Saturday, October 28, 2006

Blogs, Websites & Podcasts: When Do You Need Permission?

In this episode we’re going to examine what happens if you use other people’s material in your business – for example, you use someone’s artwork on your blog, using someone’s music on your podcast, or using another company’s trademark at your website.
We’re speaking with Rich Stim, the author of the book Getting Permission from Nolo and an expert on copyright and fair use.

NOLO: First question, Rich do I need to get your permission to interview you for this podcast?

Rich Stim: Well, in my case, no and it’s similar to the case of most interview subjects for podcasts or newspapers or magazines. I see that you’re taking notes. You’ve told me it’s for an interview. And in this case I see the microphone, so I’m impliedly consenting to have my words broadcast or recorded or used for whatever purpose you’ve told me it’s going to be used for.
There are times when you should get a signed interview release. And I want you to keep in mind one thing which is we’re only talking, right now, about the right to use the statements that are made by an interview subject. I’m not talking about the rules for getting permission to use copyrighted music or photos or artwork or anything else. We’ll talk about that later.
But as a general rule, as you move from editorial uses to commercial uses for interview subjects, if you follow that meter from one side to the other as it gets closer to commercial and further away from an editorial use, you should get a signed release.
What’s the difference between editorial and commercial? Well, if you’re interviewing a lawyer, like me, for an article or information style podcast, that’s probably an editorial use. But if you were creating a book of interviews with lawyers, or if you were using this interview as means of advertising some other legal service like a lawyer directory, I think at that point you definitely would want to have permission from the person, something signed and in writing indicating consent for those commercial purposes.
Another situation you need permission from an interview subject is if you’re working on a project and it’s a project in which other companies or distributors are involved. For example, if you’re making a documentary film that involves distributors, production companies, and everyone up higher in the food chain is going to ask you for evidence of permissions – whether or not they’re following the rules I’m talking about. So even if the use seems purely editorial, the distributor, or the book publisher may want the release. So, it’s best to get those at the time of the interview; it’s hard to go back and get that release later.
Another thing that arises with interviews is that an interview subject may ask to read or edit the interview or to have some comments removed or kept “off the record.” Any agreement that is made with the interview subject, including an agreement for anonymity, should be documented. Failure to honor the arrangement may give rise to a lawsuit for monetary damages.
By the way, I’ve posted a downloadable sample interview release, along with a transcript of this podcast at

NOLO: What’s the best way to get someone’s permission without making it seem really legal and scaring the person away?

Rich Stim: Okay … now we’re moving beyond interviews and talking about all kinds of permissions … for example, permission to use someone’s music or photography or to use a model’s image in an ad. These cases are often different and it always it depends on what you’re using and what you’re using it for. But let’s just assume you’re going to need permission for what you’re doing.
When you want to get that permission it’s always best to keep it short and sweet – if you can – for example, I’ve met photographers for example who have reduced their model release forms to the size of a business card because it seems less imposing.
And the other thing you want to keep in mind is that you want your release to reflect the potential uses you might have for the material, uses that you may anticipate in the future. And of course, as I talk about in the book, Getting Permission, there are times when you don’t need permission at all.

NOLO: What happens if someone is creating work for you like doing photography or creating a website? Do you need to get permission to use that?

Rich Stim: Right, don’t assume just because you’re paying someone to do something that you own all rights. That’s a big mistake. A lot of people make it with photographers and graphic artists. Here’s the deal -- if someone is your employee and they – you withhold taxes, etc., and that employee creates something for you under your direction or in the course of your employment – then you’re probably never need to get permission to use that material. You’re going to own it. Now, you or your company can bolster that situation with some paperwork that assures or guarantees your rights. But generally even without the paperwork, a company is going to own what the employee creates.
But that’s not always the case if the person is a contractor. In that case, you’re going to have to make sure you’re getting the rights from a contractor and you can do that a few ways. You can ask the person to assign all copyright to you, or to acquire all rights under a work made for hire agreement – though not everything qualifies as a work made for hire. Or you can have the contractor sign an agreement that gives you the exclusive rights you want. But the important thing to remember is that there’s a difference between whether some3one’s creating something for you as an employee or a contractor. So if you’re paying someone as a contractor to take your photo or build a website, it’s best to get written permission.

NOLO: Your book, Getting Permission, explains the importance of getting permission before you sell or publish something … but don’t some people do better by not asking for permission? Isn’t it possible to get more attention by taking the unauthorized route?

Rich Stim: Yes that’s true but I’d qualify one thing you said. I don’t think doing something that’s unauthorized is what gets you attention. I think what gets you attention is that you do something unauthorized and you’re doing it really well. That’s been the case with a lot of artists. They become famous using unauthorized material without permission. That’s how Andy Warhol started his career. But to really pull it off, you’ve got to be good, and you’ve got to have some amount of artistic courage because you’re going to have to face down copyright or trademark owners who will come after you and you’ve got to have some original talent because eventually, the copyright owner will stop you from doing what you’re doing. And at that point you’ll need to come up with a way to make your talent work in an authorized way.
And I’ll make another point that’s also important. It’s all great for courageous artists to take that stance but you can’t take that “forget about permission” attitude if you’re working for a client or you’re working at a company. Some companies may take risks and nothing happens. And others - like Google, will take informed risks that they’re willing to support in court.
But generally, the business world is an “authorized” world and when you’re working work with or for these are people, you’re going to need to get permission. Because if you use an image for an ad campaign or a website or you use somebody else’s trademark and you don’t have permission that’s going to hurt your livelihood. So in these cases you need to follow the straight and narrow and get permission.

NOLO: You hear about people getting letters from attorneys accusing them of ripping off somebody’s music or artwork? What’s the best way to respond when this happens?

Rich Stim: The smartest thing to do is to investigate and respond as quickly as possible, and ideally, during the period when you’re investigating, take down whatever it is that’s offending the copyright or trademark owner. That doesn’t mean you’re caving in, but it’s an important risk-aversion approach because it demonstrates you are acting in good faith and if the person decides to sue you later that initial gesture of good faith will go a long way to saving you money on financial damages in the lawsuit, if there are any.
By investigating, I mean you’re going to have to look into the issue. Maybe you can do it by checking out some common resources that I’ve provided. But you may need to speak with an attorney who is knowledgeable in copyrights, trademarks
Once you’ve done your investigating then you need to decide if you’re going to take a stand on the issue. Is it going to be worth the hassle to you? It’s really a business decision and try to avoid deciding it solely on principle. Remember that lawyers love clients who are fighting on principle means that the fees will keep coming and keep coming.

NOLO: But aren’t these letters often just somebody trying to bully somebody else

Rich Stim: Yes, there are two types of bullying. Each is annoying in its own way. One type of bullying is when a company would probably prevail in a lawsuit against you – the company has a legitimate right to stop you -- but they’re pushing much harder than they need to get the job done or asking for much more than they really might be entitled to. You’ll have to deal with that type of aggressive behavior as best as you can … perhaps attempting to negotiate the best deal you can for yourself. A lawyer may be able to help. That’s part of the price for using unauthorized material.
The second type of bullying is the really awful type where a company doesn’t really have a legal claim or they have a borderline claim. They may or may not prevail in a lawsuit. But they have the legal muscle and financing to take you to court and you probably don’t. You see this a lot in trademark cases, where companies may try to stop another company from using a similar name. And you see it in copyright cases where you may have a right under fair use rules to reproduce something but you can’t afford to prove it in court.
Again, it’s a business decision. But I would add one thing if it makes a difference. I don’t know if it does. Try not to take the bullying personally. In most cases it’s strictly business. It’s just an aggressive or greedy company is just trying to squeeze somebody.

NOLO: So we’re doing podcast, can you give us some legal tips regarding permission and podcasts?

Rich Stim: Well, podcasts are like everything in the world of permissions. You’re more likely to run into a problem if you’re doing something without permission and it’s making the owner of that you’ve taken property mad. And of course, remember the other side of it … the tree falling in the forest thing. If nobody hears or sees what you’re doing, except a few friends, well, you can rip off as much as you want but once you land on the copyright owner’s radar screen, that’s when you’re going to may run into problem.
In a way, you’re really asking what makes the owners of a trademark and copyright mad… or at least so mad that they’re going to go after you. Well, one thing is if they feel like they’re losing money; another is if they feel they’re being publicly disparaged. So, for example, if you’re a commercial podcaster and you’re working with a corporate client, you’re always best off getting signed permissions from the talent, getting a written license to use music ( or better yet use license-free music), and you’re going to want to avoid using a title that’s confusingly similar to another company or another podcast that’s engaged in the same sort of information or services. For example, I’d advise against calling a financial podcast, “Don’t Leave Home Without It” because you’re likely to get a cease and desist letter form American Express. And they will be concerned that you’re confusing consumers that your podcast is somehow associated with theirs.

NOLO: What about linking to another website, are those ever illegal?

Rich Stim: As a general rule I’d say that linking is a non-issue except for one thing and again, that is what makes a copyright owner mad. If you’re linking to something unauthorized, yes, you’re going to run into a problem. For example, at Nolo we’ve had to go after to people who are linking to illegal downloads of our software. And those are links that are doing more than connecting you with another website. Those kinds of links do what I discussed before, they duplicate illegally and they make a copyright owner mad in the process because the copyright owner is losing money.

NOLO: You hear copyright is illegal. Is it ever possible to go to jail for copying things?

Rich Stim: Very very rarely does anyone do time for copyright or trademark infringement. Usually it’s only in large cases of counterfeit goods will you find law enforcement getting involved and charging someone with a crime.

NOLO: When don’t you need to get permission?

Rich Stim: You don’t need to get permission if something is in the public domain or if you are using something and it’s a fair use. Fair use is a great concept but it takes courage or money or to really face somebody down and claim a fair use. The principal is that the copyright law says that you can use something without permission if you’re using a small portion for purposes of commentary. That’s roughly the idea. And there are four factors judges consider but the factor that matters the most is whether you’re transforming the work. That is, it’s a transformative use. For example a parody or critical commentary are transformative, But the problem with fair use is that there are no real guidelines so you can never be sure of what it is --- unless you’re matching a court case that matches your facts exactly -- until you get to court. It’s only in court that a judge will decide whether it is a fair use. So, again it comes back to whether you want to deal with the hassle and expense of that kind of battle.

NOLO: If fair use is supposed to be about transforming the work then why did the lawyers shut down that fan fiction book at Amazon.

Rich Stim: Maybe you should explain what fan fiction is.

NOLO: Fan fiction or fanfic is when fans of a movie or television show create their own fiction using the characters from the movie or show. The case I was referring to is when a fan of Star Wars wrote a book called Another Hope using Star Wars characters and Lucasfilm complained and had it pulled form online websites.

Rich Stim: For the most part, it seems as if copyright owners are taking a laissez faire attitude to fan fiction on websites. I think they realize these people are fans and they should just let it be. That’s why you see so much of it on the web. There’s not much commerce involved, it’s being done out love for the characters and the work
But – and again we get back to this same point – once you start to make the copyright owner angry – usually by diverting commerce from their business – then somebody is likely to come after you. I think this author crossed that line by moving from a website publication to printing the material in a book and selling it. I think the same result would happen if somebody tried to make a movie out of Another Hope.

Thanks so much for speaking with us today, Rich.

Rich Stim: Thanks. I have a feeling some listeners will feel like we haven’t hit all the issues that are on people’s minds when it comes to blogs and podcasts and that’s true … so I’ve posted a few links at the and I hope to set up another podcast in the future to talk about issues like the creative commons, and more specific copyright and trademark related issues.

Interview Release Form & Explanation

Nolo Copyright Center
U.S. Patent and Trademark Office
U.S. Copyright Office
Stanford Library Copyright and Fair Use Website
Example of a Sample Interview Permission
Most reporters and writers do not obtain signed interview releases because they presume that by giving the interview, the subject has consented to the interview and, therefore, there can be no claim for invasion of privacy. In addition, many interview subjects don't have the ability or inclination to execute a written release--for example, a person interviewed by telephone for a deadline newspaper story.
Nevertheless, a written interview release is helpful. It can help avoid lawsuits for libel, invasion of privacy or even copyright infringement (since the speaker’s words may be copyrightable). It’s wise to obtain a signed release if the interview is lengthy, will be reprinted verbatim (for example, in a question and answer format) or if the subject matter of the interview is controversial.
It is common for an interview subject to ask to read or edit the interview or to have some comments removed or kept “off the record.” Any agreement that is made with the interview subject (including an agreement for anonymity) should be documented. Failure to honor the arrangement may give rise to a lawsuit for monetary damages.
If the interview subject is willing to proceed with the interview, but does not want to sign a release, ask if he or she will make an oral consent into a tape or video recorder or video. Although not as reliable as a written release, a statement such as “I consent to the use of my statements for use in the Musician’s Gazette” will provide some assurance of your right to use the statement.
An interview release is a hybrid agreement, part release and part license. The release, below is suitable if permission is sought to use an existing interview or to conduct a new interview.

Interview Release
Grant. For consideration which I acknowledge, I consent to the recording of my statements and grant to _________________ (“Company”) and Company’s assigns, licensees and successors the right to copy, reproduce, and use all or a portion of the statements (the “Interview”) for incorporation in the following work _________________________________________ (the “Work”).
I permit the use of all or a portion of the Interview in the Work in all forms and media including advertising and related promotion throughout the world and in perpetuity. I grant the right to use my image and name in connection with all uses of the Interview and waive the right to inspect or approve use of my Interview as incorporated in the Work.
Release. I release Company and Company’s assigns, licensees and successors from any claims that may arise regarding the use of the Interview including any claims of defamation, invasion of privacy, or infringement of moral rights, rights of publicity or copyright. I acknowledge that I have no ownership rights in the Work.
Company is not obligated to utilize the rights granted in this Agreement.
I have read and understood this agreement and I am over the age of 18. This Agreement expresses the complete understanding of the parties.
Interview Subject Signature
Interview Subject Name
Interview Subject Address
Date _____________
Parent/Guardian Consent. I am the parent or guardian of the minor named above. I have the legal right to consent to and do consent to the terms and conditions of this release.
Parent/Guardian Signature
Parent/Guardian Name
Parent/Guardian Address
Date _____________

Explanation for Interview Release Agreement
It’s possible that the Interview may already have been recorded, in which case the language “consent to the recording of my statements and” can be stricken from the Grant section. If the Interview will be included in more than one work, list all works and change the term “Work” to “Works” throughout the agreement. Unlimited or blanket releases for interviews are not common, partly because subjects usually are not prepared to relinquish unlimited rights.
If seeking unlimited rights (the interview can be used for any purpose) substitute the following Grant section.

Grant. For consideration which I acknowledge, I consent to the recording of my statements and grant to _________________ (“Company”) and Company’s assigns, licensees and successors the right to copy, reproduce, and use all or a portion of the statements (the “Interview”) for all purposes, including advertising, trade or any commercial purpose throughout the world and in perpetuity.
I grant the right to use my image and name in connection with all uses of the Interview and waive the right to inspect or approve any use of my Interview.

If the interview subject does not wish to waive the right to inspect the final work, strike that sentence and arrange for the interview subject to provide approval.
If the release is executed after the interview has been transcribed, it is helpful to attach a transcription of the interview to the release agreement. This provides an assurance that the interview subject has notice of what was said in the interview. Add a sentence to the grant section such as “A complete transcription of the interview is attached and incorporated in this Agreement.”
The release section provides protection against subsequent legal claims.
If the interview subject is under 18, a parent or guardian’s consent is required

Saturday, October 21, 2006

What's the Best Way to Discipline An Employee?

We’re speaking with Margie Mader-Clark, an expert on human resources issues, and the author of, “The Job Description Handbook,” from Nolo. Margie is currently working on a book on progressive discipline.

QUESTION: Margie, to the layperson, the term “progressive discipline” sounds like a very unpleasant experience, sort of like corporal punishment. What does the term mean, and why has this term gained in popularity among human resources experts?

MARGIE MADER-CLARK: Well, it’s funny; I’m not sure that it is popular. In fact, it seems to be fading in popularity in human resources. I myself don’t like the term, because of all the connotations that you described. We’re using terms now more like, “Get-well plans,” or “Performance improvement plans” that are really designed more towards keeping people on board. “Progressive discipline” sounds very negative and very “you’re on your way out.” Keep in mind, the spectrum of reasons that you would employ discipline is huge; it’s broad ranging. It ca be from simple performance issues from absenteeism or tardiness, all the way up to horrible things, like sexual harassment, and violence in the workplace. So, to try to capture a term that gets all of those I think is a difficult thing, and it’s one of the reasons why we went with “progressive discipline.” Most of the time what you’re really trying to do is correct performance issues. So, things like corrective action plans, things like performance improvement plans, are a better sounding terminology for that function of this. But it is what it is; it’s sort of, this is a process, it’s a step-by-step process that’s intended to change the direction of performance or behavior of an individual, so, that’s discipline, so if you think about it in those terms, it is a progressive discipline process.

QUESTION: Some people describe progressive discipline as a ladder. Why is that?

MARGIE MADER-CLARK: Yeah, if you think about the steps of progressive discipline, or one of these other types or names for the same thing, certainly the way that this book is set up, the goal is to correct behavior. So, these would get ever more intense as that behavior doesn’t correct, I guess is the way to think about that. So, some of the different steps, you would start with basic coaching – here’s what’s going wrong, here’s what impact it’s having, here’s why we need it to get better, let’s talk about how we might do that. From there, if it’s not improving, you would go to another step called a verbal warning, which is, “You need to do this and this and this, by this particular time.” This book advocates a collaborative process to make that happen, where you actually are involving the employee in coming up with the solution for the issues, and that goes through all the steps of this. From a verbal warning you’d go to a written warning that says, “Okay, now we’re getting serious. If this doesn’t happen by this particular time, with these particular measures of success, we may move on to the next step, which would be suspension or termination.” Suspension is used pretty rarely, and it’s used primarily when you need someone off the premises while you either do an investigation, or you need a situation to cool down, so the most logical next step after written warning is typically termination. Basically, you can think of it sort of almost like a “three strikes, you’re out” type of process. For most of the behavioral issues, you would cover most of the steps; for some issues, you’ll jump right to the top.

QUESTION: Not every company appreciates progressive discipline; some prefer to avoid the counseling and strategizing. Instead, they reprimand, suspend, or terminate. This seems pretty efficient – what are the disadvantages of good old-fashioned punishment of bad employees?

MARGIE MADER-CLARK: For some, again, for some issues there are no disadvantages, and that’s absolutely the action that you should take. For what I’ve seen in my career, the bulk of the issues that you would employ a plan like this for are performance-related. So, the disadvantage of jumping straight to a quick-trigger firing is that you have this enormous replacement cost and process that would then need to occur. You would have lost time of the person that you’ve just let go, you’d have lower productivity of the team on the whole, you’d have the cost per hire that would be involved in hiring a replacement, their orientation and assimilation time, and their time to productivity… when you think about that whole thing, some work has been done in the Silicon valley to try to net out what those costs are, and for the average-knowledge worker, those costs can total up almost $250,000, which is a pretty significant impact to the bottom line. So, when you think about it from a business standpoint, being able to turn around the performance of an existing employee negates all those costs, and gets your employee more productive in a much shorter time frame than it would take to actually replace them.

QUESTION: In progressive discipline, an employee reads a reprimand, and then must sign it. Why have the employee sign it, and what happens legally if the employee refuses to sign it?

MARGIE MADER-CLARK: Typically on a reprimand, the signature is just acknowledgment of receipt, or acknowledgment of understanding what the document says, so they don’t actually have to sign it. If they refuse to sign it, all you have to do, it’s no less valid, you just have to note the date and the time that the employee saw it and that you presented it to the employee and that you can verify that they actually read it. Once you’ve done that, you’ve taken care of that step of notification, and you’ve started them down the road of the discipline process, and you have your documentation in place as well.

QUESTION: Okay, an employee has done something bad, and the company wants to suspend the employee. Let’s say the employee has threatened someone, or arrived at work drunk, or harassed another employee. How long should a suspension be for, and how do you implement that? Is it suspension with pay? Does a manager have to consult human resources before suspending an employee?

MARGIE MADER-CLARK: I wish there were some hard and fast rules about this, because it would be much easier to apply suspension consistently if there were, but suspension is basically, and I think I mentioned this earlier, it basically happens in two different times: number one, there is clear and present threat of danger to your existing workforce, or to the employee themselves, and you just need to get them off the premises. The second time it happens is if you need to do an investigation into an issue, and you don’t necessarily know if that employee is actually guilty of whatever that issue is or not, and it buys you some time when that employee is not present that you can do that investigation. Those are the two basic times you would actually use a suspension. So, the question about, “Is it paid or not?” kind of goes with those answers. If it’s an investigation and you don’t have proof of guilt, you probably want to pay them for that time. Again, it’s not hard and fast; you don’t have to, there’s no law that says you have to pay them, but a good practice is to pay them with sort of the theory of being innocent until proven guilty. If it’s the other case, where you’re getting them off the premises because you’re worried or there’s been violence, or a threat of violence, or anything like that, you don’t have to pay them; you can suspend them without pay, and that’s just basically buying you time to get your paperwork together, and get it documented, and so forth, to move ahead with the termination. Typically, if you’re suspending them without pay, the next step is termination.

QUESTION: What happens if the company acts inconsistently? For example, the company suspends one person for a week for being drunk, but another person who’s drunk simply is given notice, or sent home for the day. What kinds of issues arise if progressive discipline is not provided with consistency?

MARGIE MADER-CLARK: This is sort of the bane of progressive discipline’s existence. This is the way you can get into the most trouble; if you’re not being blatantly discriminatory and so forth, that inconsistent application will cause you the most trouble, and the reason is, someone will come up with a purpose or a reason why you treated somebody differently than you treated someone else for the same sort of instance. That can be easily interpreted as discriminatory, or showing favoritism, or nepotism, or a variety of different reasons. All those reasons can open you, and your company, you personally and your company, up to potential legal exposure, and costs associated with that. So, a written progressive discipline process that’s not followed to the extent that it’s written down, in the order that it’s written down, would be considered inconsistent application of that process, and would allow legal exposure. So, you definitely want to, especially when situations are similar, treat them as much the same as possible. Now obviously, there’s some things that you’ll do differently based on the personalities of the people that you’re working with, but for the most part, the basic steps need to happen in the same order, and at about the same point in the cycle, from person to person, as these different issues occur.

QUESTION: Is there a way for the company to implement the discipline without the employee taking it personally?

MARGIE MADER-CLARK: I think it’s always tied together; I think the most successful progressive discipline is done when you’re taking into account how it will be received, and what actions you want the employee to take, and how you want them to participate and be involved, because I’ve always seen the higher the level of employee involvement in a get-well program, the more likely they are to actually get well. So, if you’re approaching a personality that you think is going to be shocked and surprised that you’re actually taking a disciplinary step with them, then you need to walk them very slowly through the step. Don’t eliminate the step at all, because that puts you in the same trouble as the last question, but walk slowly through the step, have your reasons together, have specific examples together, and get them to a point of understanding, if not accepting; don’t worry too much about accepting in the first step of the disciplinary process, but at least get them to understanding the issue. Then you can start to bring them into actually collaborating with you on how to fix the issue. So, I think it’s very important to adapt your delivery to the person’s personality, and not try to do that very quickly, or without thought, ahead of time.

QUESTION: A big component of progressive discipline is documentation; that is, getting information into the employee’s personnel file. Where can a manager get help as to the proper wording for the types of statements that should be included in a personnel file?

MARGIE MADER-CLARK: I think the main thing to remember here is, documentation of these things, you want to basically keep wrapped around the facts and event details, just enough to trigger your memory. So, dates and times, who was present, where did this meeting or incident take place, what was said and how was it received, and if you note kind of those what, where, when, how type of statements, that’s all the documentation that you need for the most part. As you move to written warnings and so forth, obviously you’ll have that piece of paper that says what that warning is, but documenting these coaching sessions, or the verbal warnings and so forth, it’s really a who, what, where, when, and how it was received type of documentation. There’s lots more detail on that in this book, and in Nolo’s other titles.

QUESTION: What other types of things should trigger a media termination, not progressive discipline? And, do you have to notify employees that these types of things are exempt from the progressive discipline procedures?

MARGIE MADER-CLARK: There’s certain things that are just considered zero-tolerance, and most policies will list those out in sort of a comma format, and they would include all the things that you would think were very obvious. So, any violence towards another employee, harassment, blatant discrimination, any felonious actions, anything that breaks the law… these sort of jump right to the top of the ladder, and are, you know, certainly possibilities for immediate termination.

Saturday, October 14, 2006

Is it Harder to Sell a Retail or a Service Business?

We’re speaking with attorney Fred Steingold, an expert on small business law. We’re going to talk to him about the issues that arise when you’re buying or selling a business. Fred is the author of “The Complete Guide to Selling a Business,” from Nolo.

NOLO: Fred, is it harder to sell a retail business versus a service business? What are the concerns when you’re selling these types of businesses?

FRED STEINGOLD: I think that those concerns are probably greater on the part of the buyer. The buyer’s going to be interested in what kind of inventory you have, for example, in a retail business, and the location will be very important. In a service business, the location may not be quite as important; if you have an electrical contracting business you could be out someplace off the main drag and still be doing business, but the buyer in that situation is going to want to know about your contracts; do you have long-term contracts and can they be assigned to the new owner? So, the buyer’s going to have different concerns and different focuses depending on whether it’s a retail or a service business.

QUESTION: Here’s a tough question for a lot of people: what makes a business saleable?

FRED STEINGOLD: In order for a business to be saleable, you have to put yourself in the shoes of a buyer, and look at what kinds of things a buyer will want. Probably the most important thing is that the business has a good profit history. The buyer wants to see that the business has made money for the last couple years at least. Also, not only that it’s made money, but if the buyer is going to work in the business, which is very common for a small business, the buyer will want to see that there’s enough money coming in to pay a decent wage for the time that the buyer puts in, in operating the business. The buyer wants to know that there’s a lease in place, and that he or she will be able to continue on in that location after the purchase. The buyer’s going to want to see that the place of business is in good repair and is neat and attractive-looking, and, if it’s a retail business, that the inventory of goods is up to date. Those are the main things I would say that a buyer is going to be looking at. If the business has an exclusive distributorship, the buyer’s going to want to be able to take that over as well.

QUESTION: So, what you’re really saying is that it’s all about timing, right?

FRED STEINGOLD: Yeah, that’s right, in terms of business itself. Sometimes there are external factors, though; sometimes there are business cycles, and of course you’d like to be in an upswing kind of a situation where business is perking, but even in a bad business cycle, there might be opportunities. For example, sometimes corporations are laying off managers, and they’re sometimes offering a buy-out package, and so those managers, who are tired of being wage-slaves, may have a pocket full of money, and may be looking for an opportunity to go into business, and sometimes even when things are bad in the big business world, there may be opportunities for someone to sell a business.

QUESTION: What if you want to sell your business, but your partners or the other owners don’t want to sell, or what if you can’t seem to agree on the selling price? How do you sort these things out?

FRED STEINGOLD: One way would be to see if they’ll buy you out. Give them a price for your interest in the business, talk to them about some installment terms, and maybe they would buy you out, and you’ll be free to go elsewhere, and they’ll wind up owning the business and they can continue it as they wish. If that doesn’t work, you might want to call in a mediator to figure out how to resolve it, or some neutral third party to help create a win-win situation. In some situations, you may be able to force a sale; for example, if you have a partnership, if any of the partners wants to dissolve it and there’s nothing to the contrary in the partnership agreement, you’d be able to, on your own, just say, “Well, we’re going to dissolve the partnership,” and that would mean the assets or the business would have to be liquidated, and you would get out that way. Probably it’s a good idea, when you go into business with people, at the very beginning, have a plan of action, so you don’t have to worry about this later; you might have an agreement upfront about what you would do if one of you wanted to sell and the others didn’t.

QUESTION: Sometimes you read about a business that sold, but the owners stay on to run it after it’s sold. How hard is it to negotiate something like that? And what’s your experience with these situations? Is it hard for former owners to work for someone else?

FRED STEINGOLD: It’s hard sometimes, but the former owner would have to put aside his or her ego. It’s not difficult to make these arrangements however. In fact, most buyers like the seller to stay on for awhile as sort of a transition. Buyers like to do it; for one thing, they get some extra money during that period, they’re going to be either an employee or a consultant, and whether it’s months or even a couple years, they’re going to get some cash for their work, and it lets them stay tied to the business. I suppose there are buyers out there who want to start with a clean slate and don’t want to have anything to do with the seller, but that’d be fairly rare, and if the seller is willing to stay on and watch as his or her baby changes hands, that is very workable. It’s important to have the ground rules set out in advance, though; it probably is part of the sales agreement for the business. Is it going to be an employment relationship? If so, how many hours is the seller expected to work? How long will the relationship last? If it’s an independent contractor relationship, what are the terms of it? Those things should be spelled out so that there’s no misunderstanding, and I would think as a seller if you have any questions at all about it, you’d want to have the option after a certain number of minimal months to just walk away from it, if you find you can’t work for the buyer.

QUESTION: You read sometimes, for example Ben & Jerry’s, where you hear that the owners say that despite the sale, the company won’t change the product, or won’t change the company’s method for dealing with employees. Is it unrealistic for a small business to seek these types of conditions as part of the sale?

FRED STEINGOLD: You know, in an ideal world, you could leave your imprint on the business, and have it run your way forever, but most buyers are gong to be as entrepreneurial as you are; they’re going to want to put their own mark on the business, they’re going to want to do it their way, they’re going to want to take advantage of the good things that you’ve done, but they may see things differently, they may see things that they think they can do better, and so it’s best to find someone as a buyer if you can who has the same philosophy as you do, but if you try to reign them in too much, you may lose the sale of the business, so I don’t think it’s realistic to expect that the business will go on exactly as you’ve always run it.

QUESTION: In your book, you talk a lot about the preparation needed to sell a business. Can you tell us some of the things a business owner needs to think about when they’re selling?

FRED STEINGOLD: First of all, if you have a business that has had a shaky profit record, you might want to put off selling. If you wait and build up the profits, and that may mean you have to cut back on expenses, or you have to increase sales, but you have to do what you can to show a good profit picture for two or three years. If you have some outstanding legal problems, suits by an unhappy customer or a disgruntled employee, you want to get those cleaned up so that those aren’t inherited by the buyer, or you don’t get any bad press over them. You want to be sure that you’re able to explain the finances clearly; some businesspeople understand the finances of the business but they don’t keep their books in a form that someone else coming in from the outside could understand, so you might have to get a CPA to get your books organized so that the cash flow and the month-to-month profits can be understood by someone who is a prospective buyer. If you can, have a business plan that will show that the business is capable of growing over the next several years. The buyer may have a business plan as well, but if you’ve got something to kind of lead the way, that’s helpful. You want to try to make sure you’re your relationships with your suppliers and your customers are going to stay in place; you want to have contracts if possible. This won’t be true in a typical retail business, but if you have long-term relationships with suppliers or major customers, if you have contracts that will keep those relationships ongoing, that would be a positive thing. You want to see if you can get a long-term lease so that you have something of value to offer to the buyer. Probably equally important, if your business premises are kind of run down, fix ‘em up, put on a fresh coat of paint, put in better lighting, do some things to make it look more attractive. Those are some things that a business could do to get ready to sell.

QUESTION: Your book has an excellent agreement for the sale of a business. But is it really possible to do the sale without the aid of an attorney?

FRED STEINGOLD: You could do the agreement; theoretically it’s possible to avoid any help from an attorney, but that’s not really a good idea. If you’re selling a business you’re going to be dealing with tens of thousands of dollars, maybe even, hopefully, hundreds of thousands of dollars, and I think it’s a good idea to run the final product by a lawyer. The more you can do the better; it’s going to save you lots of money. Where it might take a lawyer five or six or even ten hours to handle a transaction, you might be able to just use one hour of a lawyer’s time, so you’ll be saving a great deal of money doing it that way, but you’ll also have the piece of mind of knowing that some professional has looked over your handiwork.

Saturday, October 7, 2006

Do Dads Get a Fair Shake in Divorce?

We’re speaking with Paul Mandelstein, the author of Always Dad: Being a Great Father During and After Divorce from Nolo.

NOLO: Many Dads don’t think the legal system is capable of giving them a fair shake in the divorce process. What do you think and what, if anything, can be done to balance the arrangement?

MANDELSTEIN: The arrangement might be unbalanced, but in the last ten years or so things have been shifting and more fathers are wanting to spend more time, and being more present and accountable. And basically, what you really need to do from Day One is to stay in your kid’s life, which might be hard, because everything’s emotional, but you’ve got to make sure that you create a legacy that you’ve been there from Day One, that you pick up the kids from school, doesn’t have to be full-time, any of that, but you need to show that from Day One that you’re in their life, that you’re not abandoning them. So that creates a clear pathway. Because often, you’ll move out of your house, and it’ll appear like you’re not taking care of them, and that you’re going to be the “weekend dad.” But if you just create a clear path that you are being there on a daily basis, and you’re very involved, and try to document that in some way, an email or whatever, that will help a lot.

NOLO: When you say Day One and you refer to the history … What point are you referring to exactly … the date of the divorce filing.

MANDELSTEIN: The history of when you split up, because when you’re an intact family, it’s hard to know who did what, and who’s taking care of who, but when you split up, you need to stay in the kid’s life. And if you want custody, if that’s your plan, then you should, from Day One, cut that amount of time for them, and ask for that amount of time. If you can only see them two days a week, then see them two days a week. But you need to set that precedent, because otherwise courts will look at this thing six months down the line and make a determination, and they’ll say “Well, you know, you haven’t been around, and you know, we’ll just keep it the way it is.” So it’s important to be pro-active in this way and step up.

NOLO: Paul, one point you make in discussing the initial breakup between a husband and wife with kids is that spouses should not jump right into the legal proceedings. Take it slow. Analyze the situation a little bit before you rush off to the lawyer’s office.

MANDELSTEIN: Exactly. One thing that’s going to happen is, as soon as someone goes to the lawyer’s office, that raises the ante quite a bit. And it makes things more emotional, more volatile, because even if you’re the one filing for divorce, things are going to change, right then. If the hot buttons are still hot, and no one’s in a big rush, your kids are okay, the money’s in place, and you can agree on things like that, it’s fine to wait until things settle down. Filing the papers is almost the point of no return.

NOLO: Your book is a very helpful manual for divorcing Dads. It even includes some advice on cooking. One tip you give is about using “right speech” Can you elaborate a little on what that is?

MANDELSTEIN: Right speech comes from a Buddhist term. And the Buddhists teach that right speech is essential for a satisfying life. And it means telling the truth, refraining from unjust criticism of others, using language constructively rather than harshly, and refraining from gossip. If you follow these principles, it can go a long way towards creating and maintaining a collaborative divorce. But because avoiding the truth, criticizing others and using harsh language and gossiping are all ways we vent our pain when our relationship breaks up, it’s far easier said than done.

NOLO: I liked your ten rules for communicating with an ex-spouse. One of the rules – listen to your ex-spouse without defending yourself – seemed a little unrealistic. Wouldn’t you have to be almost Zen-like to not want to defend yourself against accusations – especially unfair ones?

MANDELSTEIN: And right speech is also about staying focused on the future. You know, part of establishing a daily routine is figuring out how to communicate with your ex, and what this means. The first thing that you really need to consider is that this is about the kids. And it’s not about you right now. You’re not feeling good, you’re angry, you’re confused, you’re upset, so’s your ex, it’s a constant war. But what you’ve got to do is, you’ve got to end this war. Because the kids are unwilling hostages in an uncivil war.

NOLO: Let’s talk about custody issues. When it comes to resolving legal custody issues, you start with a quote from Virginia Burden Tower, basically ---nobody can get there unless everybody gets there. How can a divorcing Mom or Dad maintain that spirit of cooperation when dealing with divorce attorneys?

MANDELSTEIN: As I mentioned, in Virginia Towers’ book, she points out that a relationship of cooperation rather than combat begins with the thorough conviction that no one gets out of here unless everybody gets out of here. And it’s not that much different from the Buddhist philosophy where there’s no final and perfect enlightenment until everyone’s enlightened. So unless you create a collaborative path that works for everybody---so it’s not like your wife is out of the family---this is the extended family now. It’s not the broken family. Broken family is an old paradigm that doesn’t really work. This is the extended family. Which means there’s not just you and the kids, it’s you, the kids, your ex-wife, perhaps your mom and dad, the kids’ grandparents on either side, and different cousins and uncles, and everybody’s concerned. And also, if you’re going to be involved in another relationship, maybe you want to get married again, or maybe your ex gets married again, then you have perhaps her husband or your new wife and the kids. This is a large group of people and you have to take care of everyone. No one is expendable here.

NOLO: For some of our listeners who don’t know the basics, could you explain the difference between legal, physical and split custody?

MANDELSTEIN: Legal custody means that a parent has the legal authority to care for and make decisions concerning the child’s health, education and welfare. Legal custody is either joint or sole custody. Unless there’s a compelling reason to keep one parent from the involvement of decision making, the courts usually grant joint custody.

Physical custody refers to living with the children and seeing to their day-to-day physical needs, like feeding them and making sure they’re clothed. So you might have joint custody, you might have joint legal custody, which is you’re both responsible for their health, education and welfare, but one parent might be more responsible for the physical. Which means that, if you have the kids just on the weekends, well, on those days, you have physical custody. On the other days of the week, if your ex has them five days a week, then she has physical custody. Split custody---you know, in most families, siblings stay together. And that’s what split custody is about, it’s often giving others crucial stability and support---for example, if one parent tends to move to another city and there’s a great school system that would benefit their younger child, but the oldest sibling is in their last year of high school, and is involved in lots of activities and wants to stay, the parents might decide to have her live with the one parent who is remaining in that original city. But this doesn’t happen very often. In most cases, kids want to stay together. And it makes the most sense to do that.

NOLO: Tell me a little about your story? What prompted you to write this book?

MANDELSTEIN: When I split up---we split up in October--- and then a couple of weeks later it was Thanksgiving, and I have three kids, and they went over to mom’s. Where I would have been also, because mom’s a good cook, and throws a good party. But I was home, and I was feeling sad. I was sitting on my bed, and took out my yellow pad. My background is in publishing; I’ve foundered two publishing companies, I’ve been in the business for thirty years, so I kind of thought in terms of books. So I scribbled on a yellow pad, and then I went to bookstores to see what was around ,and I noticed that there were walls of information for women. And if you went to look for fathers, for men, there were about three books. And the books that there were about fathers, involving divorce, were all about men’s rights, and all about adversarial and trying to, for lack of a better word, conquer the ex-wife. I thought this was all wrong. And after talking to hundreds of people about all this, I felt that a new process should be created, and by doing that, I did my own healing by going through this and trying to help out.
NOLO: You’ve created the resource, First of all, I’m seriously impressed that you landed that domain name

MANDELSTEIN: You know, I bought it! I bought it! But I only paid $600 for it. It was in 1997, or 1996. Back then, I was going to do this great for profit portal. I found it very difficult and it was very hard to raise money because you couldn’t’ quantify your bottom line. And one day I woke up, and I said “You know, this is all wrong. I’m not doing this for money. I’m doing this to try to help.” And I turned it into a non-profit. And as soon as I did that, immediately I felt successful. Because in a non-profit, how you quantify your success is: Are you helping people. And I was helping people.

NOLO: And I’m also impressed that you launched this resource. It’s not just about divorcing dads, though is it?

MANDELSTEIN: No, it’s not. It’s about fathers and families in transition. We did a poll on the site and we asked “Do you have one, two, three, or four kids?” And almost half of them said “No kids” but that they were expecting. So it’s for new dads, and it’s certainly for divorced dads, and it’s for people dealing with end of life issues for their own parents, and maybe their own family. It’s basically for fathers and men for the tough transitions in life. And I believe that the father is a very vital and initiating force for the younger child. It’s very well-documented, the difficulties kids have in fatherless households. For example, 90% of the men in San Quentin are from fatherless households.

NOLO: has some great links. Can you tell us about any other online resources you recommend?

MANDELSTEIN: Of course, Nolo is a wonderful resource. Their specialty is self-help legal books. There’s also a site I really like called Dads and As the title suggests, this is about relationships for fathers and daughters. And we have a ton of links on