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Non Compete and Non Solicit Tips (Part 2)

If you are faced with negotiating a non compete agreement, a non solicit agreement or both, the following tips (6-10), part of our 2 part series, will help you navigate such provisions in employment agreements, consulting agreements or even the sale of your company.

 6. Do not agree to pay for attorneys fees for the employer should you want to challenge the non compete. The thought of having to pay your own attorneys fees plus the employers fees is enough to keep most employees from challenging a non compete. It is also an effective deterrent to settlement. Why? The employer has leverage knowing you will balk because of attorney fees.

7. Non Solicit clauses--make sure the contract distinguishes between customers your new employer has vs. your old employer. Agree only not to “solicit” customers. Do not agree to restrictions on soliciting where your former employer’s customers seek you out or the customers are already customers of the new employer.

8. You can often change such provisions despite employer’s claim that they have to have the same provisions against all employees. Executives often have very different provisions than intermediate or lower level employees within the same company. You can often limit the length and the scope of the non compete. You can also have different start dates and exclude from the non compete specified customers and industries.

9. Keep track of the covenant you signed, including paperwork and emails, and whether your employer is enforcing covenants uniformly. If not, the company may not be able to enforce the non compete against you. Most employers want to know if you are subject to such provisions—you may not get hired if you have signed one. Good to know if you did and what it says.

10. You are better off with a non solicit than a non compete. You want to be able to work for future employers. Tell your prospective employer if you are subject to a non compete. Your new employer does not want to get a demand letter threatening a lawsuit.

Non Compete and Non Solicit Tips

As business competition heats up and the economy (not to mention the weather) cools down, we are being asked to review both non compete agreements and non solicit agreements for executives and companies.

 Companies don’t want valuable information walking out the door and business professionals want to know they can earn a living elsewhere.

Whether it is a non compete (you may not go to work for a competitor for a specified period of time) or a non-solicit (you may not solicit customers, clients and employees from your former company or client) or both, you should be wary of such provisions.

Top 10 Non Compete Non Solicit Tips

 Here are our tips should you be asked to sign such restrictive provisions whether it is in a customer contract or an employment agreement.

1. If you sign an agreement with a non compete or non solicit provision, be prepared to live with it as written. You are likely unable to afford the costs of challenging the clause. And, even if you can, judges vary widely on how they apply them because they are so fact dependent.

2. Try to avoid signing the contract with such provisions. If the employer wants you badly enough, they may back down. Or they may agree to just a trade secret provision.

3. If you must sign a contract with a non compete, narrow the scope. The amount of time, the scope of the business and the geographic limitation are usually broad in these provisions.

4. Make sure that the non compete or non solicit contained in the contract is linked to a business interest, i.e. protection of trade secrets, confidential information and/or investment in training and education for employees. If you are not exposed to such information or don’t get the training, the non compete may not be enforceable. The employer has to protect more than general job knowledge in order for the non compete to be enforceable.

 5. If you must sign a non compete, try to get extra compensation for it if possible, e.g. a signing bonus or a severance package. If the employer balks, tell that them that such compensation or “consideration” makes this covenant enforceable. You should note that in most states, the signing of a covenant not to compete at the beginning of employment is sufficient.

We'll cover Tips 5-10 in the next blog post.

Master Agreements, Service Contracts--Negotiating with Procurement

Negotiating with Procurement at large companies is where small and mid sized companies, entrepreneurs, vendors, independent contractors and consultants face the  daunting Master Agreement or Services Contract.  Wielding a typical fifty page plus agreement, the Procurement Department seeks to slash and cut costs.

Emboldened by the recession and corporate dictates, Procurement takes a commodity pricing to most contracts while demanding unparalleled services or goods.  They use a Master Agreement or Service Contract or some other global contract form arguing that  they have to have a uniform agreement.

We had one client who had successfully used our concise 5 page contract form for almost 10 years with a global company come to us with a new 86  page Master Services Agreement. The Global Procurement division of the company said that master agreement must be signed to continue getting business.

What do you do with a small contract amount, a client who needs to watch every cent and a global company slamming down terms through such master service agreements and Procurement?

First, you make sure you have a business advocate inside the Global Company who will go to bat for you with Procurement.

Second, you prioritize--what is really truly worth fighting for so much so you will walk away?

Besides quickly pointing out where Big Company could eat the client's lunch through gotcha provisions (what we refer to as operational you snooze and lose contract provisions), we came up with four key points that the client had to  negotiate  or walk away from.

Make sure you develop a sound strategy on walk away points. What can you give up in exchange for those key terms? Is your evangelist at the customer helping you regarding those critical issues? Are you truly prepared to walk away? Easy to say, but hard to do when you have potential revenue staring you in the face. And remember the key negotiating strategy, we just want what's "mutual, fair and reasonable."

Negotiating Salary, Women and Negotiation in Business

Negotiation for Women in business was the topic for my presentation yesterday at the University of Colorado Deming Center with women MBAs.  Women just don't ask or ask as effectively--whether it is research studies, anecdotal evidence or our years of experience in negotiating--the consensus is that women use negotiation less than men to get what they want in the workplace.

Ask, prepare and listen are the negotiation mantras we think are helpful to women, particularly as negotiations have become more collaborative than confrontational.

 Ask--get in the mindset to negotiate for what you want, don't assume your hard work will be rewarded and set higher goals.

Prepare--get a wide database, e.g. not just asking women for salary information, gather information from networks and mentors, get factual support and anticipate negotiating ploys and responses.

Listen--elicit needs of the other side through listening and asking open ended questions, silence and the taking of time can add dollars to salary offers,  understand both the relationships and the issues in negotiations through listening, careful listening that enables you to ask inclusive, open ended questions allows for a collaborative solution that satisfies both parties needs.

Some excellent resources we recommend to any woman about to embark on salary negotiations or any other type of negotiation, especially negotiating in the workplace:

Breaking into the Boys Club

Self Nurture Learning to Care for Yourself As Effectively As You Care for Everyone Else

Negotiating Your Salary How to Earn $1000 a minute

Getting Past No

As one woman MBA noted, you have to remember Gandhi's quote , "You don't ask, you don't get" .

Angel Financing--Live Phone Calls, Face to Face Meetings Essential to Find Angels (PartVII)

Rule 7: Virtual contact won’t get you real angels.

Whether it’s virtual contact through LinkedIn, another network service or sending out loads of e-mails, asking for a cold introduction is no better than a cold call. Rather, find the companies and people you need to get to and work from the people you know to get to them. And yes, that means real live phone calls and face to face meetings. If you are like most entrepreneurs, you don’t have enough time in the day to do all the things you need to do. When it comes to money, you have to allocate some time for fundraising. You have to be brutally strategic about what efforts, contacts, meetings, calls can garner funds quickly enough. And, oh yes, you have to do it with the polish and persuasiveness of a diplomat, coupled with the passion of an entrepreneur. Remember the clock is ticking on the money search. The smart entrepreneur fishes where the fish are—persistence and strategy are key.

Angel Financing--How to Use Trade Associations (Part VI)

Rule 6: Use Trade/Industry Associations to Find Angels

Forget trotting to the local meeting and talking to folks looking to make a sale of their own. Go to the top. Look for the board of directors, the ex officio members and even the professional service advisors. These are the folks you’ve got to meet and develop a relationship with, find out if they or someone they know might likely invest, and get introductions to those folks.

Don’t just look at your immediate trade association. Look at the trade associations of your most critical existing or potential customers. If your product or service really does solve huge problems for these customers, you are more likely to find potential investors at those trade groups.

Angel Financing--Local /Industry Business Tycoons may be Angels (Part V)

Rule 5: Look for Business Sales, Retirements, Home Runs to Find Angels.

Compile a list of the top 25-50 business sales where founders made big bucks; include the names of founders and others who cashed out. Are these folks around, do they have any interest whatsoever in investing, and who do you know that knows them?

Even if these folks are not amenable to investing, they may be willing to mentor you and/or lead you to others who will invest.

Likewise, are there senior executives in your industry who have retired or hit major home runs (promotions, landed huge deals)? Again, are they worth pursuing and who do you know that knows them?

Angel Financing--Finding Money (Part IV)

Rule 4: Use service providers to find angels.

Often businesses fail in using service providers—they succumb to the provider’s siren song of how they will get you to the gold or how your failure to use them will doom you to poverty. Or entrepreneurs will determine service providers are unnecessary evils to be avoided at all costs literally. Either approach usually ends with no money being raised.

There is a better way to use accountants, lawyers, financial advisers and others to help you find angels. Angels often rely on trusted advisors for deal flow. You need to:

• Gather a list of the top 10 to 20 advisors in each category—accountants, attorneys, financial advisers/planners who work with high net worth individuals.
• Compile these lists by talking to the local VCs, the business editors/reporters, the presidents of the local business clubs, personal and business bankers and the most successful local business people you know and admire.
• You are looking for the right people with the right connections. Avoid random meetings with professional advisers at useless networking meetings; go meet those professional advisers most likely to know the folks with money who may invest. Recommendations from advisers and other trusted sources are extremely important to many angels.

Angel Financing--Getting Connected (Part III)

Rule 3: Forget the Herd Theory

We all know the same groups where everyone trots out their plans to the crowd of mostly service providers and few, if any investors. While there are a few viable places to do the business beauty pageant (in Colorado there’s the Venture Capital of the Rockies and other annual business plan competitions/investment forums), these events are about pitching your business plans. Don’t over shop your business deal. Forget hawking your business plan at every opportunity.

Networking is different.

Focus on finding the right connections to the right potential investors. You have to be brutally focused on what events, meetings, and people will guide you to angel investors. 

Ask:

w Are these just fellow entrepreneurs commiserating over their impoverished states, lack of sales, etc?

w Is the ratio of service providers to actual money folks greater than 10 to 1?

w Are there any folks in your industry/ niche market there? Potential customers? And are they decision makers or low level functionaries?

w Use your new status (as a newly formed business or as a company new to raising funds) to ask people if this meeting, event, etc. has any merit, e.g. people who have bucks and matter or who can lead you to those folks?  Remember that folks are often willing to share valuable information with a newcomer—take advantage of that opportunity.

Find Right Angel Financing--Part II

Second Rule: Know what kind of Angel You need Based on Money, Stage and Industry.

Angels come in all sizes and shapes, i.e. the amounts they will fund, industries they cover, stage of company.  In the last few years, VCs have moved away from early stage startup companies asking for anything below $5,000,000. Moreover, successful startups may be able to raise up to $500,000 in private placements. According to the Kauffman Foundation, angel groups (as opposed to individual angels) have stepped into that funding gap between $500,000 and $5,000,000. Angel groups are now funding not only early stage companies but also second-stage companies, leveraged buyouts and spin-offs.You need to determine how much money you need, the stage you are at and the industry you fall within to find the right angel(s).

Individual angels may be more receptive to funding earlier stage companies, especially if lesser amounts are involved. You may likely need to find angel groups if you are looking in the range between $500,000 and $5,000,000. Few individual angels are going to pony up that amount. Be aware that some angel groups are asking companies to pay for the privilege of presenting their plans. Not only is that requirement appalling, but such requirement dictates you know before hand if the group is even worth the effort and their funding history.

Dig around and find out who has presented to the angel groups and send them an e-mail. Make sure you know funding levels, industry preferences and other stated and unstated funding preferences. Ask them if they got any actual investors or good leads or if it was just a colossal waste of time.  Like any good survey, ask a good number of folks who have appeared before such groups. Do the same for individual angels.

Also, focus on the fact that angels tend to make regional investments, invest their own money in the game, have more realistic expectations of returns, favor more advisory (non-board) roles and invest at earlier stages. Get realistic and look for money in the right places.