketing to everyone! If you’re a franchise, you can probably ignore this section, but for most of us, we have a business brand that our customer base knows and comes back to because we offer great products. Sadly, though, if we don’t own that intellectual property, there’s always the threat of someone else using the same (or very similar) brand as ours, and selling to OUR hard earned customers, making the customers think that they’re buying from us!
It sounds crazy, I know, but I’ve seen this happen countless times, and even had to deal with it with my own law firm some years ago!
How do we protect our companies against this? We make sure, right from the start, that our brand is both “available” and ours to own. That means hiring an attorney to review and analyze all of the trademarks (other brands) that exist against ours to determine if ours is unique or if it’s one that someone else has already laid claim to. If it is available, then that attorney needs to make a formal USPTO filing for your business to own it outright. Then, we can feel free to pump all those marketing dollars into getting a solid customer base (with a great marketing contract that pays for good leads!).
Obviously, labor laws only become important if/when you hire people to help out – some businesses take a few years before they reach this point. But, once you do, you’ll quickly find that employment law is a legal minefield, and there’s no handbook or guide to let you know what to do. From day 1, there will be requirements that you aren’t aware of, such as filing forms with the Dep’t of Labor, withholding wages for your employees’ taxes and social security, privacy and health laws, working with the department of labor for the state(s) you work in and the employee works in (particularly if your employees work remotely and live in other states), and laws around the types of questions you can ask employees and, of course, questions you cannot ask.
Last time I checked, the average cost for a single employment and labor law violation is over $200,000 – can your business stomach that kind of a loss?
Not all attorneys are created equal. Not to toot our own horns too much, but the attorney you choose is fundamentally important for your businesses success or failure. You need an attorney that’s experienced in the world of small businesses, that can work with you on your budget, so as not to overburden your company with legal fees that cover things that are unlikely to occur, and someone that actually cares.
At Sparks Law, we have the experience. We want you to be extremely successful. We care about you and your business. Reach out today to learn more.
