Posts tagged: contracts

In Praise of Creative Entrepreneurs

By , May 14, 2014 2:39 pm

Written by:
David L. Colby, Esq., Managing Director of Colby Law Office, PC

When creative people start a business, interesting things happen. Cool things, Inspired things, game changing things. But sadly, also tragic, bad things. The users of this world prey on creative people far too often.

As an attorney who helps creative entrepreneurs, I will be the first one to say that creative people and business frequently are at odds. It is sometimes complicated for creative entrepreneurs to maintain control of their own companies. Indeed there are special challenges and disconnects that are almost directly proportionate to the level of originality and creativity in the entrepreneur.

I remind my clients of what Andy Warhol said: “being good in business is the most fascinating kind of art.” With that clever mindset, a creative entrepreneur can maintain their creative integrity and still have a head for business. Moreover, you can learn to harness creativity to structure deals, work out complex business relationships, and offer up creative solutions during negotiations.

No doubt creativity really what its all about. After all, what is a business without creativity? Its not difficult to find examples: uninspired copy-cats, knock-off agents, struggling plagiarists, copy-cats, soulless hacks pushing their way into the market with profit as its primary motive; design a secondary concern at best. A noteworthy hallmark of these types is that in the long run, they are limited in their potential. They lack authenticity… an original core… a deep well to keep going back to for inspiration.

The opposite of this is a business founded and controlled by the original creative person or team. The designer, the artist, being at the center is actually the engine, the heart of the beast, to what truly matters in the long run.

But as important as creativity and originality is, we cannot escape the fact that business is business. To level the playing field, it is imperative to have a plan and a relationship with the right kind of lawyer. If you are looking to start or grow a fashion-based business—whether as a designer or in some other related way– it is of the highest importance to organize your business and protect your interests to succeed.

In short, creative entrepreneurs require special care. And they deserve to get it. It isn’t just looking out for their interests, a lot of time it is just actually listening to them, encouraging them, and reminding them that their creativity is the secret ingredient and the most valuable asset they have.

David Colby
David L. Colby, Esq. is the Managing Director of Colby Law Office, PC, a law firm in NYC that represents many up and coming designers and their businesses worldwide. Colby Law Office works particularly with business formation and governance, intellectual property and contracts.

Colby Law Office is doing the second of their free legal clinics at FIT on May 19th from 5:30-7:30pm. Only RSVP’s may attend https://legalsalon-may.eventbrite.com. If no more space is available, David can be reached at dcolby@colbylaw.com to set up a free consultation.

Double A-Team

By , August 3, 2013 10:50 am

The Design Entrepreneurs NYC (http://www.designentrepreneursnyc.com/)  program is in full swing.  One of the programs’ many offerings is an open classroom “mentoring” evening, where designers in the program can swing by and ask questions of instructors who are there for that purpose.  It’s a great and informal way to get multiple opinions, points-of-view and advice on the designers’ company, business plan (which they write as part of the program) etc.

This recent Wednesday evening I was co-mentoring with Shawn Grain Carter, who teaches Fashion Merchandising and Marketing at FIT.  The subject, as often happens, was brought up of designers negotiating with big companies – this could mean, contracts, licenses, royalties, intellectual property, employment, or all of the above.  Many design entrepreneurs do these negotiations alone. Sometimes they feel they have enough knowledge to negotiate well for themselves. Sometimes they don’t know any better. Sometimes they don’t have the money to pay an attorney to go with them to help and advocate for them (and to keep them out of trouble).  We discussed this in class and Shawn and I agreed that an entrepreneur absolutely needs an attorney to accompany them to such negotiation meetings.  Or a business person, like an accountant.  Or both. And Shawn advised everyone, and I agree, that they should have double A’s – an accountant and an attorney.  They both keep you safe in any kind of business negotiation.

It’s a necessity in the fashion business but also in every sector. At the very least, there’s a second pair of ears listening to what’s going on and picking out important points that the entrepreneur might miss. At the very most, your A-team keeps you from making costly, and sometimes business-ending, mistakes. The world is littered with stories of failure because the entrepreneurs couldn’t or wouldn’t bring an attorney or accountant into a crucial negotiation (and, let’s face it, every negotiation when you’re a small business is crucial) with them.

I know you’ve heard me say this before…but repeating it never hurts…always use an attorney and/or accountant in contract reviews, negotiations, any business matter.  The fees you pay your Double A-Team are minor compared with the money they save or help you get in the long run.

 

Sandra Holtzman teaches CEO 035: Licensing.
She is the author of Lies Startups Tell Themselves to Avoid Marketing.

How would you like your graphic design? (You may pick two).

By , February 2, 2013 9:37 am

graphic design

These days you’re really lucky if you get two. This is a humorous approach to the magical solutions to the business problems so many clients want and have convinced themselves actually exist (these clients want all three of the big circles).  Clients who are desperate for new business and don’t want to wait.  Clients who are not business savvy. There are plenty of service providers out there who cater to the magical solutions (mind you, they don’t get results, they just cater).

I’m not one of them.

I was just interviewed by a potential client who has a service business.  She wanted half a dozen new clients in two months or less. Someone told her she could achieve this through hiring a resource to fix or improve the SEO on her website.  And maybe moving the website over to WordPress which has a fairly impressive (and free) SEO scheme that comes with websites and blogs that are created there.  The client was all set to click her heels and say “there’s no place like home.”

Then she  met me.  And I presented reality.   Uh oh.  Reality like SEO is part of a larger strategy to get attention.  A strategy which might include blogging, being published and referenced online, doing your own social networking. Next I explained that moving your existing website over to WordPress is not a simple migration process. Sure, you have all the templates, but I explained you still needed to have a designer work on it for you and you need a strategy of how to present your information in the new format (with many more choices of options). Reality like there’s no magic bullet.  And no designer on earth makes Dorothy shoes.  And that maybe, just maybe, her goals were a tad unrealistic.

She really didn’t want to hear this.  Oh she was polite alright but I knew what she was thinking – she couldn’t hide her disbelief that she couldn’t just push one button and make it all happen.

How to separate the magical wishers from the business

So knowing this, I moved on to the deal closer or breaker items that I use to weed out shoppers who want a magical solution as opposed to the real business world which I operate in.  I said I would send along my standard contract (where the client agrees to provide me with the information I need to do my job and also agrees to pay me and I agree to do my job within the time frame and estimate I provide).

And I also said I would charge for my estimate.  It takes time and strategic thinking to figure out how to solve the problem so you can estimate each item that will need to be done – this is called work product. The estimate is part of the solution (or roadmap) to the project.  So I’m working to create the estimate but I also know if I give the person an estimate for free, then I’ve done the hard work of figuring out how to get the results they need. They can then take my estimate and hire someone else (without a strategic brain) to execute it.  This is the second reason I charge for my estimates – to avoid this situation.

A day later, I got a very nice thank you note and was told the prospect wanted to interview lots of other people.  I have likewise replied very politely and wished them the best.

At some point I’m sure you’ve been on each side of this relationship.  No matter what side of the equation you find yourself on, make sure you don’t succumb to the magical thinking mindset.

 

Sandra Holtzman teaches CEO 035: Licensing.
She is the author of Lies Startups Tell Themselves to Avoid Marketing.

Preparing for Taxes

By , January 19, 2013 1:59 pm
Image provided by Shutterstock http://www.shutterstock.com

Image provided by Shutterstock http://www.shutterstock.com

Preparing your expenses and sales receipts for filing your taxes can be a nightmare. Do you have your company related papers filed in a shoe box? Or, are you organized and enter your information in bookkeeping software like QuickBooks or Peachtree?

Whatever your preferred method of filing your information is, you have to assemble it for the tax preparer or accountant. What do you have to give him? Here is a list of the documentation:

1. Receipts for the purchase of equipment. These are your assets, and assets are depreciated over time. Various types of equipment have different rates of depreciation. Your accountant will know what those rates are, and he will be able to calculate your depreciation expense. Additionally, certain purchases of capital equipment will give you a tax credit. So it is worthwhile to have your accountant review this information.

2. Payroll information is important. Providing a summary of Social Security and Medicare taxes, health benefits, if any, Federal, state and city taxes for each employee and the Treasury payments made are necessary to ascertain your payroll expenses for the year. Any payments made to independent contractors should be reported on Form 1099.

3. Any draws that you have taken from the business and any estimated taxes you have paid will assist the accountant in preparing your tax liability.

Image provided by Shutterstock http://www.shutterstock.com

Image provided by Shutterstock http://www.shutterstock.com

4. You will need to give the accountant a list of accounts receivable that have remained outstanding at the end of 2012. He may ask you about the probability of collection of these accounts and may want to indicate whether these are probable or noncollectable leading to a bad debt expense. He may also want to know whether you have “earned” the revenue you have collected in the year. This refers to the Matching Principle in accounting – if you haven’t earned the revenues but have collected it, you will have an accrual on moneys collected but not earned.

5. In this vein, you will also need to give the accountant a list of those accounts payable that you have not paid at the end of the year. The numbers in 4 and 5 will have an impact on your Working Capital.

6. It will be necessary to also keep an eye on your inventory. How frequently do you replenish your inventory? Inventory Turnover is critical to learning whether you will need to reduce the selling price or if you will have a write-off of obsolete inventory.

7. If you have entered into any contracts with vendors or suppliers and independent contractors it would be wise to provide the accountant with a copy of those contracts so that he can see any anticipated revenues or costs associated with them.

Image provided by Shutterstock http://www.shutterstock.com

Image provided by Shutterstock http://www.shutterstock.com

8. Before providing you with the completed tax returns, the accountant will want to review them with you before finalization to make sure that he has included everything. Take this conference seriously. He should offer you advice on the conduct of your operation and indicate whether you need to do more to mitigate your tax liability or improve the way you are running your business.

By the way, if you are using a software package and your accountant uses the same program, you can provide him with a download of your files so that he can manipulate the information as he needs to. This will save him a lot of time in preparing your information.

 

Margo Moore teaches BE 261 Starting a Small Business, CEO 001 Setting a Course for Your Business, CEO 002 Knowing Your Market, and CEO 003 Formulating Your Financial Strategy.

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