Can you imagine what would happen if your lead salesperson walked out the door with her rolodex?  Your sous chef with your recipes?  Your buyer and her key relationships with suppliers?  These are disasters that could undermine the financial health of your business.  You can hedge against these potentially catastrophic losses by making sure all of your employees entrusted with proprietary information sign employment agreements.

The key clauses that will give you some peace of mind — confidentiality, non competition and non solicitation.

Confidentiality:  To keep employees from walking out of the door with your hard earned secrets, every employment agreement should include a clause that prohibits employees, both during and after their term of employment, from disclosing, or using for their own or another person’s benefit, your company’s confidential information and trade secrets.  So long as these provisions are carefully drafted so as not to be vague or ambiguous, they are enforceable in most states.

Non competition:  Understandably, courts are very careful about enforcing non compete clauses, as they have the potential to prevent a former employee from making a living.  Restricting competition during the term of employment is fair game.  But as a general rule of thumb for post-term non compete clauses, any restriction must:  (i) be no great than necessary to protect a legitimate business interest, (ii) not unduly oppress the former employee’s ability to earn a living, and (iii) be reasonable in light of public policy (which generally disfavors these clauses).  If you want to include a non compete clause in your employment agreements, it is vital to receive legal advice — an unenforceable non compete clause could cause the entire employment agreement to be unenforceable, including clauses that would otherwise have been enforceable.

Non solicitation:  When an employee leaves, non solicitation clauses can prevent the immediate loss of other valuable human resources — other employees, customers and vendors.  These provisions essentially provide you with regrouping period, during which the departing employee can’t interfere, directly or indirectly, with your current relationships.

The same is true with business transactions:  No deal is really complete until the parties have satisfied all of their obligations and the parties feel good about the value received.  Closing the deal is just the beginning of the relationship.

A client recently sent me a joint venture agreement to review.  The opposing party (OP) was proposing a 75/25 split of the upside in OP’s favor.  At first glance, that didn’t seem outrageous since OP was providing all of the funding.  Then as I got deeper into the deal, I see that OP was going to raise the funds from third parties.  And they were going to take a fee off-of-the-top for doing so.  What?  No risk, no reward.  My other hard and fast rule is that my essential function is to be a dealmaker, not a deal killer.  But this one was a rare exception.

 1.         Reward

            First, determine the best possible outcome of the deal without regard to the risks.  Include monetary, goodwill, and competitive advantage rewards.  Place a value on each.

 2.         Risk

Next, ask what is the worst possible outcome.  Loss of the entire business?  Loss of the investment?  Expensive litigation?  You will find that there are mitigation options for almost any risk – insurance to protect the business, joint ventures to spread investment risk and professionally-written agreements to clarify everyone’s rights and responsibilities.  Estimate the costs of each.

 3.         Balance

            Finally, compare (i) the value of the rewards with (ii) the costs of mitigating the risks.  You may find that completely eliminating risk also completely eliminates the reward.  For most businesses, you will need to tolerate a little risk in order to see any reward.  Your personal tolerance for risk will guide you in striking the right balance for you and your business.

Clarify your desired result
Question #1: “What are we trying to do?” Whenever you become frustrated with slow progress for any reason, step back and ask this again and again.

Analyze your current methods
Question #2: “How are we trying to do it?” If you are experiencing resistance, perhaps your method is wrong. Be willing to objectively analyze your approach by asking, How are we trying to do it? Is this the right way? Could there be a better way? What if our method is completely wrong? How else could we approach it?

Could you be wrong?
Question #3: “Are we right?” It requires courage to face the possibility that you may be wrong, but it also leads to your seeing new possibilities. The rule is: Always decide what’s right before worrying about who’s right.

Question your assumptions
Question #4: “What are our assumptions” about the person, the product, the market or the business? Could we be assuming something that is incorrect? Time management expert Alec Mackenzie once wrote, “Errant assumptions lie at the root of every failure.”

What if your unspoken or implied assumptions were wrong? What would you have to do differently?

See <http://findarticles.com/p/articles/mi_m0DTI/is_10_32/ai_n6335229>

The successful negotiator listens very carefully to what the other party is saying, to determine what is that party’s “Deal Points”– in other words, what the other side wants. More often than not, one party’s Deal Points are actually Throw Away Points of the other party. Generally people ask for more than they reasonably believe to get in a negotiation, and have some points they must get, and others that are simply put on the table to trade away for what they want–the “Throw Away Points”.

2.         Understand the other side’s priorities and be willing to compromise to accommodate them.

3.         Make a win-win solution — not winning — the goal. 

4.         Remember that parties that feel fairly treated will reciprocate when the inevitable tweaking is needed and when it is time to renew.

5.         Be open to thinking outside-of-the-box and make sure that everyone on your team (attorney, accountant, banker) is capable of the same.  You have more to bargain with than just dollars and cents.

The 7 Habits of Highly Useless Corporate Lawyers.

Brilliant.