Business & Technology Law Blog

May 17
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3 Ways To Succeed In Online Business

By | Angel Investing, Startup Lawyer, Startups | No Comments

online business ownership conceptThere are three primary methods for succeeding as an e-commerce business owner. Of course, there are pros and cons to each. And, depending upon the assets you have, risk tolerance, and other personal factors, perhaps one or two of these options aren’t the right path for you.

1. Startup Founder

The most popular method is to found or co-found an online venture. To succeed, it requires years of dedication and lots of sweat equity. The money available in the early years will come out of your own pocket or through the small amount of revenue the company generates as you ramp up.

Because your labor is the primary driving force behind the startup, it takes less money to get it up and going. However, bootstrapping as a founder has a high failure rate too.

2. Acquisition

If you have some money saved up or can get access to it from other sources, you may decide to buy an online business that’s already profitable and continue to grow it as the new owner. This is a proven method. And I’ve created a course that shows U.S. entrepreneurs how to buy an online business that’s already successful. This is a popular option for those who leave a white collar job and want to own a business instead of becoming an employee again.

Of course, a downside to this option is that it does require money to invest on the front end to make the purchase — your assets and/or other people’s money (OPM). If you’re broke and don’t have friends/family willing to invest in the acquisition, it’s probably better to stick to the first method and found your own business and grow it by bootstrapping.

3. Angel Investing

If you qualify as an accredited investor, you may want to consider the third option of becoming part owner of one or more startups as an angel investor. With this method, you’re essentially placing calculated bets on founders/co-founders and their ventures with the expectation that there will be a profitable payoff down the road when the startup gets acquired or goes public in an initial public offering (IPO).

As an angel investor, it’s unlikely that you’ll have control of the company’s direction. In fact, it may be a strictly passive investment or one where you provide advice when asked for by a founder.

You may invest directly as an angel. However, many newbies choose to invest as a limited partner in an angel syndicate where a more experienced investor is the syndicate lead. A good place to learn more about these types of investments is AngelList.

Although the payoff can be huge if you’re lucky enough to invest in an online startup that becomes a decacorn ($10 billion+ valuation), understand that’s not the normal outcome. For this reason, many angel investors spread their money across multiple startups with the expectation that out of every 10 startups selected, 6-7 will fail within 3 years, 2-3 will break even, and 1 might generate a return on investment (ROI) that exceeds the losses from others by being acquired or going public.

May 09
0

Don’t Let Inflation Strangle Your Service Business

By | Business Contracts, Business Lawyer | No Comments
service business contract and inflation

When you’re a professional services provider (e.g., copywriter, software developer, website designer, business consultant, etc.), you’ve got a few options for dealing with inflation.

First, you can ignore it exists…which means that every $1,000 you earn may have the same buying power as $850 or less did a year ago. Even if your gross revenues remain the same during a recession, you’ll be struggling because the dollar just isn’t worth as much.

Or you can guesstimate how inflation is going to eat away at your business and quote your services based on the rough estimate and hope at you’re right. Of course, you’ve got to weigh the risk of losing business by overestimating future inflationary costs versus winning new business that becomes unprofitable because your estimate was too low.

In the alternative, you could tie the prices of your services to some inflationary indicator, such as the Consumer Price Index (CPI), and provide for your pricing to change based on this indicator…either by a calculation or through pricing renegotiation at the time a trigger point is hit (e.g., 20% annual inflation calculated over the past 12 months).

You could even include contract provisions that let you walk away if inflation turns a profitable contract into a money-loser because of inflation.

No matter what you decide, it’s important to get it in writing signed by the parties (e.g., a professional services contract).

If you need help with a new services agreement or revising an existing one, it’s probably time to schedule a phone consultation with Business Lawyer Mike Young.

May 04
0

How To Avoid One Of The Biggest Consulting Agreement Mistakes

By | Business Contracts, Business Lawyer | No Comments

consulting agreement mistakesWhen putting together a consulting agreement for your services, it’s common to focus on scope of work, milestones, payments, and other important issues that are essential to having a good working relationship with your client.

Intellectual Property

However, consultants frequently forget to address intellectual property (IP) ownership. And this can be a disaster.

Here’s why…

Most clients will assume that because they pay for your services, they own any intellectual property created by you when performing your services.

On the other hand, as part of systemizing your business, you’ll want to retain ownership of essential intellectual property so that you can recycle it on projects for other clients. After all, it’s inefficient to reinvent the wheel every time you consult for a new client.

So, what’s the solution?

The answer to that question depends upon a few factors.

Essential IP

If the intellectual property is vital to you providing services to other clients, then you’ll want to retain ownership of it and grant a limited license to the client to use it. The scope of that license will depend upon what you’re comfortable with. For example, will the license be transferable if the client’s business is acquired by a third party?

Non-Essential IP

What if the IP isn’t essential to you rendering services to other clients but you want to keep it anyway because it makes your work easier? You can insist upon ownership or craft a consulting agreement that transfers ownership to the client but also grants you a broad license to use the intellectual property in the future.

Now if you’re going to relinquish ownership of important IP, it’s common to charge a premium to the client for that. For example, it’s not unusual to charge 3x what a license would cost the client instead of ownership.

Hybrid Option

Of course, in a few cases, it makes sense for each party to own some of the intellectual property created as part of the consulting while licensing rights to each other.

Help Preparing a Consulting Agreement

An experienced business contracts lawyer can craft a consulting agreement template that’s right for you to use with your clients, including options for ownership and licensing intellectual property. If you need help with a consulting agreement, it’s probably time to set up a phone consultation with Business Attorney Mike Young.

Apr 29
0

Does Your Consulting Agreement Fully Protect You?

By | Business Contracts, Business Lawyer | No Comments
consulting contract for business consultants

When you’re advising business clients, are you fully protected by a professional written consulting agreement?

Because many consultants live dangerously by cutting corners.

And they risk not getting paid or even being sued by clients because their consulting contracts are defective.

Unfortunately, it’s common for a new consultant to “borrow” someone else’s agreement found online…or try to patch something together from multiple business contracts.

What’s “borrowed” is frequently copyright infringement. Not a good way to start off any legitimate venture.

And the contract’s language probably doesn’t fit the consultant’s particular needs.

Even worse, some of the provisions are written to favor the other side.

If you’re using a contract that wasn’t prepared specifically to protect your consulting business, it’s time to get one that meets your needs.

Of course, some consultants simply work off of acceptance of a written quote…a simple document that doesn’t address many essential issues.

And a simple quote may work…until it doesn’t, i.e. a problem comes up during consulting but the quote doesn’t address how things will be handled.

Now the easiest way to prevent problems with a client is at the beginning of the relationship by establishing the rights and responsibilities of each party in a binding written contract that’s signed.

So if (when) things go bad with a particularl consulting gig, you’ve already agreed on how to sort things out.

If you need a consulting agreement revised or a a new professional consulting contract prepared, it’s time to schedule a phone consultation with Business Lawyer Mike Young to discuss your needs.

Apr 25
0

Exactly What Are You Buying From Your Software Developer?

By | Software Agreements, Software Lawyer | No Comments

software development ownershipWhen you’re paying to have a software application developed, it’s important to know exactly what you’re getting.

For example, a developer might deliver a functional mobile app that meets your specs. Yet you discover you don’t legally own the app.

How is that possible?

As skilled technicians, developers frequently don’t focus on things like intellectual property (IP) ownership. They just want to get the work done.

So, what happens is an app development project ends, the client thinks it owns the code, yet the developer plans to recycle the code to use for other clients’ projects. Sometimes it’s a nasty lawsuit over who owns what, particularly when multiple parties have paid a developer for work that each thinks they own.

And it gets even more confusing if the developer has used third-party code (e.g., open source code) on the project.

What happens in these situations is both client and developer think they own something that neither do. And you may not even have the right to sell the app you think you own!

How do you prevent this type of mess?

The first step is to have a comprehensive software development agreement that’s designed to protect and clearly spells out what rights you have. If you need help with an app dev agreement or software licensing, you may want to schedule a phone consultation with Software Lawyer Mike Young.