I come from a small community of food entrepreneurs, our small turnovers which begin in a few hundred rupees makes it harder to sustain. I have a story to share with my fellow entrepreneurs on how clients take advantage when they know that it is difficult to build scale and sustenance. I had one such recent experience where a client took advantage of my hard labour to build their brand but when it came to payment decided to exploit and not pay up!
All of you must have had that big break that compensated your efforts; what if the biggest effort goes uncompensated and the big client refuses to pay up because they were unable to build their brand name and bring your effort to fruit?
Background
The client with a business family that has deep pockets and I thought of listing my products on their website as I have to cover my rent before I can go out. My products were listed and post its success on their website, the client informed me that they were looking for some new product range to include under their own brand. I was keen on doing it as I thought it would help me grow my business further and I trusted that the client had good intentions. I diligently helped the client launch 3-4 products with all the help that I could give from nutritional facts, labeling norms, pricing and support in any manner that I could help the brand grow. I didn’t even charge the client for any of these services in good faith.
The client on realizing that the products were ready for market, insisted on an agreement. As a proprietrix with little or no knowledge of legal contracts; I still went ahead thinking that we will help each other. I did not even know at the time that the client had discredited me of the very products that I had created them. I blindly placed my trust in the cleint’s good words to produce products with a promise of growing volumes.
The agreement was to create products for the clients’s brand where the client would provide packaging and I would produce, pack and transport the product to the client’s office while the price charged was only for production. The client said that they are a startup and that they would only be able to pay me after the delivery of goods. I said it was not something I would agree for usually but the client said that if I did not agree there is no going forward. I decided to go ahead and succumb to the payment schedule which was 45 days after delivery of the goods with a little advance to cover part of the raw material purchase.
The changes
When I began the order, I ran into trouble with the raw materials, the client had delayed the order confirmation and in this period the raw materials were exposed to Mumbai weather and were not usable. I borrowed money from my husband to cover the damages. The client clearly stated that it was not their problem. Perhaps it was not as I was not in the habit of maintaining written communication of the delays. Then the client asked me to split the orders in two as they were running short on storage space. While this seemed unfair because I was on rented premises, I still agreed as the money had to be recovered for earlier orders and in the hope of future business.
Every payment was delayed and I was paying rent and even had to shift out to a smaller office space to sustain my future. Even though there were delays I assumed that at least the orders had not stopped. However neither were the volume of business growing and the payments were being realized after 75 days from the delivery date!
The final straw
The last order was made mid last year and the deliveries were split by the client as usual. I was therefore able to deliver the complete order based on the client’s convenience of splitting the order into multiple deliveries.
I confirmed that they had received the last order with no damages and they confirmed. I gave them a month after the payment was due as there was no communication from them and enough time was provided to see if there was any issues that came up. I then began to follow up on payment for the last order. I got no proper responses except after continuous follow up, some delayed responses.
I then attempted to reach the client directly and was informed that they were holding the money as leverage! Now I felt exploited and cheated. After a few more weeks passed the client said that they intended to pay if I send them a letter that stops me from making any of the products I created for 2 years!! Give them back all the intellectual property?? Only after I had given all this in writing will the client release the payment as per their comprehension.
I now decided to show the agreement to a lawyer and found that the entire agreement was in the client’s favour, based on the lawyer’s advice; I used the non-payment as a breach of agreement and sent a letter through the lawyer to close the agreement. So that the agreement was voided as soon as possible.
To this the client responded saying I have caused their company a loss of 3 times the amount due. I had read on facebook that the client had bought a shoe worth the same amount that was to owed me! But the client says that I caused their brand to suffer??? Not sure how, because I did everything that the client had asked for and bent my back to produce and deliver to their office through paid labour.
The aspect I least understand is the loosely used term intellectual property by the client within the agreement. Now the client says I must return their intellectual property. If your mother made curd rice for you, can you say that the curd rice formula is your intellectual property, because she supplied it to you? How does your mother’s recipe become your intellectual property that you want her to provide to you when she created it in the first place? Besides how can the client ask me to return something that was never given to me in the first place?
Where do startup entrepreneurs like me go? The court is not an answer as the amount is too small and running around collection agents is not an option when you are trying to sustain your startup.
Pray tell me, what is the option for me or am I damned?
27th April 2015, UPDATE
I wrote this post to warn everyone else within the same industry to be careful while dealing with this particular client. There was no need to mention the name as this particular kind of client is known to whom it matters, just an update to fellow entrepreneurs. I had made up my mind to give a round of follow ups with the client and would try my very best to recover my money within April. I used sms and emails for follow-ups and frankly it took 10 minutes of my time everyday. I just decided to be a different person who would persist on having my work’s worth. As an entrepreneur we are creators and our work must not be undervalued or ignored. I finally called the land line and asked for the client (as my mobile number was blocked). I also didn’t involve my lawyer as the agreement was breached and no longer had to worry about legalities, which my client generally used as an excuse to delay the payment further. Today, when I’m writing this I feel confident and happy that I didn’t let anyone walk away with my money that I worked hard for. My work was finally compensated. So, last week I recovered my full money with interest and made sure that things were done on my terms!
I was only being persistent in what was rightfully mine. So, please don’t easily let go of your hard earned money or discount your creation. Give it your best shot and you will get what you deserve!
You can ping me at @meg_deo