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Client difficulties? Protect yourself with an exit strategy clause

(BUSINESS ENTREPRENEUR)You want to keep around that one client that pays your bills but when they are difficult make sure you can run away from a gig gone wrong.

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Client exit strategy

I am not a lawyer. Do not take legal advice from a news story.

BUT

Over at Hongkiat, Veronica Howes has a great piece about the rights that every designer should give themselves when it comes time to make a contract. It’s not just good advice for designers, though. Anyone at the mercy of the client revision deserves to know these tips.

Many of them are about making sure that the rights to your work are secured. That’s important! Work-for-hire has always been treacherous territory. But in the gig economy, when more people than ever are doing contract work, holding on to your intellectual property is important, if you can swing it.

But just as important? Knowing when to walk away — and having the freedom to do so. Having an exit strategy is important to everyone who has ever had a bad client experience, trust us on this one.

There are plenty of reasons you might need to do this. Creative differences, a work environment you weren’t expecting, or even just an unreasonable number of revisions. Obviously, you never *want* to lose work, and you never want to leave a client unsatisfied. But sometimes walking away is better emotionally and financially than finishing the gig.

Writing in a “kill fee” can help you do this safely. A kill fee is a guarantee that you still receive some compensation for the work that you did, even if that work wasn’t completed. It’s an exit strategy. If you sink a year into a project for a client and then they decide to move in a different direction, the kill fee makes sure that you didn’t just waste a year of your life. It’s an important safety tool for anyone freelancing.

The standard phrasing to include in the contract is: “Termination. Either party may terminate the contract at any time through written request. The Company shall upon termination pay Consultant all unpaid amounts due for Services completed prior to notice of termination.”

And it is worth talking about the specifics of the kill fee. Some may charge for hours already worked regardless of who terminates the contract, others may choose to keep a retainer, and so forth. Think that through and include it in your contract.

Now, let’s talk about revisions. Half the time, the reason you’d want an escape clause is that the work wasn’t scoped correctly in the first place. You need to be very clear about the expectations of the amount of work that’s going to go into a job.

Let’s say you quote someone a flat fee of $100 for a tiny project, because you expect it to take you an hour or two. But suddenly, there are 12 people at the client’s office arguing over what the project should actually be, on a conceptual level, and you’re caught in the crossfire while they re-imagine the project you’ve already finished. The worst-case scenario here is that you’re stuck doing dozens of revisions, and each minute you spend, your hourly rate just dwindles down to nothing.

Setting up an exit strategy with appropriate expectations ahead of time (in writing) can really save you here. Allot for one major revision of the work and some touch-ups, or maybe three rounds of revisions. Do whatever’s appropriate for your field and the scope of the work. But be sure that the expectations are clear, and have it in writing, and be sure you’ve got that escape hatch at the ready if things go past it.

Staff Writer, Garrett Steele is your friend. He writes lyrics, critique, and copy for ads, schools, health organizations, and more. He’s also a composer for film and video games, when he’s lucky. (One of his songs is an Xbox achievement!)

Business Entrepreneur

How to effectively share negative thoughts with your business partner

(BUSINESS ENTREPRENEUR) You and your business partner(s) are in a close relationship, and just like a marriage, negative emotions may play a role in the relationship.

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You and your business partner are in a relationship. Your business was born when you shared a common vision of the future and became giddy from the prospect of all you could do together that you couldn’t do alone. Now, you spend much of the day doing things together in collaboration. The stakes are high; there are obstacles to overcome, decisions to make together, deadlines to meet, and all the stresses of running a business.

It’s no wonder a business partnership can often be just as complicated and emotional as a romantic relationship. If you are struggling with your business partner, you might find helpful advice in resources originally targeted towards troubled couples.

Relationship expert Dr. Jeffrey Bernstein has explored how to share “toxic thoughts” with your partner. In a linked article, Bernstein describes toxic thoughts as distortions of the truth that cause us to overemphasize the negative attributes of our partner.

Some examples of toxic thoughts include blaming your partner for larger problems that aren’t really their fault, inaccurately assuming your partners intentions, or resenting your partner for not intuiting your needs, even if you haven’t expressed them. The defining characteristic of these toxic thoughts is that, although they may be based in the truth, they are generally exaggerations of reality, reflecting our own stresses and insecurities.

Just as much as in a love relationship, these toxic thoughts could easily strain a business partnership. If you find yourself having toxic thoughts about your business partner, you will need to decide whether to hold your tongue, or have a potentially difficult conversation. Even when we remain quiet about our frustrations, they are easily felt in the awkward atmosphere of interpersonal tension and passive aggressive slights that results.

Dr. Bernstein points out that being honest about your toxic thoughts with your partner can help increase understanding and intimacy. It also gives your partner a chance to share their toxic thoughts with you, so you’d better be ready to take what you dish out. It might be hard to talk about our frustrations with each other so candidly, but it might also be the most straightforward way to resolve them.

Then again, Bernstein points out, some people prefer to work through their toxic thoughts alone. By his own definition, toxic thoughts are unfair exaggerations of and assumptions about our partner’s behavior. If you find yourself jumping to conclusions, assuming the worst, or blaming your partner for imagined catastrophes, perhaps you’d better take a few minutes to calm down and consider whether or not it’s worth picking a fight about. Then again, if you’re self-aware enough to realize that you are exaggerating the truth, you can probably also tease out the real roots of any tension you’ve been experiencing with your business partner.

If you are going to get personal, shoulder your own emotional baggage and try to approach your partner with equal parts honesty and diplomacy. Avoid insults, stay optimistic, and focus on solutions. State your own feelings and ask questions, rather than airing your assumptions about their intentions or behaviors. Keep your toxic thoughts to yourself, and work towards adjusting the behaviors that are making you feel negatively towards each other. Your business might depend on it.

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Business Entrepreneur

This Uber for chefs will bring a home-cooked meal to your home

(BUSINESS ENTREPRENEUR) Who doesn’t love a home-cooked meal? Now with this amazing startup service, you’ll soon be able to get one without having to cook it yourself.

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A professional chef making a home-cooked meal with a tall cheeseburger.

Who doesn’t love a home-cooked meal that you didn’t have to cook?

No one.

And restaurants, UberEats, DoorDash, and their ilk have been banking on this desire for some time… Although whether restaurants can stay in the game remains to be seen.

McDonald's sign with a sign that says "We are short staffed. Please be patient with the staff that did show up. No one wants to work anymore."

Disrespect your essentials at your peril, but I digress.

Cofounders Heinin Zhang and Siddhi Mittal of London-based toddler-aged company, Yhangry, are bringing a solution to the problem that’s neither dragging into a restaurant during a gross
and grossly mishandled plague, nor struggling with how to perfectly word directions to your home for delivery drivers.

Essentially, you pay a certain amount per head in your dining party, which includes the chef’s time and expertise, groceries, booze if you want it, AND post-cooking cleanup. Then said chef
comes to your home, does their thing, and skedaddles.

If anything, it’s like a nice little splurge— okay, NO I can’t yet afford to keep a private chef on hand to make sure I’m not having Taco Bell sauce packets for lunch, but I COULD maybe do a
little splurge once every quarter and have some ‘Let’s pretend we’re rich’ time with a gaggle of friends.

It’s like a spa day, but for your tummy.

Now of course the idea of luxury house calls isn’t new, in and of itself, but you have to admit it is extremely cool that you can trust a centralized service to have vetted individuals who need to uphold certain standards on their books. Let’s face it, if your first thought upon inviting someone you don’t know into your house isn’t ‘What effed up ess are they gonna do in here’, you’re too well-adjusted to be reading this anyway.

I kind of love it! And I’m not the only one.

Yhangry’s raised $1.5 million USD (1,079,272.50 pounds sterling in redcoat money) through several angel investors after managing swift, and successful pivots during England’s lockdowns
last year! What started as a custom dinner party organization had to shift to virtual cooking classes! Now, as things open back up with the advent of the vaccines in Great Britain, Zhang and Mittal’s business savvy and quick thinking are being very aptly rewarded. They’ve got a ready team of 130 chefs in their rosters, Covid guidelines for all to follow, and a lot of big names
in their corner.

Nimbleness always pays is the takeaway here.

I fully wish these ladies every success, mostly because I reeeeeeeeeeeally want their home-cooked meal service to hurry up and be in my house already. What’s the English equivalent of fingers crossed… Something to do with tea? My teabags are plopped for them.

It only remains to sip and see what happens!

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Business Entrepreneur

Why receiving big funding doesn’t guarantee startup success

(BUSINESS ENTREPRENEUR) You finally got that big funding check that allows you to make your dreams come true, but most startups fail because they shoot for the moon.

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funding box

The first thing every startup needs to get off the ground is funding. It’s crucial to have enough capital to cover equipment, inventory, and employee salaries, along with other basic expenses unique to the industry. Most startups cover these initial costs through business loans and capital from private investors.

Some business owners perceive getting funded as the first milestone toward success. While receiving capital is critical for success, being well-funded doesn’t guarantee success. Plenty of well-funded startups have failed, gone bankrupt, and all but disappeared.

How could so many well-funded startups possibly go under? The 90% failure rate for startups is due to a variety of factors including bad timing, no market, and most of all – mishandling of finances.

Here’s why receiving big capital doesn’t guarantee success.

Getting investment capital provides false hope

Getting funded can make you feel invincible and cause you to be too relaxed about spending money. It’s a powerful feeling to have plenty of money and know an investor believes in your business. Investors are smart; they wouldn’t throw money at a startup unless they had every reason to believe it will succeed, right? Not exactly.

Startups in big tech areas like Silicon Valley and San Francisco often have an easy time generating large amounts of capital from investors who can’t wait to throw money at the latest startup. Many investors ignore risk and throw their money at long-shot bets hoping to invest in the next Facebook or Instagram. The size of the pot is too mesmerizing not to take the risk.

These long-shot bets carry similar odds to winning a “Pick 6” bet in horse racing. The Pick 6 is one of the hardest bets to win because you have to pick the winning horses for six consecutive races. What if the top horse becomes injured before the sixth race? Investors who toss money at random startups have to pick a startup that will continue to meet all the right circumstances to become profitable long-term. Some of those circumstances are unpredictable.

No business owner wants to view their startup as a long-shot bet. However, the reality is that many startups are. You can’t gauge your potential for success based on how much funding you receive.

Having plenty of cash encourages premature scaling

When you’ve got the cash to scale your startup it seems like a waste not to dive in. Just one look around the internet reveals plenty of videos and articles encouraging entrepreneurs to scale their business. Advice online gives the impression that if you’re not scaling your business, you’re falling behind. However, scaling too soon can tank your startup.

Research conducted by Startup Genome found premature scaling to be the number one cause of startup failure. Nathan Furr from Forbes.com explains this finding and what it means for businesses. Premature scaling is defined as “spending money beyond the essentials on growing the business (e.g., hiring sales personnel, expensive marketing, perfecting the product, leasing offices, etc.) before nailing the product/market fit.” Furr says any business is susceptible to premature scaling – not just startups.

The problem is that premature scaling depletes your cash reserves more quickly. This leaves you with less cash to fix mistakes and readjust as you go along. Failure is what happens when you don’t have the necessary cash to fix mistakes and move toward success.

How to make the most of your funding and increase your odds of success

To increase the odds of developing a long-term successful startup, here’s what you can do:

Save as much money as possible. For instance, you don’t need a giant office with expensive furniture right away. Work from home and hire a remote team until an office is absolutely necessary.

Make sure the cost of acquiring each customer makes sense. Know how much money you’re spending to acquire each customer. Track all marketing efforts and eliminate the avenues that don’t generate paying, loyal customers. If the cost to acquire a customer is more than what they spend with your company, revisit your marketing strategy.

Aim for an order-of-magnitude improvement with your innovation. Skip Prichard advises startups to strive for a 10x increase in the value of whatever innovation is being provided to the world. For example, if your company is offering a lower price for a greater value, aim to increase the value 10x. Attract the early adopters who want big improvements and they will validate you.

Money is a tool – use it wisely

Celebrate when you get your funding, but keep that money in the bank for necessary expenses. Money is a tool that doesn’t guarantee success, but if you budget wisely, you’ll have a better chance at beating the startup odds.

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