Being an Engineer
Being an Engineer
S6E45 Jeremy Jarrett | Legal Advice & Strategy for Starting An Engineering Business
Our guest today is Jeremy Jarrett, an attorney at Sacks Tierney in Scottsdale, Arizona, where he focuses on corporate, securities, and finance law. Jeremy brings more than 10 years of experience advising businesses on complex transactions, including mergers and acquisitions, spin-offs, recapitalizations, commercial lending, and equity and debt financings. His clients have ranged from early-stage startups to large public companies, spanning industries such as technology, oilfield services, agriculture, defense contracting, automotive, and manufacturing.
In addition to representing venture capital-backed companies in financing transactions, Jeremy has played a key role in supporting Phoenix-area entrepreneurs and growth-minded businesses. His unique path to corporate law began in the sports industry, where he worked with NCAA and NBA organizations, sports agents, and management firms before transitioning to private practice.
Jeremy holds a JD from Tulane University Law School, where he specialized in sports law, and a BA in Philosophy, Politics, and Economics from the University of Pennsylvania. With his diverse background, Jeremy offers engineers and technical leaders a unique perspective on how smart legal strategies can safeguard innovation, attract capital, and unlock growth opportunities.
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Hey, hello, and welcome to the being an engineer podcast today. We're joined by Jeremy Jarrett, a corporate and m&a attorney at Sacks Tierney, here in Scottsdale, Arizona, just next door, with more than a decade of experience helping businesses navigate complex deals from mergers and acquisitions to venture financing, Jeremy has worked across industries that matter to engineers, including technology, defense, contracting and manufacturing. He's here to share insights on how legal strategy intersects with engineering innovation and why understanding the business side of engineering can make all the difference. Jeremy, thank you so much for being with us today.
Jeremy Jarrett:Happy to be here. Thanks for having me
Aaron Moncur:on All right, so a lot of engineers that I've talked to, and some have actually got on to do this, but a lot that I've talked to are interested in opening their own business, whether it's like their full time primary source of income, or or just a side hustle, maybe nights and weekends freelancing to, you know, kind of like Uber for engineering, just to bring in a few extra dollars on top of their their primary source of income. What? What are some of the legal steps involved in setting up, you know, your own legal entity under which you can provide engineering services?
Jeremy Jarrett:Sure, so it's very easy to set up a legal entity. Frankly, most of the time clients asking us to do that, we have a paralegal or one of our admins. Do it and we'll just double check it. But the first question an engineer should be asking is, with respect to this new business, are they going to be the sole owner or not? Because if they're the sole owner, it's very, very easy. If there's going to be more than one owner, the amount of documentation and the importance of the documentation changes to get a bit right. But in terms of filing Articles of Organization to make an LLC in Arizona, very, very simple, you don't really even need a lawyer to do that. If you aren't sure it's done right, we can do it pretty cheaply. But even if you don't do it right, there's nothing that can't be fixed on that later. But whenever you have more than one owner of a business, the whole landscape changes, and that you need to make sure, sort of the corporate governance and things like that are are much more run down in a different way than if you're the only owner, if you're the only owner, you know, even if you mess it up, you're not going to, you know, see yourself. The second big thing is, are you looking for funding at that same time and you're trying to raise capital from like a venture fund, or even through a contest? That can make it a little bit different, too? I know venture madness is a big one in Phoenix. A lot of companies do that. I think they're usually already operating. But those would be the two things, are you the sole owner? And, you know, are you raising capital for it? Because if you're raising capital, it has to be done in compliance with securities laws, and so that kind of adds another layer. But if it really is your nights and weekend household, and I'm coming up with a cool idea in my garage, and I just want to try to lift you an LLC, yeah, that's really simple.
Aaron Moncur:Now you're practicing law here in Arizona, how different are laws, you know, across the various states here in the US, because a lot of our listeners, probably most of our listeners, are not here in Arizona. So any of the advice that you just gave, does that change much state to state?
Jeremy Jarrett:Not really the only types of things and make them up later that have an impact on you know what I do and we're gone, would be non compete laws and confidentiality laws those. Those are the things that vary enough for me to care about, you know, choice of law or which state. One thing I think a lot of business owners overvalue is, well, I want to be in Delaware so I can keep my name off the entity, and I want to be anonymous. There's really no way to be anonymous in today's business world. So you're either going to have to register your entity in a state that is going to require you to put some level of ownership on it, or it's sort of hung up in legal limbo, but there's a corporate Transparency Act which would require beneficial ownership information to be provided. So I don't think in the purpose of starting up a new business, I wouldn't really let I would try to just do it in the state where you're going to. To operate. Okay, save you a little money. Do you want to ride your shirt somewhere else? I mean, that's probably the best advice.
Aaron Moncur:Now, you've worked with a lot of businesses over the years, and we talked just briefly right now about sole ownership over a business, versus having partners which, from a legal standpoint, and probably beyond just a legal standpoint, does make things a little bit more complicated with all the different businesses that you've worked with. Have you seen any kind of trend where companies who have a sole 100% owner tend to fare better than others in which the ownership is split between, you know, multiple owners, or is it entirely case dependent? And there's no real strong correlation between sole ownership or split ownership and long term success of a business.
Jeremy Jarrett:I think there's probably not a huge correlation. What I would say is, if you're thinking of transitioning from a sole owner to checking out a partner. Be very, very, very careful who you get into business with. You know, getting into business with a partner, the little bit of legal fees, and everyone's excited for things to work, but when rubber hits the road and you hit a hard time, and pretty much every business will. At some point it gets really hard to get out of a partnership. I guess that's the best way to put it. Much easier get into one than to get out of one. And I use the term partnership. It could be, you know, another shareholder, or whatever, but just your business part, Colloquially speaking.
Aaron Moncur:Like a marriage in that way, right? Yeah,
Jeremy Jarrett:yeah, but that, and, you know, I've got a few going on right now that are really, really tough. So I think when you're considering taking out a partner or going into business with with some co owners. The biggest thing you're looking for is clarity in your governance and your documentation. And the goal should be to think about all the bad things yet that could happen up front while you all get along, so that if it does happen after you don't like each other anymore. You've sort of already agreed on what's supposed to happen.
Aaron Moncur:That's yeah, that's great advice. Let's dig into that maybe a little bit more. What? What are some common mistakes that you see when engineers or businesses in general are just starting maybe around protecting IP or just the general like business, corporate structure.
Jeremy Jarrett:I think the biggest mistake isn't necessarily a legal one. It's just sort of having a rosy vision of the future and not realize, you know, it's always exciting when you're first getting started and setting out, right? Everyone thinks it's going to work. We have this great idea, you know, and you don't think about what happens if my business partner gets hit by the bus, or what happens if they get embroiled in a nasty divorce, or, you know, what happens if they just sort of peter out and stop pulling their weight and things like that. So I think lack of lack of foresight or forethought is is kind of one another is, you know, making sure your contracts and agreements, both on the customer side and the supplier side, are adequate for what you need. You know, I'm not saying every business needs a 80 page agreement or something, but for an engineering business like those contracts probably should be more than a PO and invoice system, and probably should be more than a one pager. And so the problem we sometimes see is companies do really well with like a one pager for 10 years, and then the first time they go, it really kills the company. And I think the other mistake I've seen happen in smaller construction, space and engineering, perhaps, but I think it's still informative. Is if you're doing something out of your company's wheelhouse, you know, talk to an attorney, think about whether it makes sense to segment that off from your core business, right? So for example, we've seen construction companies that do prefabricated modular buildings, right? And you sleep like super adult Legos. And we're very good at it. And then decided, well, now we want to do steel fabrication jobs, which I'm not a construction guy, but I understand enough to know that is a very different thing. And then when they did the second thing poorly in the steel jobs, it really. Acted their underlying business, which was very good. So before you go out of your box too much, think about whether it makes sense to protect your business. And that's a pretty quick call to an attorney. Nice.
Aaron Moncur:How about if, if your company becomes a target for acquisition, right? That for a lot of founders, that's the goal. You build it up to a certain point, and then you get acquired and you cash out. What? What are some things that engineers should consider if their company gets to that point? Yeah.
Jeremy Jarrett:So I would say the first thing is, you know, find your counsel sooner than later. And I would say so typically, an M and A process, you, you know, signing on disclosure agreement, you'd give the buyer financials. Eventually you'll get a, what's called a letter of intent or term sheet. That that letter of intent or term sheet is the point where you should call your counsel. And the reason for that is, even though those aren't binding, it's really difficult, and you can lose a lot of, you know, negotiation good faith if you go back on what's in the term sheet, or maybe the case that you there's something particular to your business that ought to be in the term sheet at a time, so you don't waste time and money going through the process. I think the second thing to realize is going through the sale of a company is a really hard and long process, and it's really annoying, especially with a sophisticated buyer who's going to do real due diligence. That's kind of the world's worst proctology exam, except, and so it's just frustrating. I would say I'm about half my deals I work on. A big part of my job is sort of just managing the client's feelings, frankly, because it's, it's difficult. And then I think the last thing I'd say is, you know, you should call your council as well, or your CPA to help you evaluate the offers. You know, we had a situation where we were selling a company and they had three different offers from private equity firms, right? One for 60,000,001 for 55 and one for 50 but to be able to evaluate the terms of those and look at the$60 million deal and say they have no intention of paying me 60 they probably are expecting to pay 45 right? Whereas the $50 million deal is a lot more certain, to be able to sort of think through and understand that because selling of days, and I suspect really one that's successful, there's a lot of it's like putting a puzzle together. There's a lot of pieces to that, and it's hard to sort of conceptualize, what am I really getting at the end of the day, after I pay taxes, after I pay lawyers, after I pay my CPA, after I pay perhaps a business broker or investment banker on you'd be surprised how many times clients get halfway through the browser and we're like, wait, I'm only walking away with this march like that doesn't sound as good as it did Three months ago. So I think just having your advisors, you know, insurance guides, to sort of lined up, you know, you know who they are, you'll pick up with on now the first time you're calling them, that's generally a pretty good practice. But yeah, M and A, it's just a long, you know, it's usually at least a two to four month process, but more likely it's going to be six to eight.
Aaron Moncur:Let's talk about the opposite end of that process. Right? We talked about M A and acquisition. How about the very beginning when you're starting your business? A lot of businesses start with some some kind of private equity or venture capital funding. What advice can you give to founders who might be considering accepting some of that private equity or venture capital funding?
Jeremy Jarrett:Yeah, so that's probably more venture funding than private equity, unless you already have, you know, some patents or something there. But I think regardless of whether it's private equity venture or just private capital, anytime you take someone else's money, you have a responsibility to deliver them a profit on it at some point, right? So you have to kind of treat it as like an obligation, a weight over. You have to treat it responsibly, fairly, and so that goes back to the conversation we had earlier about being a solo owner or not, right? When you're the sole owner, you can do whatever you want, right? If you're a little behind on, you know, the sort of housekeeping corporate items, like, maybe you don't have everybody to or maybe, you know, you. You just haven't documented everything super properly. That's fine. You're the only one who's going to suffer from it. But, you know, you might be in the process of running, running, running, to get revenue right and sell, sell, sell, and you can do that what you're taking someone else's money. You have an obligation to keep everything really clean and really proper, right? And venture firms and private equity, they're going to expect you to know how to do that as well. That's a big expectation. And so that goes back to why it's good to have advisors ahead of time, right? Like a CPA who can help you keep your books clean. You know an attorney who can keep your corporate governance clean, and that one attorney may not do everything. I do this all the time where all the client call me and I'll say, well, I need to get that to my employment guy, and I need to get that to my tax guy, or whatever it might be, but you should have a person who you know, if I have a legal issue, that's where I'm calling and I I know them, I trust them, they'll get me to the right person. But that's really the biggest difference. You know, when you take outside money, it is an obligation. You go along, what we call fiduciary duties, to spend it wisely and eventually deliver retrieval on it.
Aaron Moncur:Are there any specific examples that you can share where having thorough legal preparation really saved a company from making a big mistake, and then, if you have one, the opposite as well, where lack of preparation led to kind of a catastrophic crisis for the company,
Jeremy Jarrett:yeah, so in terms of savings, easy one. We represented a financial services firm, and they wanted to incentivize a couple of their their top employees by giving them some equity. And so we did that, but we also entered into what's called a shareholders agreement, if the law are getting operating room for an LLC or sometimes similar to bylaws on a closely held company. But the point was, one of the provisions in that shareholders agreement was that these employees who were getting equity if they stopped working for the company, the company would be able to buy them out on very favorable terms, so like, 20% down on a five year low interest note. So you didn't have to even though they weren't working there, they they no longer own the company, and it wasn't too problematic for the company to to buy them out. And I remember that one in particular not to pull muscle Patty myself on the back, but the client called me and said I was so worried I didn't know what we were going to do when I pulled the document out of a drawer and just said, Oh, I can do that. This is great. And that was probably a cause he hadn't thought about in two and a half years. Yeah, wow. Lauren, so that's one. That's a relatively small one. The only thing on the other side, you know, I'll give two examples I mentioned earlier, just making sure your contracts are sufficient for what you need. Like you want to review the right size, right. You don't want to read too short. You don't need them to be too long, because then it's unwieldy. Making sure those are right. But we got guns that, like I said, operated 10 years. Never had a problem, and then they did, and then there was a much bigger problem than they needed. The other one is a little bit less legal advice, but I think pertinent to engineers in that, you know, you don't want to run before you can crawl, especially on adventure and like PE space, you know, I, I used to represent quite a big company that was very, very well funded, well into the nine figures ever involved in ground Jacob in the world, and their products just never really did what they said they would do. And so then they're several years down the line, and nothing's working as well as it's supposed to. So it wasn't like a Theranos like fraud situation, but I would just say, you know, don't get too far ahead, out over your skis, the companies that I see the most success with, and especially if we're talking about an exit. And most of what I work on are companies that sell in the five to $50 million range. You know, we obviously do deals that are smaller, and we do deals that are much bigger, but if you're looking for an exit in that range, the companies that are successful are the ones who kind of are grinding it out. And. Making sure that everything makes money, and then, yeah, they might have a scramble to, like, clean up their desk or clean up their house, you know, more towards an exit time, but the businesses show consistent profitability, right? And that's what people want to buy, right? They're they're not trying to buy the promise or something they want to buy the truck. I feel them. What I know is there and shadow, I think, yeah, trying to run before you can crawl is probably a mistake. I see a lot of people make.
Aaron Moncur:You've brought up a couple of times now this idea of a one pager style contract versus something more comprehensive. Let's talk about that a little bit more. What? What are some examples? I mean, every contract is going to be a little bit different, but, but nevertheless, there are probably some similarities across the board as well. What's an example of like a one pager? That's probably oversimplified, and then, what are some common things that engineers should have in in their contracts without, like you mentioned, without getting overly complicated and, like, burdening the company with unnecessary legal documentation,
Jeremy Jarrett:yeah, and so, like, a one or two Bader that might be, like, you know, your data privacy policy or something, right, that You're just gonna post it on your website. It's kind of there, right? Covers what it needs to that's probably fine, right? If you're doing a custom design for a machine, you probably need a more thorough or green one, because you're not gonna be able to address intellectual property, timeline, payment timeline, and delivery terms, right? If it's something big, you know, how's it getting from where it's made to where it needs to go? Installment training, things like that in a page or two, right? You're just, you're not going to those are all important parts of that type of transaction, you know, the same time, if it's a supplier contract, right? And it's critical to your business, yet, I know I need a bunch of tungsten on this timeline where I can't make what I'm making that you know, that probably need to deal with. Where is it coming from? How is it chipped? Right? What happens? And this is the big one on both sides. What happens if something doesn't go as planned? Because the answer you don't want there is that I don't know, right? There should be, you know, for any sort of breach of a contract. You can think there ought to be an answer to it, if it's an important contract. Now that your cable bill, who cares, right? Cox is going to do what Cox does, fine, right? If it's, you know, any, PS, you're likely to go, not worth the time of day. Don't worry about it. It's yeah, just understand it didn't retil Did my favor, and move on with your day. But I think a lot of businesses fall into the trap of either my supplier won't take any comments. Yes, they will. You just have to get to the right person, or this is too complicated for my customer, they just can't understand it, and I'm moving along with something insufficient. And then when inevitably, problem comes up, now you kind of got a bigger problem that could have easily been avoided. Yeah, that makes sense, like things like making sure you know, limits on liability, indemnification clauses. Those were really important. Yeah, and again, just payment terms. The other one we I see, I work a lot with the Entrepreneurs Organization, and one of the biggest problems I noticed, is companies are forced to pay their suppliers on a quicker timeline, and their customers are forced to pay that, and then they get into a cash flow management problem. So I think just thinking about things like that, that seems benign, right? Like, Oh, it's fine if my customer pays me, you know, 60 days from invoice, if I have to pay all my invoices within 30 days. Well, now I'm walking into a bald situation.
Aaron Moncur:Yeah, we're seeing this more and more. I mean our customers, the bigger ones, anyway, when we started with them, it may have been net 30, or some of them may be net 45 and now net 60 is pretty typical, and some of them are trying unsuccessfully so far, thankfully, but are trying to push net 90, and it's just, it's crazy. I mean, the bean counters love it right in the back end. But man, for for the small businesses, that's rough,
Jeremy Jarrett:some of the really big companies, like publicly traded ones, are getting real aggressive on here. I've seen a few. Year where they want to pay net 180 I'm like,$600,000 order, my gosh, like, it's just not feasible for a business, like, you know, or not your bank,
Aaron Moncur:yeah, what? What do you think that is? I'm assuming that the longer these large organizations can hold on to cash, the more money they can make with it, whether it's, I don't know, they put it into some kind of investment. Is that primarily the reason for why companies are pushing long terms so much?
Jeremy Jarrett:I think it's just flexibility, right? Just buy yourself as much flexibility as you can. And when you're a really big company and you have the leverage, right? Because this is like, company I was talking about. But like, everyone wants to do business with Intel. So, like, an intro can, well, maybe not right now, Intel can probably get away with what Intel wants. And most of their most of their programs, right? Or, yeah, or insight can probably dictate most of their terms. And so I think that's, you know, understanding what you're signing in your contracts, because it's really exciting to get that big order from a big company right. And I think sometimes smaller businesses tend to get too afraid of ticking them off to sort of prudently negotiate it, when, in reality, this is not any of these companies first rodeo like they know what you're going to push back on. They know what will say yes to you'll know what they're not going to say yes to you under any circumstances. But I think a lot of people just Snider, and I understand the impulse entirely, right? You know, she divided company, and you know, someone gave me a million dollar contract. I'd probably even as a lawyer, be inclined to guess.
Aaron Moncur:But yeah, yeah, there was a company here locally who manufactured sapphire sapphire glass for consumer electronics. And there's, there's a very large company that everyone knows that engaged them to manufacture sapphire for some of their devices. And from what I hear, this company couldn't satisfy the terms of the agreement, and they went under that, you know, maybe there was an opportunity there for pushing back on on some terms or or whatever the constraints were that caused them to go out of business. But that was a big deal here locally A little while back.
Jeremy Jarrett:Yeah, I think that's the other thing for, you know, business owners, engineers or otherwise, is, you know, as you're bringing these contracts, try to leave yourself a little wiggle room, right? Like, if you're gonna promise to deliver something in five months, you know you should only promise five months if you're pretty sure you could do it in three, right? So if something goes wrong, you've already got at least a little buffer, or at least time to sort of work it out on the business side, not the legal side. Yeah, yeah.
Aaron Moncur:All right. Well, let me take a real short break here and share with everyone that the being an engineer podcast is brought to you by pipeline design and engineering, where we don't design pipelines, but we do help companies develop advanced manufacturing processes, automated machines and custom fixtures, complemented with product design and R D services. Learn more at Team pipeline.us. The podcast is also sponsored by the wave, an online platform of free tools, education and community for engineers. Learn more at the wave. Dot, engineer, today we're talking with Jeremy Jarrett. So Jeremy negotiation is a huge part of starting and running any business, and most engineers don't really have any experience negotiating, at least no formal experience are there. This is a huge subject and topic. So it's not like we're going to cover the art of negotiation here in five or 10 minutes, but are there any pieces of advice that you can share? Of course, bringing in legal counsel is probably one of the big ones, like people who actually do this for a living and can help you negotiate. But outside of that, are there any other pieces of advice or hard earned wisdom that you can share about being effective in your negotiation as a business owner? Yeah,
Jeremy Jarrett:I would say, probably for very few people, is negotiating a natural skill or talent. I think we've all known people who just have like that sales G, that's kind of similar, right? That's just who they are, how they are. But negotiation can be learned. And there's some good books, you know, there's getting the ass and bargaining for advantage. But if I were to distill it down to the one biggest thing that was the hardest lesson to learn for me, and it's a little iron. Like this on a podcast is is listen more, and the more information and sneaking behavior, the more questions you ask, the more you find out, the better off you're going to end up in your negotiations. And that's true for lawyers or people who aren't lawyers, right? And so I think if you start to pay attention, you'll notice that in the situations where you have more information, your contracts look better, your deals will probably look better. And I think sometimes it's real easy to just forget to ask questions, right? And so, and this will feed into my next point. But, you know, in an M A deal the opposing side saying, No, I don't want to give you that representation warranty. I could take that as a no, or I could also what, hey, I thought that was really reasonable. Is there a specific problem you have with it, other than just win loss, right? Because a lot of times, most people have a reason for what they're pushing for pushing the gaps right? It's not just coming out of thin air. Usually, we all be able to see knuckleheads, but most of the time, there's a reason, and so when you find out more information, turns out that you have a lot more opportunity for creative solutions, right? So they and that's probably a very engineering trait, but someone may say, Well, you know, the last deal I did, we had a real problem collecting their accounts receivable, and we just don't want to take that risk again. And we might say, Okay, well, we know that's not a problem for us. So they can either, like, agree to their language or come up with a solution we don't care about, or just, you know, trade it for some other point we did. So the more you can find out, asking why is always a good thing. And then the other thing I would say, is when someone asks you why, almost all of the time, telling the truth is the best option, right? So you're negotiating a deal, and someone's fussing about something you want or don't want, just tell them why you want it or don't want it. And again, because you can probably get to a creative solution. But if everyone thinks you're hiding the ball or some skeleton in a closet or whatever, it's a lot harder to do that. There are very, very rare exceptions to that, and what I would tell you is your council will tell you when those are but generally speaking, yeah, you know, try to get more information and and tell the truth, and you surprised how much quicker and less painlessly you'll, you'll get stuff done. Yeah,
Aaron Moncur:we've had a few examples just in recent history that I can think of where pushing back a little bit or just asking questions has been really useful in terms of negotiating a more beneficial outcome for pipeline. There's one company, large company, anyone in the medical device space knows this company, and we had been on net 30 terms with them for several years, and we got a new a new project from them, and they were pushing net 60. And actually they weren't pushing net 60, that the engineer just said, Oh, here the terms are going to be net 60. That's just a new thing we're doing across the board for everyone. Now we could have just said, oh, shoot, they're doing it for everyone. There's no way out of this. Well, I guess we just have to accept it. And like, rolled over and said, okay, sure, we'll sign it net 60, right? But instead, we said, hey, you know, in the past, there's been this small business exception that your company has had, and that's allowed us to have net 30, as opposed to net, net 45 which I think it was before, or at this point, net 60. And the engineer says, nah, I've never heard of that. I'm pretty sure that doesn't exist, but I'll check. You know, you brought it up, so I'll check. I guess, you know, the the inference was, was kind of, you're wrong, that that's not a thing. But sure, I'll to pacify you all, go talk to our finance people and see and sure enough, he came back and said, Yeah, you're right. I didn't even know that this existed. So yeah, you're still on net 30, and we're still on that 30 with that company. There's another one
Jeremy Jarrett:good point, because you don't get what you don't ask for, right? Yeah. And sometimes there's also an assumption that your point of contact is like the Bible of what another party might do, especially if you're dealing with a big company, the sales people don't know. They don't read the legal contracts, right? You know, the engineers know their part very well, but they you know. That. And I don't even mean this pejoratively, but I've worked with some big companies, and we've done some very big contracts, and some of the hardest parts of those deals are going to have to, you know, make sure the service level agreement, which is sort of the text and facts and all that, is just right. And have to be the bad guy like, Hey, I know that you know what you're saying, but anyone who's not an engineer who picks this up has no idea what it means.
Aaron Moncur:Yeah, there was another situation we had where I share this just to illustrate the fact that even with big, gigantic Goliath companies out there, there's often room for some negotiation. You don't have to accept what they offer the first time, even if they present it as like this is the only solution. There's no wiggle room in here. We were on net 45 terms with a company, and they came back and their procurement team that I was negotiating with, and they said, Hey, we're moving to net 90 across all of our vendors, that's just how it is. And so we need you to sign up for net 90. And I said, you know, I'm happy to do that. I'm happy to sign up for net 90 as long as you can commit to over a million dollars of business with us this year. And they said, Oh, well, let us go talk about that internally. And they came back and had they said, Yeah, we'll sign up for a million dollars in business with you this year. I would have been happy to sign net 90, but they said, We don't know for sure that we're going to do that, and so nevermind, we'll just stay at net 45 and that was, that was the end of the conversation. So you can do that.
Jeremy Jarrett:That's telling, though, because then you get to play in your business knowing that now,
Aaron Moncur:yeah, right, you can tie a string to these things. Yeah, I'll agree to these beneficial terms for you that you're asking for, as long as we also include this thing in the agreement. And now you have a little bit of leverage that they have to work on.
Jeremy Jarrett:We've seen a lot of big companies tend to like it. But you know, Hey, okay, you are net 90 or net 128 filing, but if you pay net 30, we'll give you one and a half percent off or something. Yeah, right. Like they like that too, because then that looks good on somebody else's desk, I guess.
Aaron Moncur:Yeah, yeah. I had someone in procurement schedule a meeting with me to talk about, basically, how can we extend our terms with you one of our customers, right? And I was, I was kind of miffed that they even scheduled this call, because we'd had this conversation before, and I thought we had already put that issue to bed, but nevertheless, they scheduled this call, and I'm talking with procurement, one of their procurement team specialists, and it became clear very quickly that the person on the call, this person that scheduled the call with me, they didn't care at all about the terms. Their boss had said, go out and try and push extended terms on our vendors. And so she was just trying to satisfy what her boss had asked her to do. And in the end, I just, I basically said no, and she was like, Okay, I tried, you know, that was, that was kind of all that mattered to her, is that she made the phone call like her boss asked her to do. Well,
Jeremy Jarrett:that's a good negotiation point, too. And a big pitfall lots of people make across all walks and sort of negotiations is it's critical that you're you make sure you're talking to the decision maker, right? Because if you're not, you're just wasting your time, right? And so we get this a lot of times when I'm negotiating a deal, if you get contracts administrator on the other side, that person's job is to say no to everything I'm going to ask for and then just sort of see how big of a problem it's going to be, and then kick it back up the chain, right? Yeah, and so be making sure you're talking to someone with you know, the authority to actually make the agreement is important and again, on a different context, I used to work with sports agents, and when I was in college or trying to sign this RDA player. His name was Al Horford, and his parents were separated, and the people I was working with were super tight with his mom. We had everything, you know, signed, sealed delivered pretty much, pretty much being a key point. He goes, Yeah, I'll sign all your green ones soon as I get back from, you know, going back to Puerto Rico to visit some family. And he goes to Puerto Rico and signs of the different agent that talking to his dad. And so we had made the mistake of not understanding who was calling shots, basically, and that's not a slight on anyone, but it's just an easy example of in work was not confidential, of how that can sort of happen. So you know whether it's a customer or supplier or whatever, it's pretty important to make sure you're talking. The person who has the right authority?
Aaron Moncur:Yeah, let's go back to funding briefly here. Do you have an opinion on or maybe the right way to ask this question is, how should founders? You know, you start in a new engineering company, you got this new product, this technology, that you're developing, but you need funding. And one option is, is debt financing, right? Whether it's going to a bank and getting a loan or taking out a bunch of credit cards and Max, maxing them out, but it's debt. There's no investment that you have to provide a return on. And then the other option is, is, you know, venture capital, or equity or something like that, where there is an expectation that whoever is giving you that money is expecting some return on on that investment, how should founders think about engaging with with either of those options? As far as funding,
Jeremy Jarrett:it really depends. I like working with the companies that grind it out. Probably match out some credit cards and just get the company to cash flow positive first, and I'm sorry to do the cleanup later. I think that is creates little bit different breed of entrepreneur. And I think it's easier to access those other options when you own a business that already makes money, makes profit. That being said, it depends on what you're trying to do. It maybe what you're trying to engineer, you know, it's gonna cost like, $2 million you know, banks probably not gonna loan you that right to get to, like, proof of concept, or whatever stage, you know, you might need private capital. And then, like I said, You got to treat that responsibly, right? That's not I've seen a lot of people make mistake of treating that like the company piggy bank all of a sudden, they're having all their meetings at expensive restaurants and traveling in first class and like that's somebody else with money they're spending. But there are instances where that's sort of required based on what it would take to get there right. Like you might need to rent, or you might need to put a bunch of money down for a lease and rent a big space. You didn't put a bunch of industrial equipment in, right? And then you got to buy that equipment and refinance their equipment. And if your company doesn't have a track record, it's gonna be hard to finance it, right? Yeah, yep. I think it just depends. To the extent you can bootstrap it. I would suggest shots. You know, if you really believe in it, that's the way to go. You know, I've worked with people have taken out equity out of their house. Can do it, and I it just, but it depends. You know, on the other hand, no business has ever failed for having too much money, or, I think you just need to understand the implications that come with, with taking outside money. Yeah, the bank's easy. The bank's not your friend. The bank's out your enemy. The bank's a bank, right? They're going to make sure you pay them back.
Aaron Moncur:We've talked a lot about founders and, you know, legal strategies and best practices for them starting a business, but how about the engineers who are working inside of a company so everyone outside of the owner, the founder, the founders, if you're working at a company where there's perhaps an acquisition exit strategy, how should you, as a non owner of the company, think about how that acquisition could affect your your projects and even your your career.
Jeremy Jarrett:So I think the first thing I'd say is you're gonna find out way later in the process than you'd like to. And don't be offended by that. It's not about you. There's, you know, 20 different legal reasons you're gonna find out way further down the line than anybody. All right, so that's the big one. The second one, I would say, is, you know, think about, in terms of your career, think about who's the buyer, right? If it's a competitor or business in, like, an ancillary market where it's, you know, what we call a strategic buyer that may be different than what we call a financial buyer, like a private equity firm, and it just depends on what both can be good and bad, right? Private equity firm might want to cut costs to make the balance sheet look better, but they might also. Be looking at the company and saying, Man, if these guys just have a little more money, they could really, they could be pouring gasoline on a fire. And they could be looking at it like that in the same way strategic could be saying, Man, look like we already have a great back office. We can, you know, once we eliminate redundancies, we'll really be cooking on fire, or they could be saying, Man, these engineers are critical because they're doing something like we just don't quite know how to do. And we want them. We don't want to compete with it anymore. We want to, you know, if you can't beat them, join them type of situation. So I don't, don't make assumptions. I know it's people's lives. It's their livelihoods. It's their careers. You know, my advice would be, if you find out your company's getting acquired, wait for a minute, right? I don't know the hiring cycles like for engineers, but I wouldn't panic. You know, you wanted to call a recruiter. Finally, I really wouldn't panic. My advice would be, wait and see what happens. But it is hard, and you will find out later in the process. And you know, have a WTF moment, a little bit like there's, I think what you got to understand is there's no way around that from the people on charges side, really, because what they don't want to do is they wouldn't say anything too early or not happen. Man, yeah. Like, no matter what they do, people are generally the water golf can be bad.
Aaron Moncur:It's not that they don't trust you or respect you or value you. They're just legal reasons why they can't talk about it, legal
Jeremy Jarrett:reasons. It's just, you know, silence is usually the best of bad options. Yeah,
Aaron Moncur:all right, well, we'll wrap things up here. Last question, if you could give one piece of legal advice to engineers who are thinking about commercializing some technology or bringing to life some invention that they've been thinking about what? What would that be?
Jeremy Jarrett:First of all, doing it home on your personal laptop, like do not let it touch your current pointer in any way, shape or form, not saying you have to air gap, it or whatever, but be really cognizant about
Aaron Moncur:is that, because, if you do, there could be legal reasons why your current employer might own that that technology. Yeah, yeah.
Jeremy Jarrett:So approved engineering firm would have what's called an invention assignment. Again, it's part of New Hire paperwork, and getting there in the course of your employment we are and so, right? I have a work laptop. Let's say I take that home and enduring something on it. Well, it's works laptop. So they're going to make that argument. I don't know if they win it, but they're going to make it. I don't know for anybody to watch the show Silicon Valley that was a pretty big like plot cycle several years back, but that that would be one thing, and I think the second thing is just understanding, sort of when to pay attention to the legal stuff is good. Like, go try and do your invention. Like, like, get a tour first. You know, you don't need to go spend like, 1000s of dollars on, you know, legal and insurance and stuff like this ahead of time. Like, make sure you have something, and then you can go do a little bit of house cleaning. Like, don't get too far down the road. I'm dark. You don't need it all. Just so at the beginning. And I'd be remiss if I left without telling my my engineer joke.
Aaron Moncur:Okay, let's, let's hear this ought to be good,
Jeremy Jarrett:which is an optimist sees the glass half full, a passive nurse. Piece of glass half empty, an engineer is confused as to why it's twice as big as a
Aaron Moncur:beautiful that could double as a dad joke too.
Jeremy Jarrett:Yeah, probably
Aaron Moncur:all right. Jeremy, thank you so much. This has really been great. I thought this was really interesting and useful, especially for those considering venturing off on their own in the future. So thank you so much for being with us today and sharing all of this really actionable, sound legal advice with our listeners really
Jeremy Jarrett:appreciate it. Thanks for having me on and you know, for any listeners are at Sacks Tierney, we're always happy to help. You can find me. It's just Jeremy Jarrett at the law firm Sacks Tierney also. My email is just j, A, R, R, E, T, t@Sacks Tierney.com, we're. That's S, H, E, k, s, t, i, v, r, M, E, y.com,
Aaron Moncur:Excellent, great. Are you active on LinkedIn as well?
Jeremy Jarrett:Yes, perfect. All right. All right. Well, Jeremy thanks again for being on the show today. Anytime. Thank you.
Aaron Moncur:I'm Aaron Moncur, founder of pipeline design and engineering. If you liked what you heard today, please share the episode to learn how your team can leverage our team's expertise developing advanced manufacturing processes, automated machines and custom fixtures, complemented with product design and R D services. Visit us at Team pipeline.us. To join a vibrant community of engineers online visit the wave dot engineer, thank you for listening.
