The Dangers of Discounting are clear. A small discount has a huge impact on your profit margin and you will have to work very hard to recover the potential profits thrown overboard in a discount.

It is called a discount the first time you do it. It is likely to become a price war as soon as either you or a competitor moves to match a lower price. It all happens oh so easily.

Price wars are fuelled by fear – the dread that you will lose the sale if you don’t match the competitor’s price. That is understandable, but it is all based on a lack of confidence in the merits of your product.

Now, there may be good reason for that uncertainty. Maybe your product is not the best in the market. If that truly is the case, then a price war may have a good outcome after all. It may force you either into a new market or push you towards developing a new improved product. Such change may be the only way to hold back the Darwinian forces besetting your business.

While we are on the subject of markets, think about the effect a price discount is likely to have on your market.

First, it tells your customers that your product is just another commodity where price should dominate their purchase decision. Do you really want to be just a commodity?

If your product merits confidence, it is clearly much better to position your product as an item which has added value. Display your confidence that your product possess some intrinsic merit that warrants a higher price.

Women’s cosmetics are a good example. Cheap face crème comes in a large container with a small price. Put roughly the same ingredients in much smaller container, wrap in it nice packaging and give it a classy name and you can sell it at a huge mark up. Essentially a small amount of the same substance can be sold at price that is a multiple of price of the cheaper packaged brand. It says much about human nature, the power of branding and the irrationality of buyer behaviour. The end result is a skincare industry worth around $7 billion.

The audacity of charging much more for far less is all about brand confidence. Such brand positioning tells a story to the buyer. It espouses a belief that this item is worth more, far more and as buyers we fall for it… regardless of how irrational their valuation is and how much we suspect its validity.

Consumers want to believe additional value and benefits can be attained, if they are just willing to part with some extra cash. They want to believe they are special and they may get a certain satisfaction out of spending money on themselves. Their retail therapy regime may even be heavily reliant on such instant gratification.

What will a price discount say about your product? Will you lose credibility or prestige in the eyes of your customers?

A price drop could mark a new price line – a lower starting point when your customer begins their next round of price negotiations. Once they know you are a soft touch and that you are willing to drop your prices to get a sale, you can expect them to come knocking on that same door next time.

Another large danger also lurks. If your competition is of a similar mindset, there is a risk that they also drop their price to hold onto their chunk of the market. It could lead to a deadly race to the bottom where you both frantically discount your way into oblivion.

The only thing that will sustain a company in the end is profit. Not market share. Not product reputation. No customer goodwill. Without revenue you will eventually have to start cutting expenses. The math is simple. Things will eventually deteriorate unless you have abundant capital or other products that are subsidising your operations. Survival will then depend on the depth of the cuts and what people, resources or assets you have to throw overboard to stay afloat.

Business is about making money. Despite all the administration, strategy and processes involved in running a business and all the frenetic activity it demands of you, if you are not making money… you will drown. It is just a matter of when.

Photo by Gianni Dominici

What’s in a name? Not a lot in this case.

A Deed of Release and a Deed of Settlement are essentially the same document with just a different title. One title may be preferred over another, depending on the author’s perspective and whether a release from an obligation is being sought or whether a settlement is being finalized.

Some even cover both bases and call it a Deed of Settlement and Release. Don’t let the name throw you, it is the content that matters.

The key thing to remember is that this is the last chance to negotiate. Once such a document is signed, the deal is finalized. If it is well drafted, it will be impossible to revisit any issues or to make any further claims.

We can assist you.

We charge a flat rate for initial review and advice. Our standard charges will apply for negotiation of any amendments.

Contact us today!

We can review your Deed of Release or Deed of Settlement and give you peace of mind that you are fully protected.

Signing a Deed of Release is a big move.

You are probably about to accept payment in exchange for giving away certain rights.

A Deed of Release is usually designed to exclude any further legal action. It is the final settlement and brings all negotiations to an end.

It also often includes a provision that bars you from taking any further legal action.

Make sure you get it right. Once you put pen to paper you can’t revisit the deal. The deal is done and the transaction or settlement is completed.

Adroit Lawyers can examine the document for you and advise you on its contents. You can also engage us to negotiate amendments on your behalf.

Let us take the strain out of what is probably already a difficult situation.

We charge a flat rate for initial review and advice. Our standard charges will apply for negotiation of any amendments.

Contact us today!

There’s no substitute for experience gained from negotiating and documenting major commercial deals and Adroit Lawyers can deliver that experience to your next venture.

Business leaders know how important a deal can be to their company’s future.

They ‘live’ the deal and inevitably the highs and lows of the negotiations assume great importance in their lives.

Adroit Lawyers understand that passionate dedication and the need for legal services that hit the target, on-time and on-budget.

Call us if you want a lawyer who has walked in your shoes, delivered major deals and understands commercial goals and the pressures you face.

We’ll help you achieve!

The following article is reprinted with permission from Darmesh Shah, founder of hubspot.com – a leading website marketing site and author of the onstartups.com blog.

First off, let me begin with a disclaimer:  I AM NOT A LAWYER, I don’t play one on TV and I don’t play golf with lawyers on Sundays (I don’t play golf at all).

None of the content from this article  should be taken as legal advice.  If you have a situation that does require professional legal advice, please seek legal counsel.

The following are some tips from my own personal experience working in and around startups.  Clearly, your situation is different, but I have found that there are often “patterns” in early-stage startups.  These tips are written from the basis of an early-stage startup with just one or two founders.  It’s based on startups in the U.S. (I’ve never started a company anywhere else).  It’s not meant to be exhaustive or detailed, but to just provide some of the core elements that startups usually consider when contemplating whether or not they need to hire a lawyer.

When You Need A Startup Lawyer (and When You Don’t)

1.  Company Formation:  Usually, the early process of formalizing your company (creating an Inc. or LLC) does not require a lawyer to get the paperwork done.  There is plenty of information on the web to help make this decision yourself, in most cases.

2.  Operating Agreement:  This one’s a bit more complicated.  If you need to have an operating agreement (that defines the rules by which the company will be run), you’ll probably need some legal help.  Operating agreements can be complicated (though a fair amount is boiler-plate).  Usually, single-person entities don’t need a sophisticated operating agreement, but as the team grows and you need to structure control and governance better, this will likely become necessary.  Even if it’s not a full operating agreement, you’ll likely need something that defines how big decisions get made, the terms for anyone that holds stock in the company, vesting periods, termination clauses, etc.  Once the company consists of more than just one person, it becomes increasingly important to define these things.

3.  Employee Agreements:  It may be advisable that you have each of the employees of the company (including yourself) sign some basic agreements such as non-competition, non-soliciation, etc.  These are usually pretty straight-forward and samples can be found online.  Common things to see here are what an employee can’t do after she leaves the company for some period of time (often a year or two).  Examples include:  Not working for a competitor.  Not soliciting other employees to leave.  Not taking client lists.  Not revealing company secrets.  The documents can range from reasonably simple and boiler-plate to pretty complicated (based on what your needs are). [Editor's Note: While basic agreements are a calculated risk, if your project has any inventive element or valuable intellectual property is being created then you are well advised to ensure your ownership is watertight.]

4.  Trademarks:  If you intend not to hire a lawyer in the early days, you should probably at least do a basic search for your company name to see if the trademark is available.  This can be done at the U.S. Patent and Trademark Office website.  I generally don’t worry about registering trademarks in the early, early days of a company as it’s rarely the case that trademarks have been an issue.  At some point, you’ll likely want to trademark your company name, product name, etc.  On a related note, I’d adviseagainst trying to find an available trademark — registering it, and then trying to use it to get a domain name from someone that owns it.  This is painful.  When picking a name, just find a domain that’s already freely available (or available for sale).

5.  Patents:  Patents in the software industry are still hotly debated but can be an important asset for you in certain situations.  I’m not going to tell you when you should or shouldn’t patent.  But, if you do decide to try filing a patent, you’ll likely need a lawyer to help work it through the system.  Also, do some basic reading on the web on what not to do should you intend to file a patent (like talk about the basics of the patent publicly too early).  You may also want to consider filing a “provisional patent” which is much easier and helps lay some groundwork should you decide to file a full patent someday.

6.  Financing/Investors:  If you’re going to raise money from outside individuals (particularly VCs), you’re going to need a lawyer.  Probably a really good one that has experience executing financing transactions for startups.  In most cases, you (the company) pays for all legal fees — including theirs.  Prepared to be annoyed/irritated/offended at the high costs for executing what you would think would be a “standard” transaction with lots of boiler-plate terms.  I don’t know why it costs so much, I just know that it does [Editor's note: We hear the need for reasonable rates and pakaged service fees are available].

What I would do (though this may seem out of order to some):  Have the idea.  Find suitable domain name and company name.  Create the entity (either S-corp or LLC).  Work like heck to build something.  Attract team members and/or co-founders.  Then, engage a lawyer that has tons of experience dealing with startups and have her work on the basic corporate docs we need.  If done right, this same lawyer should be able to help with the legal side of the first round of financing (if there is one).

A couple of things in closing.  When you’re hiring a lawyer for your startup, it’s important to remember that the she represents the company — not you.  In most (but not all) cases, the company’s interests and your interests are aligned.  But, as the company evolves and grows, interests can diverge.

Business 101 – How to Get Paid

Regardless of how exciting your Web 2.0 project is and how ‘cutting edge’ your technology may be, it’s still important to pay attention to the most fundamental principle of business – making sure you get paid.

The risk of being ‘dudded’ is reduced by following a few simple rules.

Despite their simplicity, it is surprising how often these basic business principles are bypassed or forgotten. Structure your business processess and secure your right to payment.

Rule 1: Identify Your Client

It sounds simple, but the complexity can be hidden under the surface of a business name or blurred by our failure to correctly identify the entity that is to pay. Often, this is due to the haste of agreeing to a job that’s “just for a couple of days”.

Time for some basic legal theory: Businesses are generally structured as sole traders, partnerships or companies. The type of structure makes a big difference to who has to pay.

A sole trader may operate under their own name or under a business name (registered with the Department of Fair Trading in the respective state). Sally Smith, as an individual, is liable for her debts. Don’t be puzzled if she operates under a business name such as ‘Amazing Skills’. The contract is still between you and Sally. Any agreement or invoice should make it clear that Sally Smith is required to pay you. Refer to her as “Sally Smith trading as Amazing Skills”.

The same approach works if Sally is in a partnership with Sam. Contract with Sally Smith and Sam Chung “a partnership trading as Amazing Skills”. The beauty of dealing with a partnership is that they are both bound to pay any debt the partnership owes. So, if one partner can’t or is unwilling to pay, then the full debt can be recovered from the other partner.

There are two main company types. The common-garden-variety will have a name like Amazing Skills Pty Limited. If simply named Amazing Skills Limited, it is a public company and is probably listed on the ASX. Corporations can also hold business names or operate through a subsidiary.

Clarify which entity in the corporate structure is engaging you and verify that the person giving the undertaking to pay is authorised to bind the company. Usually senior executives have this power. If a substantial amount of money is involved, it’d be prudent to get a director (or better still two directors) to put pen to paper.

Rule 2: Record the Deal

That reference to paper highlights a crucial point – make sure you get the deal set down in writing!

Memories fade (not always wilfully) and a written record can clear things up. It also provides excellent evidence of the debt if things turn sour.

Rule 3: Use the Correct Address

Cite the other party’s registered office address on your agreement and any invoice. Send all correspondence there. This removes any question about whether proper notice of the debt was given.

Taking Action

If things turn ugly, there are cost-effective ways to boost the heat. A solicitor’s letter often gets the desired result. Or you could make use of a Small Claims Tribunal or local Magistrates Court. Sadly, the structures vary in each State as do the monetary limits (around $5,000 -$10,000).

If it’s enough money to buy a new car, the correct jurisdiction will probably be a District Court. More serious cash means your matter is destined for the Supreme Court – and all that involves.

The above rules aren’t fail-safe, but they are sound defensive measures. Adherence will help ensure you are fairly rewarded.

Whether you’re selling your business, signing-up for a project, or finalising any other deal, the first step is to get a good overview of the deal in your own mind. Always remember basic concepts and keep reverting to a macro view of your overall strategy so you can maintain your bearings.

There is considerable flexibility in how a deal is documented and progressed. The main aim in any deal, and any well-drafted legal document, is clarity of the key terms: What is to be done? When? How much is to be paid? Who is liable if things go wrong? Of course, many other issues must eventually be recorded and there’s no shortage of distracting issues.

A deal should be built to suit the particular transaction, its timetable and each party’s concerns. Interim documents can sometimes be bypassed or selectively used – just like selecting a particular item from a legal tool kit. The only really mandatory document is the final detailed Agreement.

Keep the transaction simple and don’t let the other party bamboozle you with unnecessary complexity or with jargon and terminology.

Let’s work through what deal building tools you can use if they are seeking a Deed of Confidentiality, Deed of Non-Disclosure, Deal Memo, Term Sheet, Heads of Agreement, Memorandum of Understanding or Letter of Intent.

No binding legal agreement can be formed without the presence of at least one drop of consideration.

If a person makes a gratuitous promise it will not be binding unless something is exchanged or “buys” that promise.

That extra element given to acquire an undertaking – either to do something or not to do something – is consideration.

A legally binding deal will simply not exist if consideration is not present.

Consideration is a bit tricky to grasp at first because it can be so intangible.

It is an important legal concept however.

Although the forms consideration can take are almost infinitely varied, the absence of consideration is fatal to the existence of an agreement.

Hundreds of years of law have built up numerous rules concerning consideration, but a few simple rules will give you the general idea:

• while the consideration must be of some value (at least from a legal viewpoint) that does not mean that it needs to be valuable;
• consideration needs to flow from the one receiving the promise, but the benefit of that promise can be directed to anyone nominated to receive the promise; and
• the consideration must relate to some future undertaking to either do or not do something as it can’t relate to ‘past’ consideration which has already been given.

Importantly, an absence of consideration can be overcome by documenting the agreement as a deed rather than as an agreement. Deeds do not require the presence of consideration to be legally binding and enforceable.

The other primary difference between a deed and an agreement is the way the deed is signed (or ‘executed’ in legal speak). There are certain legal formalities that a lawyer can guide you thorough in the execution process to ensure the deed is validly signed. In most other respects a deed and an agreement are very similar documents.

The task of buying or selling a business can be daunting if you lack experienced assistance. That is why teamwork is key to any major deal.

It can be hard work managing each aspect of the transaction: the accounting, legal, commercial and operational factors – particularly if you don’t have all the assistance you need.

It can be equally demanding if you are trying to launch a new subsidiary or venture and you don’t have all the firepower you need to get the job done.

The load of trying to achieve so much without enough help is gruelling and it can result in a deal slowing or even being lost if the other party’s enthusiasm wanes.

We’ve developed a range of service options to meet those needs. We can work with you as an advisor, on a project basis or as a vitual lawyer.  It really comes down to your requirements.

We’re keen to help you take your business to the next level and we’re convinced that experienced advice will lighten the load and make success more achievable.

Of course, choosing the team that will assist you is an important decision and it is wise to understand how our services could help in your particular circumstances.

The best evidence of results we’ve delivered are the recommendations others have kindly given.

Here are a few tips that may help to demystify legal jargon and enable you to use business terminology more accurately.

Joint Venture / Partnership / Alliance
The terms joint venture and partnership have very serious legal implications. Unless you mean to use them in their true context, avoid the use of these terms. They will cause confusion in the other camp if they are used indiscriminately. A more general term that is less likely to provoke concern is “alliance”.

A joint venture is a legal arrangement that normally requires significant commitment from the participants. It generally connotes the incorporation of an entity in which the venturers are joint shareholders. Often the new entity is initially supported by shareholder contributions before it launches its own business. The subsequent profits are divided according to the equity held by each party.

Partnership is also a precise legal concept that means two or more persons working together with a view to making profits. The danger of entering into a partnership is that each partner has the power to bind the other partners. If one partner incurs a debt, the creditor can recover it from the borrowing individual or from any other partner.
In short, unless it is completely accurate, avoid the use of the word “partner” or any related terminology. A better term to use is “working together”.

Agreement or Contract
There is often confusion about whether a document is a contract or agreement. It is really the same thing and the terms are interchangeable.

Deed or Agreement
There is a legal difference between a deed and an agreement although there is not a great deal of practical difference, other than the name and the way the document should be executed.

A crucial reason to execute a document as a deed rather than an agreement is if there was concern over the existence of valid consideration. This is a fairly legal issue, so don’t worry too much. The key point is this: Don’t be overly perplexed by a document being a deed and not an agreement.