Finding a space is half the battle, the second half is negotiating the terms of the lease.
First — define your space requirements.
Make a list of your key requirements: location, size, parking, access to transportation, security, price, as well as any special requirements that you may have, such as a loading dock or specific requirements for storage, power, plumbing, of other facilities. Continue reading
Not all lawyers are adversarial, but the sad truth is that lawyers make more money when there’s a fight. Lawyers have an economic incentive to turn amicable business relationships into protracted negotiations and even adversarial outcomes.
Here are some warning signs:
Lawyer is posturing and taking positions that are obviously one-sided and trigger protracted negotiations which – in theory — will ultimately result in a position of reasonable balance for all parties.
Lawyer demands last-minute concessions, price reductions or other major changes just before the deal is to be completed. Continue reading
There is an old adage that you learn more from your mistakes than your successes. But “being wrong” is hard to face.
The natural human tendency is to want to be “right” and to dig into positions based on “beliefs” (economic, political, religious …) and “evidence” without asking that important question, “What if I am wrong?”
According to Kathryn Schulz, we should “embrace error” rather than “avoid it.”
In her book “Being Wrong: Adventures in the Margin of Error” Kathryn Schultz provides lots of historical examples of people “being wrong.”
A recent example is Alan Greenspan, long-time chairman of the Federal Reserve, who had the authority to stop the irresponsible subprime lending practices that led to the worldwide financial crisis, but did not. Rather, he clung to his economic model based on the doctrine of market self-regulation and ignored any data that conflicted with his model. He was wrong. Many credible people had challenged his “deregulatory dogma” – and he systematically silenced critics, including the Commodity Futures Trading Commission, which tried to regulate the market in derivatives. He did not admit he was wrong (his “model was flawed”) until there was overwhelming data and devastating consequences.
Schulz’s book includes many other well-documented examples of people being wrong – cases of wrongful convictions based on eyewitness testimony, medical mistakes, false memories, optical illusions and failed prophecies.
While people resist admitting that they were wrong – it is from these errors that learnings emerge, thinking changes and innovation happens.
But how do you get people to embrace being wrong? Schultz’s conclusion is that “we can learn to live with disagreement and error as long as we feel esteemed and loved.” So, rather than becoming defensive when there is a disagreement or your position turns out to be wrong – be good at listening, suspend your worldview for awhile, and be open to dialogue – that’s how you learn.
I have previously written about how innovative products resulted from mistakes –including:
(1) Microwave Oven
(2) Artificial sweeteners
(3) Penicillin
(4) Velcro
(5) Levi’s
(6) Scotchgard
(7) Safety glass
(8) Aspirin
(9) Ivory Soap
(10) Post-it Notes
For more information on these stories of how mistakes turned into successful products, click here Innovation by Learning from Mistakes and read my blog.
In conclusion, we really can learn (and profit) from our mistakes if we keep an open mind – and ask “What if – my assumptions are wrong?” or “Is there another way to look at this problem?”
What “mistakes” have you learned from?
When you receive a contract from a prospective client or for a contractor role, you’ll want to read it and compare it with your checklist. Sometimes, the legal boilerplate is dense and difficult to read – so keep a checklist handy to make sure the key points are clear.
1. Who are the parties?
The agreement should clearly identify the name, entity, address, and jurisdiction of the parties.
2. What is the purpose of the agreement?
The agreement should specify the scope of work. Does it clearly define deliverables and payment terms? How are changes handled? Does it reference any other agreements? Continue reading
Web-based services are cost effective – and legally complicated.
The “Cloud” refers to computing services performed in the Internet – and it is morphing and evolving every day. From simple email and remote backup services, to processing on-line transactions of all sorts, transmission of medical records and personal financial information – we are all impacted by the Cloud in our everyday lives.
A business using the Cloud (web-based services) needs to understand and be aware of the additional level of legal complexity.
Cloud computing is broadly defined – and complicated.
The US National Institute of Standards & Technology (NIST) defines Cloud computing as “a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction. This Cloud model promotes availability and is composed of five essential characteristics, three service models, and four deployment models.”
Essential Characteristics:
Service Models:
(e.g., web-based email).
(e.g., hosting consumer-created or acquired applications).
(e.g., host firewalls).
Deployment Models:
For more info see: http://csrc.nist.gov/groups/SNS/Cloud-computing/.
While using the Cloud for web-based services makes good business sense in terms of reduced costs and access to enhanced services, it comes with risks. Once your data is out of your control – out there somewhere on the web – it is wise to assess your risks and use contracts to reduce your risks.
Your contract for web-based services should address:
(1) Security of your data. Handled in compliance with the law? Breaches?
(2) Service Levels. Guaranteed uptime?
(3) Ownership of IP?
(4) Disaster Recovery?
(5) Termination. Transition of data to new service provider?
(6) Audits? Liability? Indemnity?
(7) Choice of Law?
These are general guidelines. Each business using web-based services should assess their specific requirements – and take steps to reduce risk and ensure that their service providers are operating in compliance with the law.
I am always interested in learning from first hand experience. Are you using web-based services to run your business? What has been your experience?
Want to own your own business? Don’t want to start from scratch?
Is a franchise right for you?
Franchises are a way to get into business quickly, with a brand name, proven methods of operation and a support structure. Franchises are everywhere. Familiar names include Dunkin’ Donuts, Curves, Mail Boxes Etc. and McDonalds, to name a few.
A common misconception is that franchises are really “turnkey” operations. Purchasers think that they just “buy” the franchise and it runs itself. This is incorrect. It’s important to clearly understand what you are buying, how hard you will have to work and what income is realistic.
“Buying” a franchise is legally complicated. As a franchisee, you pay for the right to use the franchisor’s trademarks, systems and methods. You don’t really “own” the franchise — rather you license the rights for a period of time, say seven or ten years. At the end of that time, you have to pay renewal fees …
Many franchises are legitimate and successful. Unfortunately, there has been a history of problems with franchises. As a result, franchising is heavily regulated at both the state and federal levels.
The legally required franchise documents are intended to provide full disclosure to the prospective purchaser. In reality, the franchise documents are voluminous, full of legalese, extremely one-sided in favor of the franchisor, and packed with restrictions and fees.
Advantages of buying a franchise include:
- Quick startup
- Help with site selection
- Brand name and recognition in the marketplace
- Training and support
- Customized accounting system
- Exclusive territory
- Marketing assistance
- Access to markets and suppliers
Disadvantages of buying a franchise include:
- Up-front fees (substantial initial investment required)
- Ongoing fees (usually royalty payment is a percentage of revenues)
- Fees for marketing and related services
- Restrictions on activities (you can only offer approved franchise products and services)
- Monitoring (the franchisor monitors your books, bank accounts and operations)
- Termination criteria
- Renewal requirements and fees
- Restrictions on transfer
Here are some tips to evaluate a franchise opportunity:
1. Check to see if there are lawsuits against the franchisor.
Litigation is required to be disclosed in the franchise documents.
This will give you important information about what’s gone wrong for others.
2. Talk to/visit existing owners of the franchise you are considering.
There should be a list of existing franchise owners in the franchise documents.
You can stop by and visit as a customer, and observe their operations.
You can also call up and ask questions, such as:
- Are you satisfied?
- Did you receive the support promised?
- Were there any surprises?
- Have there been any problems?
- How were the problems resolved?
- Are you making the money you expected?
- Can I visit and observe your operations?
3. What are the fees?
Franchise terms vary. It’s important to understand the fees.
Make a list of fees:
- What’s included with the initial franchise fee?
- What’s the royalty? Is it a percent of “gross” or “net” sales?
- Is the royalty a fixed percentage or does it decline over time?
- Are there service fees? Training fees? Marketing fees? Advertising fees?
4. What’s your territory?
Draw a map with clear boundaries:
- What is your defined geographic territory?
- How close can another franchise like yours be located relative to your location?
5. What’s your competitive advantage?
- What sets this franchise apart?
- Does the franchise include key technology or methods?
- Can it be easily copied?
6. What are the restrictions?
- Are you limited as to what you can sell?
- Are you required to buy from specific suppliers?
- What are the reasons for termination?
- What is the scope/term of the non-compete?
- What are the requirements for renewal?
- Can you transfer ownership?
In conclusion, spending money on a franchise may or may not be a good choice for you. Before signing a franchise agreement, check it out carefully and make sure you understand what the documents say. The advice of a business attorney knowledgeable about franchises can help you understand the legalese and make an informed decision.
Negotiating is complicated. No one style is effective in every situation.
The ideal situation is when both parties are clear and collaborative and work towards a win-win solution. Sometimes, the other party does not play by the same rules or behave in a reasonable way.
Negotiating is situational. To get the outcome you want, you need to adapt to the situation. So, it’s important to stay focused on your objectives and remain flexible in finding ways to achieve them.
Here are some tips:
(1) Stay Positive:
-Friendly discussion of issues, objectives
-Use facts, data to support position
-Problem solve, look for alternatives, tradeoffs
-Acknowledge the other party’s point of view
-Ask questions, ‘What if?’
(2) Avoid Negative Tactics:
-Making demands
-Using provocative and threatening statements
-Digging into a position
-Being adversarial
(3) Use a Term Sheet:
To focus negotiations, I find that preparing a “term sheet” or a one page summary outline of terms is a framework for discussions. The terms define: Who? What? Where? When? And, how much?). Exhanging emails can help to clarify key terms. Ask for clarification: ”This is what I was thinking — will it work for you?” “Can you help me understand what you are looking for with respect to __________.”
(4) Involve an Intermediary:
Sometimes cultural or style differences make it advisable to involve an intermediary. Effective negotiation needs to be peer-to-peer. Involving an intermediary can help to bridge the differences and find the common ground or ‘win-win’ outcome. Be careful in your choice of intermediary. You want a deal — not a battle.
(5) Take a Break:
If the negotiation becomes deadlocked, or the other party is unreasonable to deal with, you may need to “take a break” or ”walk away.” You can’t force the other party to be reasonable, and making too many concessions is not the basis for a healthy business relationship.
(6) Put Your Agreement in Writing:
You don’t needs lots of legal boilerplate. The parties should be able to track from the term sheet to the agreement easily.
With this approach, you increase your chances of negotiating a good outcome~!
“Value drivers” distinguish successful companies from their competitors.
While it’s easy to be distracted by all the demands competing for the business owner’s time and attention, successful companies focus on the key value drivers – which are frequently “intangibles” and employees.
Value drivers vary by type of business. While reputation and cost control are always important, other factors vary.
For example:
Restaurants – are known by reputation for good food and a positive dining experience.
Key value (profitability) drivers for a successful restaurant include: location, concept, menu, quality of cooking and wait staff, and cost control.
Technology companies – must have a core product/technology or “know how” that solves a customer problem.
Key value (profitability) drivers for tech companies include: highly skilled workers, quality and cost control, and R&D (research and development).
Professional Services Firms (e.g., lawyers, accountants, consultants) - are known by reputation.
Key value (profitability) drivers for professional service firms include personal relationships, highly skilled staff and cost effective service delivery.
Retail – brand/merchandise mix and location are critical.
Key value (profitability) drivers for retail businesses include sales personnel, inventory management and cost control.
So the recurring theme is that “great employees” and “intangibles” (intellectual property and ways to doing business) add great value to a business.
Hence, it’s important to protect and leverage these aspects of the business by using a combination of business strategies and legal protections.
Business strategies include incentive compensation plans to recognize, reward and retain high performing employees.
Legal protections include requiring key employees to sign non-compete agreements, registering Trademarks and Copyrights, and taking steps to protect proprietary information/trade secrets such as recipes and formulas. Contracts with key players, including partners, customers and suppliers, are also important.
What are the value drivers for your business?
Start by using the SWOT Analysis – Strengths, Weaknesses, Opportunities and Threats – this will help you identify the “value drivers” for your business.
If you found this useful, please post a comment. Thanks!
Even failed projects can result in successful products if people can see potential applications and learn from the experience.
For example, Post-it notes resulted from a failed glue project at 3M. Kevlar (bulletproof fibers) resulted from a failed project at DuPont to find a material for gasoline-efficient automobile tires.
Both products were successful because the companies encouraged employees to pursue their ideas. Cross-company communications also helped. The failed 3M glue, which was created by an adhesives engineer, was explained to other employees at one of 3M’s regular in-house seminars. Applying it to little bits of paper occurred to an employee in product development. Dupont’s chemist had to persuade a technician to risk gumming up his spinneret with her untried material.
It’s really amazing how many inventions came about by “accident.” When something unexpected happens, it’s important to be aware of the potential business opportunity.
Here are 10 examples:
(1) Microwave Oven.
A melted candy bar in his pocket led Raytheon researcher Percy Le Baron Spencer to the conclusion that microwaves (short radio waves) could be used to heat other food.
(2) Artificial sweeteners.
Noticing that his fingers tasted sweet led a John Hopkins University student working on food preservatives to figure out the formula for saccharin. Sucaryl was discovered by another chemistry researcher, trying to find a drug to kill bacteria, at the University of Illinois.
(3) Penicillin.
An experiment concerning staphylococci bacteria was left near an open window and became contaminated with mold. Rather than discard the spoiled experiment, Alexander Fleming re-examined it under a microscope. He observed a clear area around the mold and concluded that the deadly staphylococci were being eliminated by the mold. This led to the discovery of penicillin.
(4) Velcro.
Cockleburs that stuck to the clothes of George de Mestral in 1948 inspired the invention of Velcro. Recognizing that the cockleburs were really tiny hooks, he saw the potential for a new type of hook and loop fastener.
(5) Levi’s.
Gold miners complaining about the need for durable pants during the gold rush of 1853 led Levi Straus to adapt his plan — from using canvas for tents — to making heavy-duty pants.
(6) Scotchgard.
An accidental spill (of fluorochemicals related to aircrafts) on a researcher’s tennis shoe in a 3M laboratory — led to the creation of Scotchgard — when it was observed that the area of the spill stayed clean.
(7) Safety glass.
The glass of a dropped flask shattered but the broken pieces held together because the flask had previously held cellulose nitrate (evaporated liquid plastic). After reading about the many injuries resulting from broken windshields, Chemist Edouard Benedictus recognized a practical application for his nitro-cellulose-coated glass.
(8) Aspirin.
Re-examining a formula that had lain dormant for over forty years (because it was deemed impractical by French Chemist Charles Gerhardt) led to the popular pain reliever aspirin.
(9) Ivory Soap.
A production accident, leaving a machine running during lunchtime, allowed air to be worked into the soap mixture, resulting in “floating” soap, a popular and unique feature.
(10) Post-it Notes.
Post-it notes resulted from a failed glue project at 3M. It was discovered by accident that the weak adhesive could be used on paper scraps which could mark places in a book without falling out and then be easily removed.
In conclusion, we really can learn (and profit) from our mistakes if we keep an open mind to the potential applications when something unexpected happens.
As you go about your daily work, remember to:
Pay attention to unexpected results.
Examples include: Microwave Oven, Artificial Sweeteners, Penicillin and Scotchgard.
Adapt to the changing customer demand.
Example: Levi’s.
Recognize the potential for a new product or feature.
Examples include: Velcro, Safety glass, Ivory Soap and Post-it Notes.
Take a look at previously discarded work.
Example: Aspirin.
Whether by luck or serendipity, each of these innovations resulted from an unintended event that was leveraged in a new direction.
I heard about “the law of two feet” at Innovation 2010, an UN-conference sponsored by Mass Technology Leadership Council. Basically, it means “If at any time you find yourself in any situation where you are neither learning nor contributing, use your two feet and go someplace else.”
An Un-conference is based on the participants creating the agenda. There are no podiums, panels or PowerPoint presentations. At Innovation 2010, about 600 people gathered in a Boston ballroom seated in a circle-like format. Individuals who had a topic they wanted to discuss used blank pieces of paper and markers to propose a “session.” The session descriptions were posted on a “wall.”
People moved around from session to session, using “the law of two feet” to take them to sessions of interest. This resulted in an amazing interaction and communication between the participants. There were no awkward networking introductions; people engaged with each other to discuss topics of mutual interest. Young people and older experienced people were talking and listening to each other, sharing experiences and ideas, all high-energy.
