Latest / The Start, Scale & Succeed Podcast / Highly Profitable Legal Steps Before You Leap with Richard Gearhart (stage 1) - Ep. 403

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Highly Profitable Legal Steps Before You Leap with Richard Gearhart (stage 1) - Ep. 403 · The Start, Scale & Succeed Podcast

• 0:00
  Scott Ritzheimer: Hello, hello, and welcome, welcome once again
• 0:03
  to the Start Scale and Succeed podcast, the only podcast that
• 0:06
  grows with you through all seven levels of your journey as a
• 0:09
  founder. I'm your host, Scott Retzheimer, and this one's for
• 0:12
  all you pre-founders out there, folks who have a great idea and
• 0:16
  have the wonderful benefit of still collecting a paycheck, and
• 0:21
  as much as that can feel like a challenge when you're in the
• 0:24
  middle of it, because there's so much to do and there's so much
• 0:26
  you're excited about, there's a lot to do before you take the
• 0:29
  leap, and in that window, legal protection can be really, really
• 0:36
  painful. However, if you're smart about it, it can also be
• 0:40
  highly profitable, and here to show us that narrow path is
• 0:44
  Richard Gerhardt, Esquire, who is a leading intellectual
• 0:48
  property attorney, entrepreneur, and nationally recognized
• 0:50
  speaker dedicated to helping innovators protect and scale
• 0:53
  their ideas. He's the founder of Gerhardt Law, an international
• 0:56
  law firm focused on patent, trademark, and copyright matters
• 0:59
  for startups and growing businesses worldwide. He has
• 1:03
  presented to Fortune 50 companies, top colleges and
• 1:06
  universities, and legal audiences nationwide, having
• 1:09
  also spoken alongside New Jersey Supreme Court Justice Chief
• 1:13
  Justice Stuart Rabner. Richard is the co-host of the nationally
• 1:17
  syndicated iHeart Radio Show Passage to Profit: Road to
• 1:21
  entrepreneurship, airing on 35 radio stations. He's here with
• 1:24
  us today. Richard, welcome to the show. Really excited to have
• 1:28
  you here. As I was getting ready for this episode, I told you how
• 1:32
  struck I was that an attorney's focus would be on the passage to
• 1:37
  profit. That is just like probably one of my favorite
• 1:40
  things in the world, and so you work with founders at every
• 1:44
  stage in this journey, but I really want to start here with
• 1:48
  that person who they haven't quit their job yet, maybe a kid
• 1:51
  at school, but they haven't made the leap to full time, and for
• 1:55
  these folks, the legal side, if they think about it at all, is
• 1:59
  so intimidating, but from what I gather and the research that
• 2:03
  I've done, you approach this very differently. So, how do you
• 2:06
  see legal on the road to profit?
• 2:10
  Unknown: Well, that's a great question, Scott. And thank you
• 2:12
  very much for having me. I've been looking forward to this,
• 2:15
  and I love talking about entrepreneurs and
• 2:19
  entrepreneurism. Gerhard Law was an entrepreneurial venture. I
• 2:24
  worked for a big company, and then left, started the law firm
• 2:28
  20 years ago, and I still feel like an entrepreneur after all
• 2:31
  these times. So, it's really, it's been really been a great
• 2:36
  journey, and it's, it's really worked out. If you're starting a
• 2:39
  side hustle, one piece of advice I would give you is to make sure
• 2:44
  it's okay with your employer, right. A lot of people have
• 2:48
  employment contracts that restrict what they're able to
• 2:51
  do, and if what you're doing is too close to the employer's
• 2:55
  business, it could cause you problems, right. And I think
• 3:00
  you, it's almost always better to get permission from your
• 3:03
  employer before you embark on that path. If not, you have to
• 3:08
  have a strategy to make sure that the employer can't come
• 3:11
  back later and you know claim rights in your ideas, etc. So
• 3:16
  that's one area I think everybody needs to be a little
• 3:19
  bit careful with. Now, if you don't have an employment
• 3:21
  contract, if you're working on software, but you're working at
• 3:26
  a grocery store, it's probably not going to be an issue, but if
• 3:29
  you're working for a software company and you're starting a
• 3:32
  software business on the side, it's something that you might
• 3:34
  want to pay a little bit of attention to, and so really
• 3:39
  getting set up from a legal perspective is super important.
• 3:44
  It's not, doesn't have to be super expensive, you know.
• 3:47
  Generally, you want to set up an LLC at some point, you're going
• 3:50
  to need that in order to have a bank account, right. Pretty
• 3:53
  basic stuff, but if you're going to be a legitimate business,
• 3:56
  you're going to want your own bank account where you can, you
• 3:59
  know, pay and receive money. In order to do that. Banks require
• 4:03
  an LLC. So one question that comes up a lot is, what should I
• 4:08
  call my company? And if you have an idea for a company name, it's
• 4:15
  really important to make sure that you not only check the
• 4:18
  availability of the name with the state registration bureau,
• 4:23
  like in New Jersey, it's the secretary of state that provides
• 4:30
  business names, but you also make sure that it's free from a
• 4:35
  trademark perspective, so just because you can register the
• 4:39
  name with your state registrar doesn't mean that the name is
• 4:44
  generally available, and so I see this happening a lot. People
• 4:48
  come to me and say, well, the business name was available, and
• 4:53
  when I went to register, and so I thought I was good, but that
• 4:56
  really doesn't give you the freedom to operate that you.
• 5:00
  Need somebody could have a trademark on that name, and the
• 5:06
  registry, the registrar will give you the name if it's all
• 5:10
  even off by a period, right? If you put L period C period L L C
• 5:16
  period, or you put L period L period C period, that the
• 5:21
  software doesn't know the difference, right, and, and so
• 5:24
  that's something that you need to be careful about when you're
• 5:27
  first getting started.
• 5:29
  Yeah,
• 5:31
  Scott Ritzheimer: I want to unpack that, because there's,
• 5:33
  there's kind of two ways to look here: there's looking backward,
• 5:36
  or at the current situation, and then there's looking forward
• 5:38
  about what you're building, and this idea of paying attention to
• 5:42
  your employment contract, I think, is really, really
• 5:44
  important. One of the areas that I think is of growing concern,
• 5:51
  especially because we have such an intellectual property heavy
• 5:55
  economy at the moment.
• 5:58
  Unknown: I'm not a, by the way, yeah, how do you,
• 6:02
  Scott Ritzheimer: how do you, how do you know or navigate
• 6:06
  whether or not it's actually your property to use, because
• 6:09
  there's the possibility that if it's, if it's something that you
• 6:12
  do well already, if it's something that's part of your
• 6:14
  work, if it's something you do for your employer, that might be
• 6:17
  related. How do you help folks navigate that conversation?
• 6:21
  Unknown: Well, we would look at the employment contract number
• 6:24
  one, and you know there are always clauses in the employment
• 6:29
  contract about using employer information and disclosing
• 6:34
  employer trade secrets. So, my suggestion is, is that if you're
• 6:39
  in a closed case where you're working for a software company,
• 6:43
  but you're also developing software to be very careful to
• 6:46
  document your ideas in a way that it doesn't implicate the
• 6:54
  intellectual property of the company that you're working for,
• 6:58
  right. So, if you work for Google, and you're building
• 7:01
  browsers. Well, it's going to be a tough sell to somebody to say
• 7:06
  you weren't using Google trade secrets, right? But so you
• 7:11
  generally kind of want to find a way to stay clear of the
• 7:16
  company's main business if you want to take the safest path,
• 7:21
  another thing, you don't want to use company time or company
• 7:25
  materials, you don't want to use the company computer, you don't
• 7:29
  want to use company resources. Those are things that the court
• 7:34
  would look at when they're trying to decide, well, is this
• 7:37
  your invention, is this your intellectual property, or does
• 7:40
  it belong to the to the company, so those are things that I think
• 7:46
  are important to keep track of. I, I know we had one client many
• 7:52
  years ago who was getting an MBA, and she entered a business
• 7:58
  contest to, you know, an MBA competition, and she used her
• 8:04
  company computer when she was in school, and she created the
• 8:07
  presentation, and she won the competition, and then she went
• 8:12
  on to start a business around this. Well, the company found
• 8:16
  out about it, and they said, look, it, you're using the
• 8:19
  company computer, and you know, she was meeting with people at
• 8:23
  4o'clock you know, like company hours, and the company got mad
• 8:28
  and terminated her employment, and so that's kind of an extreme
• 8:33
  case, but you know, here's she just thought she was getting an
• 8:37
  MBA, and and entering a contest, and then she was going to see if
• 8:42
  this business could take off, and the company didn't like it,
• 8:46
  so yeah, you have to, you know, you have to kind of evaluate,
• 8:50
  are you putting your job at risk, and do you care? I mean,
• 8:54
  sometimes people are putting their job at risk, and they
• 8:57
  don't care, because they're planning to leave anyway, but
• 9:00
  other people are like, no, I, I need this job, and I want to, I
• 9:06
  don't want to, I don't want to leave yet, right? So, yeah,
• 9:11
  Scott Ritzheimer: I think for some of our mercurial listeners,
• 9:14
  whether or not you should care isn't necessarily how you feel
• 9:17
  in the moment, but what is, what is going to put you in the best
• 9:22
  position to succeed in this new venture? There's a slightly
• 9:25
  different, and so I can just imagine, like I would hate to be
• 9:31
  in the legal profession with work from home, and how so many
• 9:35
  of those lines are starting to blur. I could see some folks
• 9:38
  just thinking, like, hey, like, how could I ever navigate that,
• 9:42
  and, and so these ideas on, on how to separate that, how to
• 9:46
  document that, I think are really, really helpful for folks
• 9:49
  now looking ahead, because ultimately the, the, the goal
• 9:53
  isn't to just not get, not to not get fired, the goal is to,
• 9:58
  to go out and. And start your own thing, and to do that, you
• 10:01
  have to be profitable, right, or you have to be very close on the
• 10:05
  path to profit. So, walk us through, and you kind of did
• 10:10
  this out of the intro, but let's, let's break it apart a
• 10:13
  little bit, but walk us through those, those kind of minimum
• 10:15
  legal steps that you can do to help get on the road to
• 10:18
  profitability as soon as possible,
• 10:21
  Unknown: so I mean, most of the legal stuff is more of more
• 10:26
  defensive. So, setting up your LLC, you know, you want to
• 10:31
  shield your personal assets. It depends on what kind of business
• 10:34
  you are in, but if something goes wrong with your business,
• 10:37
  you don't want people trying to reach your house, and if you, if
• 10:41
  you do an LLC properly, you can prevent that from happening.
• 10:46
  Another area that we want to look at, I specialize in
• 10:49
  intellectual property, so I do patents, trademarks, and
• 10:52
  copyrights and agreements related there. But if you're
• 10:56
  picking a name, you want to make sure that somebody else doesn't
• 10:58
  have the name. If you're creating a new product, you want
• 11:01
  to make sure that somebody else doesn't have a patent on it and
• 11:04
  could block you. So, I think at some point during your
• 11:09
  commercialization process, you have to do research, and you
• 11:13
  know you can do it yourself, or you can hire an attorney to do
• 11:17
  it. It's typically not that expensive, and but an attorney
• 11:23
  is going to look at things a little bit differently with a
• 11:26
  little bit more experience when it comes to like selecting a
• 11:30
  name and again I have had clients who start the business
• 11:36
  it goes well for a couple of years all of a sudden they gain
• 11:39
  some visibility somebody in another state says, 'Hey, wait a
• 11:44
  minute, you're using my name and I've got a trademark on that.
• 11:47
  And so it's two years of branding and advertising that
• 11:53
  are put in jeopardy, and then you know you have to change your
• 11:58
  name or you get lawyers involved, or there's litigation,
• 12:02
  I I've had clients who have, you know, picked the wrong name, and
• 12:09
  $300,000 later in litigation they've been out for five years,
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  and all of a sudden this company in Europe decides to sue them,
• 12:20
  and it's not only just the legal fees, it's like, well, do I have
• 12:26
  to change my name, are customers going to be able to find me, and
• 12:30
  so doing that research early on can maintain your profitability
• 12:36
  and your ability to exist as a business, and so I mean, for
• 12:42
  like a trademark search, you're looking at spending maybe 750
• 12:45
  bucks, and it's kind of a small price to pay, and so you want to
• 12:51
  check into that, you know, before you get too far down the
• 12:54
  road, and and so I think that's, you know, I think that should be
• 12:59
  part of every entrepreneur's planning process.
• 13:02
  Scott Ritzheimer: Yeah,
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  Unknown: so
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  Scott Ritzheimer: it's very good. There's there's one area
• 13:06
  that I know is a total headache for me, and I've seen this
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  happen for others as well. But one of the things that you have
• 13:12
  to do to be profitable is get paid, and you talked a little
• 13:15
  bit about some of the requirements for the bank. What
• 13:18
  I've also found is getting a payments processor set up can be
• 13:22
  a really cumbersome process, and, and so, what have you found
• 13:26
  for helping folks to, to get the, the legal side of that
• 13:31
  everything sorted, so that they can start collecting payments
• 13:34
  and actually put themselves on the road to profit?
• 13:37
  Unknown: Well, you have to have a bank account, and then there
• 13:40
  are a lot of payment processors now. I mean, you have
• 13:44
  QuickBooks, has a payment processing system, there's
• 13:48
  Clover, there's Stripe, there's a lot of drop-in plugins that
• 13:54
  make it easy to accept credit card payments. It's kind of
• 13:58
  expensive sometimes, but it makes it easy, I think. The
• 14:01
  bigger challenge is actually getting people to pay right, and
• 14:06
  so I think it's important. One of the lessons that we learned
• 14:10
  early on in the business was to get some sort of deposit or get
• 14:14
  money up front if you're providing a service right, and
• 14:20
  you know, in my life, I would, I would never purchase something
• 14:25
  or order a service that I wasn't planning to pay for, but
• 14:29
  unfortunately, there's people out there that don't have that
• 14:33
  same approach, or they, they are well-intentioned to pay for it
• 14:37
  when it starts, but then, for whatever reason, they, they,
• 14:41
  they can't, the circumstances change, and now you've put a lot
• 14:45
  of effort and labor and materials, perhaps into project,
• 14:50
  and now you're spending too much time trying to get payments, so
• 14:56
  it's pretty rare now that we only. For certain customers, do
• 15:01
  we extend credit at the firm, so getting paid early is, is
• 15:07
  important, and it's here, and if you're, if you're, you know, you
• 15:13
  want to maybe set up automatic withdrawals, if it's a
• 15:16
  reoccurring, if it's a reoccurring service, if you're
• 15:21
  making appointments where you're going to be showing up, getting
• 15:25
  a deposit of part of the money before the appointment helps
• 15:30
  ensure that somebody's going to show up, because it's, it's too
• 15:35
  easy for somebody to send you a note, you know, an hour before
• 15:39
  the appointment, saying, "Oh, sorry, I can't make it today. My
• 15:41
  kids are sick, right? And the kids may be sick, but then
• 15:44
  you've just planned to spend that hour. If you have a
• 15:47
  deposit, it sort of weeds out the people who are serious about
• 15:53
  it from the people who are still thinking about it. So,
• 15:58
  Scott Ritzheimer: yeah,
• 15:59
  Unknown: you know, making sure that you set your business up,
• 16:02
  and it's kind of hard to do when you're first starting out. For
• 16:04
  some people, I think it wasn't natural for me. I'm an attorney,
• 16:08
  and it wasn't natural for me, you know. But over time, I saw
• 16:12
  how much time and effort we spent trying to collect the
• 16:16
  money, and it's like, I don't want to work with somebody who's
• 16:19
  not able to, you know, at least give me a deposit upfront, so
• 16:25
  Scott Ritzheimer: yeah, so good. Richard, before I let you go,
• 16:28
  I've got just two quick questions for you. The first one
• 16:31
  here is a question I'd ask all my guests. I'm very interested
• 16:34
  to see what you'd have to say, but the question is this: What
• 16:37
  is the biggest secret you wish wasn't a secret at all? What's
• 16:40
  that one thing you wish every founder watching or listening
• 16:42
  today knew?
• 16:45
  Unknown: I would just say, take care of your health. I mean, get
• 16:49
  enough sleep, eat the right foods, get some exercise, get
• 16:52
  some entertainment. I think you can get stale. I think,
• 16:58
  especially work from home projects, entrepreneurs can kind
• 17:02
  of just turn their, their office into their own little mini
• 17:05
  prison, right? And they never come out, and so I think you
• 17:09
  need to get out, take a break, get some fresh ideas, and you
• 17:14
  can go back to it with a new mindset.
• 17:19
  Scott Ritzheimer: Very good, very good. No mini prisons, we
• 17:21
  don't want that, Richard. There's some folks listening
• 17:24
  that would love help from someone who gets entrepreneurs
• 17:27
  and legal. It's a rare combination there. Where can
• 17:31
  they reach out to you? How can they find out more about you and
• 17:33
  the work that you all do?
• 17:34
  Unknown: So you can reach out to us@gearhartlaw.com It's spelled
• 17:39
  G E A R H A R T L A w.com and you can fill out a contact form,
• 17:47
  or give us a call. Our initial consultations are complimentary,
• 17:52
  and people get a lot of good advice and support. We hope, and
• 17:58
  entrepreneurs are our sweet spot, so you know, feel free to
• 18:01
  reach out. We're always available to help an
• 18:04
  entrepreneur.
• 18:06
  Scott Ritzheimer: Brilliant, Richard. Thank you so much for
• 18:08
  being on, being here with us today. It was a privilege and
• 18:10
  honor having you here today. I really appreciate it. And for
• 18:14
  those of you watching and listening, you know your time
• 18:16
  and attention mean the world to us. I hope you got as much out
• 18:19
  of this conversation as I know I did, and I cannot wait to see
• 18:22
  you next time. Take care. Hey everyone, ScoreTimer here. Thank
• 18:29
  you so much for listening to the Start Scale and Succeed podcast.
• 18:32
  I hope this episode gave you exactly what you need for the
• 18:36
  level you're in right now. If you want to discover what level
• 18:40
  you're in. Take our 10 question founders evolution quiz for
• 18:43
  free@foundersquiz.com That's foundersquiz.com It'll pinpoint
• 18:49
  exactly where you are and give you tailored tips to move
• 18:52
  forward and reach that next level in your journey as a
• 18:56
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• 18:59
  forget to subscribe, rate, or review, it helps us reach more
• 19:02
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• 19:06
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• 19:09
  scaling, and succeeding, and I'll see you in the next
• 19:13
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