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
asha chaudhry
megha – this sounds like you need legal help only.
how much money are you talking about here?
pinging our lawyer rodinhooders and foodpreneurs to help you….
Ravi Kumar
Megha,
I am sorry to hear about your predicament. It might be tough but you have to seriously think whether it is worth spending more time, effort and money chasing this or is it better to learn a lesson and move on? Even Sam Walton (Walmart founder) suffered due to an unfavourable contract with his first outlet but he learnt his lesson, moved on and built Walmart. Maybe this is your stepping stone for greater success. Good luck and Godspeed.
Rdgs
Ravi
Nilesh Gamit
Hi Megha,
In business, trust no one. A good agreement is a must needed thing even if you’ve a healthy business relations with client. That’s hard lesson I’ve learned.
We’ve had similar issue. You may want to read the details here. We’ve taken a legal action against such unethical business firms. Though matter is still in court and we don’t know if we ever receive payment, but at-least it gave me some peace.
I’ll say, it’s a lesson learned. Move on. They’ll get their lesson some day.
Best of Luck.
Megha
Thank you for writing in to me.I’m not sure if I should let it go… I hope I can get something out of the client.
Megha
Thank you for your encouragement Nilesh. I’m afraid such people will never learn their lesson 🙁
Rishi Khare
@Megha
Do not leave them, problem is that if you do this, there is going to be another person whom they will cheat, how ever you can play smart and do things in multiple ways.
a) You can build the identical products, and sell them and build your brand names. Using e-commerce like flipkart and snapdeal, this shouldnt be a problem, lot of people here can help you with digital marketing.
b) You can put up some good sites talking about how they cheated you, basically publicly shamming them, and you may not be the only one, in all probability there will be many more people they would have cheated, try to dig in deeper, collect them all, use those facts in your online site, social network and also in your legal case. When couple of you can sue together, you have a much more strong case.
Lastly, read a news about housing.com and sequoia india feud. That happened a few days ago, I wouldn’t suggest doing that, but that is one extreme way, in which you can cause way more damage than any legal remedy !!
Go get them girl !
Megha
Thank you so much Rishi for your words of encouragement. I cannot sit peacefully until this is resolved!
Sushrut Munje
Hey Megha, I’m sorry you had to face this but it’s best to take this in your stride and learn a lesson out of it. As a business person, we ought to be thorough with agreements and alliances. If we are putting blind trust in anyone, it is our problem, not theirs. Maintaining written communication over all key aspects of the deal is crucial since you need a legal record to state facts. Best wishes.
Amit Agrawal
Megha,
This is harsh reality of life where a lot of people will take you for a ride as soon as they can. My suggestion is to take this setback in your stride but not be bitter – as against – be wiser – from this episode for future.
Seems like you have a lot of potential and if I were you I would swallow the pain and move on towards my journey to realize my full potential. Remember success is the best form of revenge.
All the best,
Amit
p.s. Feel free to ping me for any 1:1 discussion via linkedin.com/in/amit13
Sanchita Dutta
Sad to hear ur predicament. One needs to be practical. as u say the amount in question is too small to go to court, then you may treat it as cost of learning a few important lessons while doing business which other members have brought out.
As I read somewhere and deeply influenced with, it says “One needs to forgive others not because they deserve the forgiveness but because you deserve the peace”. As long as you are with the intent to “correct the wrong done to you” , “teach him a lesson” or “wont get peace till you get back the payment as a matter of principle”, you will actually end up hurting yourself and your business more, its like fighting with a pig in the mud.
I would discourage you from going after him publicly on FB etc for the above reasons and also since it would continue to cause you distress and further prolong the fight which will harm you more than him.
U should however continue to pursue the payments from him if u see any possibility. if not leave it n move forward
best wishes, Sanchita, owner/partner, http://www.indiacod.com, http://www.sanchitacollections.com(work in progress)
Sampat Bhansali
I agree with Ravi, it’s time to move on with the lesson learned (though hardway). In any relation, personal or professional always keep things black and white (as much as possible). You did almost everything in good faith, not a good way to do business. Now that you have learned the lesson use it to grow your business and protect it well.
I work for a logistics company and in many cases where we gave customer extra support to save their money and time (without written consent on the cost) we have suffered.
All the best
Sampat Bhansali
Megha
Hi Asha,
I’m happy to announce that I was able to recover all my money with interest from the client. It took me some time and with constant follow-ups I was able to settle the dispute on my terms 🙂
asha chaudhry
WOW. SO HAPPY FOR YOU MEGHA!!! CONGRATS!!!
pls update your post as well at the fag end and mention today’s date!!!
big hugs your way for being persistent!
Megha
Done! 🙂