As an attorney, I hear stories all the time from clients about deals they never should have done and checks that never were in the mail. Here’s an example:
A business owner I’ll call Laura thought she was doing everything right. She was invited to partner with a national training firm. She would use her expertise to develop course materials and present a biweekly training course that clients would pay to attend. She also developed the materials for a higher-priced program that was sold at the end of the initial training class. The training firm, in turn, would provide the marketing, handle enrollments and sales, and pay her an attractive commission.
She obtained a written agreement from the firm and had it reviewed by a local attorney. (She was not a client of my firm at the time.) She checked a business reference. However, that was the extent of her background research.
The project seemed off to a great start. She worked hard to develop excellent content. Enrollments were strong, as were sales. But soon, weeks started slipping by, and she was not paid as agreed. She heard one excuse after another; then, finally, she realized she would never get paid for her work. She ended the arrangement with the firm but discovered that trying to pursue the money she owed would probably be throwing good money after bad.
It’s easy to forget that your time and expertise can be as valuable as money. Even though Laura wasn’t extending credit to the training firm, she was providing something of value, her expertise, intellectual property, and labor, with the promise of getting paid later. And that meant she should have treated the partnership like a loan, making sure she did the same due diligence she would have done if they had asked her to write them a check.
Had Laura been my client at the time, I would have made a couple more suggestions to help protect her:
- Check credit: I would have encouraged her to check the corporate credit reports of the firm in question. She later found out that hers was not the only firm this company had stiffed. Had she obtained credit reports from firms such as D&B, Experian Small Business, Cortera, or Equifax, she may have spotted payment problems. It could have saved her countless hours of work, and frustration.
- Register a copyright: Laura did not retain or register the copyright for the materials she created. I would have encouraged her to do both. It’s simple and inexpensive to register a copyright. When she realized she needed to end the arrangement, she could have easily ordered the company to stop using her copyrighted material, and if they continued to use it without her permission, she could have been entitled to damages for copyright infringement and injunctive relief (a court order to cease use of the copyrighted material).
- Get a deposit: If Laura was selling widgets, would she have shipped boxes of them to the company without asking for a deposit? Hopefully not. She didn’t assign the same value to her time and knowledge, however. A deposit would have helped indicate the company was serious about the project.
If you are a consultant, or provide services, it’s important to protect your intellectual property and expertise. Remember, it’s not a sale until the money is in your account.