Do you know my nickname for “non-competes”?  “Niche killers.”  

A non-compete is a provision that restricts your ability to seek and work with similar clients.  And what is a group of similar clients?  A niche! 

Non-competes are the enemy of strong positioning. Being the go-to person for a niche increases profitability and authority.

In this episode, I discuss how to identify and negotiate these controversial provisions. A few topics we will be talking about are:

• Improving your profitability by focusing on your niche
• Ways to narrow down the non-compete provision as a means of compromise
• The importance of negotiating an agreement to protect your business 

This was an intentionally surface-level discussion; don’t hesitate to send me a message with your questions.

Connect with Erin and find the resources mentioned in this episode at hourlytoexit.com/podcast.

Erin's LinkedIn Page: https://www.linkedin.com/in/erinaustin/

Think Beyond IP YouTube Page: https://www.youtube.com/channel/UCVztXnDYnZ83oIb-EGX9IGA/videos

Music credit: Yes She Can by Tiny Music

A Team Dklutr production

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.