Video Transcript

One painful mistake made by many new business owners is not having adequate protections on the people that they are adding to their team. So here's the scenario. Imagine you start a business. You hire a key person to manage some of your biggest customer accounts. You trust that person. You train that person. You hand over those customer accounts to that person. You are still involved a little bit, but that person primarily is doing the work. A couple of years goes by, and your most lucrative accounts are managed by that person. Imagine the sense of betrayal you would feel if that employee left, either went off on his or her own or went to a competitor, and then brought all those customer relationships with.

Unfortunately, I see that time and time again. Or for example, maybe it is not a relationship with major accounts; maybe it is knowledge that the employee acquired about how to do a specific type of marketing. Or maybe it is a relationship the employee built with a referral source or a vendor or a supplier, and the employee leaves, takes that relationship with, and now you are dealing with the frustration and betrayal of somebody you invested so much in as a business owner. But you are also dealing with the financial fallout of losing that revenue source while still having to cover all your overhead, all your payroll, all your expenses. That can be extremely frustrating. And so if you are hiring people who you are going to trust and entrust with your property and secrets and strategy and confidential information, it often makes sense to have some protections in place for you so those people can't go and compete with you immediately in your direct market, or at least they can't solicit your client's, customers, employees, suppliers, or vendors.

For example, imagine how you would feel if, after this employee leaves, then they contact three more of your best employees and offer to pay them 30% more in order to come work at the new company. Well, you are already dealing with the fallout of losing that revenue source, and now this ex-employee is trying to steal some of your other great workers and tear apart your team. Essentially, you, as a business owner, have built this business, and it is now exposed to the risk of departing employees, taking your assets and the value with them.

So how do you stop this? Quite simply, you can explore having a non-compete agreement, non-solicitation agreement, confidentiality agreement, and some other basic protections in place legally so that these employees, if they do this, they are breaching a contract. And not only can you sue the employee, you can sue the company they go to. And not only that, most of the time, you have a right to disgorgement. Disgorgement means when the profits come into them, the court can disgorge those profits and give them to you, essentially taking any benefit that they get from your assets or in violation of the contract and moving that benefit over to you.

These are powerful contracts and powerful options available to you as a business owner. This is one of the common pitfalls I see for new business owners. And this video is available to you as a subscriber-only. It is not available online. It is only for people who subscribe to this mailing list.

If you know of other business owners who would benefit by this educational free content, feel free to encourage them to subscribe at aaronhall.com/free. In my next video, I am going to talk about another common pitfall and how you can avoid it. It is going to be common mistakes in contracts. We all have contracts.

Today we talked about with employees, but contracts with vendors, suppliers, customers, clients, business partners, investors; what are some of the common mistakes that I see new business owners making related to contracts? You will find out more in the next video.

I am Aaron Hall, an attorney for entrepreneurs and business owners. Thank you for joining me today. Keep an eye out for the next email from me with a link to another video.