Q & A Table of Contents
How Can We Negotiate Before We Bring In The Lawyers?
From: Megan, San Bernardino, CA
Question: Our company has developed, patented and manufactured a product. We have received a dozen reviews from magazines that best represent our target market, newspaper articles and television spots. We have also received an extremely high SLR (Success Likelihood Rating) from the WIN (Formerly Wal-Mart's Innovative Network) Product Assessment Team.
It has cost us everything we have to get to this point. Because we are still so new and have used up all savings, equity in our home & vehicles, etc. a bank will not touch us.
We decided to place an ad in the newspaper seeking a co-signor of $75,000 in exchange for 10-15% of our company/possible partnership. We have narrowed it down to one individual, who has previous experience taking a product to market. They bring with them a great deal of experience as well as understanding of the unique situation we are in.
We know we need to have an attorney in the final stages, but can you offer advice for the preliminary stage. IE: the first couple of face-to-face meetings. We want this (we NEED this) to work out. I want to negotiate a FAIR deal for all involved. Are there basic questions I should ask, besides the obvious, "What do you want from this deal?"??????
Response: You and your investor have a common interest; you both want to maximize the productivity of their investment, rather than spending money on attorneys' fees.
You and your investor should agree on an agenda before you meet; figure out what details need to be agreed upon in order to develop a mutually satisfactory contract. If you can agree ahead of time on your agenda items -- both the substantive issues and the order in which they will be discussed -- then you will have a more productive meeting. Moreover, you can take notes on the agenda and present those notes, with the initials of the parties to a lawyer as the outline of the 'guts' of the business deal you want the lawyer(s) to turn into a contract. That will reduce the amount of time the lawyer(s) need to spend on their part of the job.
I imagine the agenda items may include issues to which you have already reached general agreement for example: the amount to be invested, the share of the company thus gained, membership on a board of directors if it is a corporation, the ability to buy each other out if there is a disagreement, any time limit of the relationship, or what happens in the event any party to the agreement dies or cannot perform his/her obligations. Other similar issues may also be discussed and decided as you and your investor meet to make the basic arrangements.
It is really a matter of finding out what specific matters concern each party, agreeing to discuss them, and finding your own best answers.
Good luck on your venture,
Steve
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