Business Information for Entrepreneurs by an Entrepreneur

Washington writes:

What is the best way to handle contract disputes with clients?  My company has a business agreement for clients to sign.  Is there ever a time when a company should sign a clients’ independent contractor agreement?

Washington:

Whenever possible, get clients to sign your contract.  If the attorney who drafted your contract did their job well, your contract should more favorable to your company.  It would specify that arbitration or disputes being handled in your state, not the client’s (if they are out of state), plus include other stipulations that are fair to your client but also advantageous to you.

There are exceptions.  If you are using software or an online service, you typically review terms online and agree to them by clicking a checkbox before you proceed to use the tool.  But for consulting engagements or high ticket items that require a written signed contract, try to use your own contract.

That said, some clients will absolutely insist that you sign their agreement.  Make sure that there is nothing in their contract that is detrimental to you.

I once had a big brand name client agree to signing our agreement.  However, their lawyers wanted to modify parts of it, which wasn’t surprising since that’s what lawyers at big firms do.  The document they returned looked like it went through an episode of Extreme Makeovers – Lawyers Edition.  It contained so many negative and heavy handed attributes that I was very uncomfortable signing it. The client was frustrated because she really wanted to use our company and did not feel our initial terms were out of line, but she was only authorized to sign what her lawyers agreed to.  In the end, the deal broke down.

Be prepared to walk away from a deal if the contract terms could put you in a bind.

Ed writes:
Given the economy, is this a good time to start a professional photography business focused on photojournalism, not personal photography events such as weddings, etc.? Professional photo sales would be via stock photography distributors, business services, insurance services, etc.

Ed, the answer depends on the kinds of professional photographs you will be taking, your connections into your proposed distribution channels, and what your earning requirements are. Sites like istockphoto.com, which provide licenses for millions of stock images at extremely low prices, have put a big dent in traditional stock photography license fees. This prompted Getty Images, the largest of the lot, to buy istockphoto a few years ago as a bet against declining sales for their expensive stock images. The quality of images in these less expensive sites is fairly good so if your hope is to make money through stock images, you might find a tough market that generates very nominal income for you.

However, if your photographs will be from assigned projects, you stand a much better chance at earning decent income. Such projects are usually assigned by organizations based on your relationship with them. Contact magazines, ad agencies, and others who routinely outsource projects to local photographers to take pictures of people or events nearby. Create a web site and post your portfolio (you can use software to watermark your images if you are concerned about unauthorized use). You might consider starting it off as a side business so you can gauge the marketplace and your growth rate, then make it a full-time effort once you have established connections and can project your cash flow more accurately.

My team has a blast running our web sites.  Each site has its own unique personality and enables us to unleash our creativity and utilize our skills.  Our small business site, morebusiness.com, is a favorite among start-ups and currently gets over 10,000 unique visitors per day.  Most seek out sample marketing plans, business plans and other guides to help start a company.  Others seek advice that is more specific to their situation.

To help, we are putting together an “Ask the Expert” section where small business owners and budding entrepreneurs can submit specific questions and get usable answers without the expert pitching his or her consulting services.

Each week, or every few days depending upon how many questions we get, we will pick one or two to showcase on this blog.  Suggestion: the more specific the question, the better the chance of it being profiled (i.e., it is unlikely we will respond to “How do I start a business?” – answer: read our Start-Up section).

Do you have a business issue that is keeping you up at night?  Fill out our morebusiness.com contact form and we’ll try to help with expert business advice!

Dear Buzz,

I want to buy an existing company. How do I determine what it is worth?

Ollie

Dear Ollie,

Publicly traded companies make it pretty easy: just see what other people are paying for it! Take their share price and multiply it by the number of shares and you know exactly what (collectively) someone is willing to pay to own the company. Of course it's not a perfect calculation because the market is not always perfect but it's a good start. The best calculation is appropriately called “Enterprise Value” and it works well for any company.

market value — (cash and investments) / (divided by) net earnings

Best regards,
Buzz

Dear Buzz,

I'm concerned about the week between Christmas and New Year. I'm a freelance graphic designer working out of my home and I need the work during that time, however, many people are away or not interested in doing work over that week. How can I pay my bills and feed my family?

Dan

Dear Dan,

I talked to a few successful freelance business owners about this and received a mixture of responses. Some said that they plan their personal holidays during this time to coincide with the quiet time.

Another piece of advice I heard was to acquire as much business as possible early in November, even if it means earning slightly less for the job… but committing to a delivery time in early January. You'll be busy for the month of November and early December and the boost in income should carry you through the last of the month.

Still a third freelancer suggested tightening your belt for that one week and working on the business planning, identity development, website building, and brainstorming that you likely mean to do during the year but never actually complete.

Buzz

Buzz,

Our family's business has grown and now we have to rearrange our organizational chart. Should we rearrange it by function? By our newly developed regions? By product line-up? How?

Lorraine

Dear Lorraine,

Unfortunately, this isn't an easy question to answer because every industry is different. I think that functional organization charts can often create unnecessary bureaucracy in a company, reducing customer service in the long run. Regions are a good way to do it, especially if you are looking to expand even further or if those regions have a lot of unique business requirements.

Another way to consider changing it is by customer base, if you serve more than one type of customer. However you decide to do it, don't think about tomorrow… think about ten years from now when you've grown 100 times the size. Will you still be able to operate with the same chart?

While changing your organizational chart from time to time is okay, it does reduce your efficiency and your ability to serve customers for a time while everyone figures out who answers to whom and whether there are any gaps in service, so having a scalable chart now is best. And, to help drive down costs, think about what common aspects are shared by all departments (such as administrative functions) and create a department to deal with that.

Buzz

Dear Buzz,

I've just started a new business, a B2B software solution, and I'm out “knocking on doors” and selling my products. But I'm not meeting a lot of success. I'm pretty sure that I've targeted my audience and priced my products competitively. I don't want to lower my price, what should I do?

Marty

Dear Marty,

This is a common problem in sales. Many sales people knock themselves out by trying to build up additional service or by cutting the price down to practically nothing. However, neither of these two options is profitable.

Assuming that you're offering a quality product and excellent service, see if there's another way you can sell the product: perhaps it's your method and not the product that's keeping it from selling. (Do your competitors sell this way? If not, it could be an opportunity but there may also be a good reason why they don't.)

Another option is to think about a creative solution. For example, charge more for your product and work out a deal with a business consultant and corporate trainer who specializes in a related area and offer an entire solutions package: software, consultation, and training in that specific area.

Buzz

Laura asks, “Do door-to-door sales still work?”

Dear Laura,

According to SBTV , there are 13 million sales people making door-to-door calls resulting in over $28 billion in sales. The numbers show us that it is effective. But aside from the numbers we need to also do a gut check: What do your instincts tell you about door-to-door sales?

While it does generating buying activity, it may lower the perceived respectability of your business. I'm not saying that there's anything wrong with it, but I am suggesting that consumers may lump your business in with other door-to-door contact, including religious organizations or those companies that sound like they are the power company offering to lower your energy bill.

If you do want to use the face-to-face method of sales, it's okay to use door-to-door methods as long they are not your primary method of contact. Let people connect with you through the telephone or Internet first and then offer the value of coming to their home to display your wares. This makes you seem like you add value to their lives by saving them time.

Buzz

E.Y. writes, “Buzz! Help me! I want to start a business but I have no idea where to start. I feel overwhelmed by the possibilities.”

Dear E.Y.,

“Many people feel that way; you're not alone. If we met in person I'd start a dialogue with you about a few things including:

· What do you like to do? (As a hobby, for example.)
· What are you good at?
· How long have you done that?
· Would you say your knowledge on the matter is a little, intermediate, or a lot?
· Create a list of 5 — 10 things that you love to do.
· Create a list of 10 — 25 things that you feel other people need.
· Compare your two lists. Do you notice any overlap?
· Are there businesses currently doing any of the 5 — 10 things that you love to do?
· Do you think the marketplace can sustain another business in that sector?
· What would you do the same as those other businesses?
· What would you do differently?

Once you've asked yourself these questions, then you're ready to start… PLANNING! Click to MoreBusiness.com and check out the resources there (such as business plan templates).

Related Link: Health insurance leads can help you grow your business through a good return on investment.

Lenore writes, “Buzz we have some concerns in our medium-sized business over how to deal with harassment (i.e., sexual harassment or racial discrimination, etc.). Thankfully, we haven't seen any cases but we want to be best prepared for the possibility. How can we do that?”

Dear Lenore,

“Thanks for the question, Lenore. Next week I'll be writing about this in greater detail on morebusiness.com but I have two pieces of advice right now for you:

1. Create a written policy today! Having a policy in place won't prevent harassment from happening but it will ensure that you handle each case properly and efficiently.
2. In your size of business, there aren't a lot of options to turn to if someone does feel harassed. A panel, rather than a single human resources person, is a good choice to make sure that there are several people to turn to.”