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Jenna* had always been bright and ambitious. A precocious child, sheâd established big goals early in her life. One of them was being an entrepreneur, a global consultant. Determined to make that reality, she launched her consulting firm right after attending a top-tier business school. She operated lean and mean and, because of her business school connections and some of her fatherâs, she got off to a strong start.
But, she had her eye on working with one firm that had an award-winning marketing team. It was a growing tech enterprise sheâd learned about while working at her job as a consultant before business school when it was still a well-funded tech start-up.
An Exciting Dream Client
Jenna got the opportunity to work with this firm when one of her business school friends called her and told her heâd heard the company was looking for consulting contractors. He also warned her of management changes and rumblings of discontent as the new executivesâ aggressive new growth strategy put pressure on the firm to generate more profit.
Undaunted by that last piece of news, Jenna submitted her résumé, a three-month marketing plan, and a short proposal. After waiting a few weeks, she got a call to meet with the CEO and a few of the other top executives at the firm about the role.
Never ignore contract terms that trouble you. Question them, get changes or walk away. Click To Tweet
She made the trip to their West Coast offices and knew immediately she was in a different world. But, confident as always, Jenna overcame her nervousness and conquered the interview. The firm offered her a two-year contract at fantastic compensation a week later, which she accepted.
The contract contained clauses that made her nervous. They included a few making her liable for any poor outcomes based on marketing strategies she provided. But she signed it and kept her fingers crossed that all would go well. This opportunity, she convinced herself, could lead to bigger ones and, with her global ambitions, she determined she’d make it work.
She ignored her concerns and plunged into the work believing her life was about to change. It would change for sure, though not in the way she thought.
The Honeymoon Always Ends
The project went well for the first nine months allowing Jenna to push her fears about the contract to the back of her mind. But, there was always a gnawing âwhat if?â back there. Jenna learned the answer to that question when she got a new assignment as part of her consulting gig late in the first summer of the contract.
The client wanted her to âstretchâ herself and use her sharp mind to create a unique marketing strategy for a new a legal software application they were developing to ârevolutionizeâ law practice management processes. The client wanted her to base her approach on some ânovelâ marketing tactics their key competitor apparently used successfully.
During that team conference call, Jenna informed her clients that she didnât like the business tactics this competitor, who had a pretty shady reputation in marketing circles, was using. These new âtacticsâ were as unprincipled as that firm itself, she said. But, Jennaâs client pushed back, telling her how important it was to her relationship with them that she âmake this work.â
This softwareâs sales would drive year-end and first-quarter revenues next year, they told her. They wanted the marketing campaign to contribute to making that happen. They were giving her three months to the public software launch and a small team of marketing assistants to develop the marketing campaign strategy based on these tactics.
Don't engage in unethical business activities for clients, even dream clients. Click To Tweet
Jenna reluctantly agreed to develop the new marketing campaign but not before wondering if she should end the engagement âfor cause.â After all, she was sure the client was asking her she to do something that might be unethical.
But she remembered her global business aspirations and talked herself out of those thoughts. She pushed her apprehensions to the back of her mind with those about the contract and determined to move forward.
Besides, she was sure she could both execute this new strategy successfully and turn the shady tactics into ethical ones. Sheâd be a marketing hero, she thought, her confidence welling up. But, she was completely wrong. Her clients had other plans.
The Clientâs Sleight of Marketing Hand
Jenna managed to develop a campaign strategy that represented the firmâs new product, which was still in early beta testing, in a strong but honest way.
Instead of representing that it was in its final form and had been successfully market-tested and passed for usefulness, her plan showed what it could be and created market anticipation for the fully-functional product. She eliminated the idea of constructing misleading client testimonials based on culled together positive comments from beta testers.
Trouble came when, during a video conference, Jenna proudly presented her written plan to the firmâs marketing VP. The VP said liked the plan overall but thought it needed a few âtweaks to work more effectively.â Jenna argued that perhaps the team should slow the pace of campaign launch down and wait until the software was actually market-ready.
Unethical clients present a danger to your business. Take the necessary steps to protect it. Click To Tweet
Or, just execute the marketing campaign strategy she’d created, which was truthful. The client vetoed her idea. After reminding Jenna of the revenue goals, the marketing VP made the changes she wantedâinjecting the misleading information and tactics into Jenna’s plan.
The client intended to represent a product that was nowhere near ready for the market was going as ready. They would take with pre-orders taken at full retail price for a finished application. The goal was to get enough pre-orders to complete development of the software they represented as already completed.
The firm wouldn’t tell buyers they were investing in an unfinished software application. Jenna got most of the credit for this strategy, which, by the way the marketing VP represented it to them, the firm’s CXOâs loved.
But, Jenna hadnât wanted credit for a lie. That felt shameful to her. The client hadn’t thought this through thoroughly. Jennaâs head spun with panic about how they thought theyâd get away with this since it was software. More importantly, how it would affect her reputation and her business if exposed? She wouldnât have to wait long to learn.
A Top Marketing Blunder of the Year
The marketing campaign was a disaster. A global law firm customer of her client’s had gotten a call from one of their contractors, who was anonymously beta testing the software. He informed the law firmâs CTO that it had a long way to go before it could work at all.
The companyâs marketing executives, some of whom were Jenna’s consulting colleagues, quickly figured out what Jennaâs client was doing in their marketing.
The law firmâs business development director sent a scathing email to the tech firm calling Jenna’s client out for its misleading campaign intended to deceive the public into buying a worthless new legal software application. Then, the tech blogosphere got tipped off about this ânew marketing strategyâ that Jennaâs client had tried when somebody anonymously forwarded a tech blog that email.
Jenna waited while the firm scrambled to stave off a PR nightmare. Looking to lay blame, they tried to figure out who the sources of the email leak or about the still ongoing beta testing were but they couldnât. It didnât matter anyway. The story was out. Industry blogs and journals were covering the story widely, and those stories spread rapidly across social media.
When legal issues arise with clients, never wait to see what they'll do first. Get legal help. Click To Tweet
People made memes and gifs mocking the firm, and they went viral on business social networks. Ultimately, the client named Jenna as the âbrainchildâ of the marketing âschemeâ and then terminated her contract while the marketing VP tried to resign quietly.
By late December of that year, the marketing campaign was showing up on âtop marketing blunders of the yearâ lists everywhere. The company was a laughing-stock whose biggest clients bailed on her and almost put Jenna out of business. Her woes were just beginning, though.
From Bad Business News to Worse Legal News
Jenna greeted the new year with news that this year, she’d be one of the 36-53% of small businesses who found herself in a lawsuit that year. Her former tech firm clients had filed one for a breach of contract. Specifically, they alleged that sheâd failed to give good advice and failed to meet professional service standards. They also were claiming she was unethical in her marketing approaches.
The former client was blaming her publicly for the marketing scandal, and she now had to battle for her reputation and her dreams of global business success. With no cash to fight a lawsuitâsheâd used her three months savings to pay bills while she tried to restructure her business lifeâshe maxed out her credit cards to get legal help.
Between 36-53% of small businesses will find themselves in a lawsuit during any given year. Click To Tweet
She called her insurance agent to see if she had insurance protection for this catastrophe. He had only more bad news. He told her that the general liability insurance under her business owner’s policy or BOP might have covered her business if the clients had claimed defamation, but they hadnât.
Also, because there was no event that her BOPâs property insurance would cover, she couldnât use its business interruption coverage while she rebuilt her business. Moreover, he informed her, the umbrella policy sheâd brought as part of her homeownerâs insurance wouldnât cover her, either.
He reminded her that heâd suggested she add professional liability or errors & omissions insurance as a rider to her BOP when she first took this contract. Wanting to save a few dollars and not aware of cheaper alternatives, sheâd declined thinking nothing like this would ever happen.
Does your small business have the right insurance coverage if you get sued? Many don't. Click To Tweet
But that insurance protection covers consultants while they offer professional advising services. It may have helped Jenna fight this lawsuit she now had to win. This graphic shows how errors & omissions (E&O) insurance could have protected Jenna in a lawsuit.
Her former clients sued Jenna for at least three of those alleged mistakes and demanded over $1 million in damages in the suit. She didnât have a million dollars or anywhere close to that much pay a judgment creditor.
Fighting a Legal Battle with No Insurance Shield
While she did have limited liability protection under her corporation, Jenna had no insurance protection in this fight. Now, sheâd probably have to sell her townhouse and try to prevent bankruptcy.
But, battling this suit successfully was the only chance Jenna had to restore her reputation. She was in her mid-30s with a lot of her career left, and she was still paying business school debt. She had to win this lawsuit.
She believed she had a shot at victory, too. She had proof that sheâd written a plan that didnât include those ethical breaches and misleading tactics. All sheâd have to do is show that evidence in court, if the suit got that far, and hope the court would dismiss the lawsuit.
The SBA found that many small business lawsuits don't settle. They go to court. Click To Tweet
But she knew the former client was using this to try to regain their lost reputation, too. If they could make her look like a rogue consultant whoâd used slick marketing of her own to take advantage of a relatively new business, they might be able to rebuild their reputation at her expense. She knew theyâd probably take this to court and not settle since she was expendable to them.
Looking back, Jenna wished sheâd emailed the client about her concerns around the new marketing strategy. She regretted she hadn’t put her fears about the revised plan in writing, too. Jenna lamented signing a contract that hadn’t left her so vulnerable. She wished she had purchased errors & omissions insurance. She now wished all this would disappear, but she knew it wouldnât.
Now, she had to put her trust in the legal system and hope she could fund a lawsuit on her own since she hated to ask for her parents’ help. Next time, she vowed, sheâd buy whatever business insurance protection she could, including E&O.
But, she knew sheâd have to win this lawsuit if she had any expectation of restoring her business reputation and rebuilding from what were now ashes. Only then would she be eligible to get business insurance coverage, she believed. She didnât think insurers took risks on business owners who fought lawsuits for unethical business behavior and lost.
Worse, she knew she hadnât committed any ethical breaches, but it was enough that these shady former clients accused of doing so. Now, though it might cost whatever she had left, she had to fightâand beatâthis lawsuit.
*Jenna is a fictional character and her story is a fictitious account to illustrate the points made in this blog post. Please review this site’s Content Disclaimer for more details on its use of fictional characters and accounts on this blog and how you should apply the information in this post.
(c) 2016-2018. Dahna M. Chandler for Get Money Moxie, Inc., a division of Thrive Media, Inc. All rights reserved. This article may not be reproduced or reposted in whole or in part without express written permission of the author.
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