Hello everyone.
Welcome to LinkedIn Live.
I have these every last Wednesday of
the month, at noon.
Eastern.
So, again, Erin Austin, very happy
to be here with you, founder of
Think Beyond ip, we talk about.
Issues that help you scale and
hopefully someday sell your business.
this is being recorded live on
LinkedIn live, but it's also going to
be, distributed as part of my podcast.
Hourly to exit.
So just to let you know if you are
listening to this on the podcast,
that there are some slides that
go with this conversation that
will be helpful.
So you can find them either over,
my YouTube channel for Think Beyond
ip, YouTube channel, or, I will have
that there's a link to the slides
actually in the show notes as well.
either way, you should be
able to get.
The full benefit of our conversation
today, Feel free to put,
questions in the chat at any time.
Today we're going to talk about
non-competes, which I call niche
killers, and, that will become
very, obvious.
Why, as we go through our
conversation.
first, what is a non-compete?
So, non-compete is a restrictive
covenant, and you'll find it as
a provision in your client agreements
where they restrict your ability or
maybe even prohibit you from working
with any of their competitors.
what is a group of competitors?
If you specialize in working with
law firms or you specialize working
with doctors, or you specialize working
with teachers, a group of competitors
is a niche.
And so that specialized
segment for your goods or services.
Now, if you are here, you've
probably heard a million times that,
riches are in the niches there are
tons of resources, if you haven't heard
that before, that I can point you to.
I love the, business of
Authority podcast.
Talks about that a lot.
Jonathan Stark and Rochelle Moton.
also, biz Chicks talks
about it a lot.
the two bobs, there's so many
resources to tell you about the value
of having a niche.
Now, just to go over them very
quickly here, one, know, to be fishing
in a, Small pool instead of fishing
in an ocean.
Your resources are the same whether
you're fishing in an ocean or you're
fishing in a pond, and so you're
gonna be a lot more effective fishing
in a pond with your resources than
you are fishing in an ocean.
Also, when you have a niche, you
get very strong positioning.
You become known as the go-to person
or the authority in your area, and that
is only possible within a niche.
You have less spending on
your marketing.
When you are known as the authority or
the go-to person, then you are
highly referable.
People will know, oh, I know
exactly You are an accountant
and you need help with your S E O.
I know exactly who you need to talk to.
So you become very referable and,
therefore spend less on marketing
when you are known as the authority
in an area you can.
command higher premium pricing.
You cannot get those premium pricing when
you are just another SEO expert or just
another copywriter.
and then it, of course, it
accelerates the development of
your expertise.
When you are working in a specific
area, you get to know intimately
the issues that your clients have,
their businesses really well, you
know the language that they, speak
and that helps you really accelerate
your expertise.
It's all kind of builds on
each other.
And so if riches are in the niches,
then what is in non-competes?
And so it's really kind of the opposite
of what's, the riches In the
niches, you have weak positioning.
if you are working, if you're doing
SEO o for every different kind of
client, it is very hard to have a
strong positioning, as they say.
If you work with everyone, then you
work with no one.
Your messaging is very squishy.
Are you talking to, clients who
serve customers, or are you talking
to clients who serve patients, or
are you talking to clients that serve,
collaborators like.
Who are you talking to?
What is the language that they're using?
And that's hard to do if you don't
have a niche.
You get a grab bag of clients.
in the legal world they're called, the,
front door clients.
Like anyone who walks through the
front door is your client is, and that
generalist, law practice that's,
Actually, pretty hard to maintain.
the more niched a lawyer is, the
higher and more premium prices
they can command.
And that applies to many other areas of
expertise as well.
And then if you are getting referrals
at all, cuz sometimes you aren't
because people.
Find it hard to refer to you.
They aren't the right kind
of referrals.
They don't quite understand
what you do.
so if they just hear some random
buzzword, then they'll go, oh yeah,
I think you need to talk to this person.
And then you spend time on the phone
with them and find out that they're
not the right referral for you.
It's much harder to build valuable
IP because again, you're kind of all
over the place and often you'll find
yourself reduced to selling your time
instead of selling your expertise.
these are the reasons we don't
like non-competes, which interfere
in our ability to create niches and
all the wonderful riches that
come with them.
So let's talk about some
specific examples of non-compete
provisions that you will see in your
services agreements.
again, look for the slides if you are
listening to this on the podcast.
So my first example, which, involves
when you are the subcontractor and
there is an end client it is not.
That unusual for your immediate
client to want to prevent you as a
subcontractor from doing an end run
and serving that end client directly?
not that I'm a huge.
Antifa of non-competes, but
the only time I'm not offended by
non-competes is in this circumstance,
it is fair for your client not
to expect you to like, do the end
run and go directly to the end client.
for those services that you've been
engaged to do.
in this example, if the contractor
provides services to a client of
company under this agreement,
subcontractor agrees not to independently
contract to provide services to such
client during the same period and for
a period of one year after completion,
expiration, or termination of
such services.
If subcontractor has an existing
agreement in place with a company
client prior to the effective date of
this agreement, any services provided
by subcontractor pursuant to that
agreement are excluded from
the proceeding restriction.
And just to clarify, in this
example, you are the subcontractor
and your client is company and then
company client would be the end client.
And so this is an example where, your
client does not want you to do an end
run to go directly to the end client.
That said, it is still too broad.
There are a number of issues that
I have with that provision and, In
this next slide, I am, addressing
the way that I would remedy this
to make it more reasonable so it
doesn't interfere with your ability to
create your niche.
I e work with competitors of your
client, In this one, one, you need to
make sure that you actually know who
that end client is.
Depending on the nature of your
services, sometimes you don't know who
the end client is.
Maybe you're brought in just
to do something specifically.
Maybe, in the market research field,
you may be brought in to provide.
respondents and you don't know who
the end client is, so you certainly
don't want to agree to, not provide,
services with an end client that you're
not even aware of.
So you, would, accidentally breach
your agreement.
Also, you may provide services
that don't actually compete
with your client.
You may be in completely different
industries, but your client is providing
kind of a 360 degree, solution.
And so they need to bring in
subcontractors in order.
To fill in the blanks where they
don't have that expertise in house.
So if you are not competing with your
client, there's no reason for you to
not be able to work with that end client
providing services that don't even
compete with your immediate client.
So you wanna make sure it's clear
that any non-compete would apply only
to services that compete with your
immediate client.
Also for that one year tale, that one
year non-compete period after your
services have been completed.
the point is for you to not poach
this client, the point is not for.
There to be some exclusive market
that only your client can play in.
You have your own expertise, they have
their expertise.
You should be able to go out in the
market and compete in the market
based on your expertise without
any restrictions.
And so that non-compete period
just apply to providing services
to that client in connection with
this engagement.
And then, never, agree to anything
that will interfere with your current
relationships.
As an expert, one of your most valuable
assets are your relationships.
So if you have relationships
either that you're cultivating or.
That are with actual clients, you want to
be able to continue to cultivate those
relationships.
You don't want anything to come
between you and that, obviously
if you have a client that has,
worked with you in the past and they
come back to you, can you imagine
having to say no?
because of one of these non-compete
provisions.
So make sure that it doesn't apply that
any non-compete.
Not only carves out existing agreements
but it also carves out existing
relationships.
Another example.
So this is, a more general
non-compete, not the subcontractor
scenario, but it is just you and your
client may, have engage with the
same market from time to time, and
your client just wants you completely
out of the market.
and just because you've worked
together on this one specific
project, and that is unreasonable.
So this language during the term
of this agreement, and for a period
of one year after the termination
of this agreement.
Contractor shall not engage in
any employment, consulting, or
other activity that competes
with the business.
Proposed business or business interest
of company and contractor will not
assist any other person or entity
in doing so without company's prior
written consent.
There are many, many things wrong
with this provision.
So many that my recommendation is
to simply strike it.
you're not in the business of
carving up the market for using
your expertise.
you have yours, they have theirs, and
you should be able to go out into the
market and compete.
As the market, demands.
step one is try to eliminate it
all together.
Now, any contract negotiation depends
on the relative, negotiating power
of each And so there may be a reason
that you need to agree to some level
of non-compete, and so you need
to negotiate this provision.
So here my recommendation, the
fallback position would be first limit
the term or the non-compete to the
term that you're working together.
Two, the restriction on Doing competing
employment or other activity
is far too broad.
maybe you are solo and one of your
other clients, wants you to go in
house and that is a competing client.
There should be no restriction
on your ability to go in-house
with a client and provide services.
you will always be subject to the
non-disclosure obligations.
You, of course, are not permitted to use
any other party's, intellectual
property or their secrets without
their permission, but for you to use
your expertise, you can use it
with anyone.
and so we're limiting that
language, that competes with
the services, they have here.
You can't compete with proposed
business or business interest.
I mean, how broad is that?
How would you possibly know what
other proposed business, prospects
they're looking at, what other business
interests they have other than what
you're directly engaged to perform.
So you need to eliminate anything
that is so broad and so vague as proposed
business interests.
and then you can't, assist.
Well again, you may not know that one
of your clients, is a competitor
of the old client.
you can't, be in a position of
accidentally an agreement because
you're not aware of who the end
clients are.
And again, always, always, make sure
that any restriction does not apply to
your preexisting relationships.
Now, there is a provision here
called interference.
This is a real provision that came
from a services agreement that.
Absolutely blew my mind when I saw it.
And I think, you don't need to be
a lawyer to know why this, provision
is so outrageous.
during the term of this agreement,
and for a period of one year following
termination or expiration of
this agreement, supplier agrees
not to induce.
Or attempt to induce influence or attempt
to influence any client, supplier
or other business relation of company
or any affiliate of company deceased
doing business.
Terminate or modify any written or
oral agreement, arrangement or
course of dealing or to otherwise
interfere with the business
relationship.
This is so broad that you literally
couldn't, like what can you do
that doesn't breach this provision?
anytime you talk to another client,
another supplier or other business
relation, I mean all sorts of people
we have business relationships
with, that might.
Caused them to work with you instead
of with them and all those things.
Even attempting to, not even succeeding
to, but just having a conversation
about possibly working together
would breach this provision.
This is a hundred percent unreasonable
and, absolutely, would be something
that could.
Kill your business and as a general
rule, you know, even with provisions
that seem a little more reasonable,
such as the very first one regarding
the subcontractor arrangements, you
need to think about.
The overall effect of agreeing to
provisions like this, any version
of non-compete or non-solicitation.
You if you agreed to the language
that this particular client is asking
you to agree to, and you did that
with every client, be out of business?
Like what would be left if with
every client you said, okay, I won't
work with any of your competitors.
And so that eliminates 20%
of the market and then you do it
with another one, eliminates another
20% and another one pretty soon you're
out of business.
So you really need to think about the
overall effect of agreeing going,
just slippery slope of non-competes,
when you think about that.
make sure that.
You don't lose that when you're,
negotiating with your clients.
So the key takeaways here, You need to
restrict any type of non-compete.
You know, first try to get rid of 'em,
but if you can't, make sure that any
restriction is as narrow as possible
in terms of the time that it applies,
who it applies to and what services
it applies to.
Make sure that standard carve
out is there any preexisting
relationships must be carved out.
most importantly, don't be afraid
to stand up for your business.
It is a B two B relationship.
You are partners in making sure that
both parties have, a happy resolution.
Any business relationship where
both parties don't feel like they got
value from it is an unsuccessful one.
And so the other party does want you
to feel good about their relationship
as well.
And they are set up for you to have
conversations about those provisions.
What do I do if my client insists
on including a non-compete?
Yeah, I mean, sometimes as it
will happen, and again, depending on
the nature of your industry, it will
be very important for them to know
that you aren't.
Working with their competitors.
Certainly if you're doing anything that
involves access to your client's
trade secrets, they are going to,
probably insist on having some version
of a non-compete.
And so again, you're going to have to
just make sure that it is as narrow in
scope as possible.
and even specific to, maybe let's
say it is a pharmaceutical
company and they you to not work with any
other pharmaceutical companies, maybe try
to get it as narrow as We won't work
with someone who is in the same category
of drug, know, diabetes drugs or
hypertension drugs.
So as narrow as you can make it
so that, you can still work with
other pharmaceutical companies.
You certainly there are a lot
of pharmaceutical companies, although
they may be competitors on the
surface, they really aren't because they
work in different areas of, therapy.
that would be my recommendation.
Um, again, just as narrow as possible
and making sure that you can
continue to work with your existing
relationships.
one other thing I wanna add, Is
when they ask you to come and get
their approval of working with
any competitors.
That is generally not workable.
Your clients are not going to want you to
talk to your other clients about who
you're working with and they wouldn't
want you to.
so anything that says you need to
come to us and get approval really
isn't workable.
You need to just make sure that
there are very clear parameters that
you can work with.
so that you can continue to grow
your business, create a niche
so that you can develop, a high
value business, where you're known
as the authority in the business
can command premium prices,
can accelerate your expertise all
the riches that come with niches.
So, Thank you for joining me and all
the links, will be in the show
notes and of course if you have any
questions, please don't hesitate
to contact me.
Oh, actually have contact page.
you can find me on LinkedIn.
I am the Erin Austin, without
Thethe of course, and I also have
many resources.
On my website, think beyond@ip.com
where you can find me as well.
So thanks again for joining me.