Question

Topic: Advertising/PR

Advice With Setting Up A Marketing Agency Plse!

Posted by Anonymous on 5/31/2008 at 6:08 PM ET 250 Points
Hi everyone,

Im currently in the process of setting up a direct marketing agency in the UK. When set up, we will be out-sourcing design, print and distribution to deliver complete door to door campaigns.

At the moment Im looking into the legal and insurance side of things, and Ive come up with an issue that I really cant work out how marketing agencies deal with ??

How do Marketing Agencies protect themselves financially in the event that one of their suppliers (e.g. a printer) fails to deliver an acceptable quality of work or fails to deliver at all for that matter?

Let me explain with an example:
Our printer messes up with the print, and puts a fold in the wrong place. The print is deemed unusable and cannot be distributed to houses. The campaign delivery dates are tight and there is no time to do a reprint. We have to pull the campaign, and the client demands a full refund for all monies paid.

If we have already paid up front for design, print and distribution and the design house and printer wont refund us, and the distributor gives us a partial refund (less cancellation fee), then we will have to pay the client back everything from our own pocket!

Is this simply a risk I need to take in running my agency, or is there a solution to this?

Can anyone offer some advice?

Many thanks

Ben

p.s. Ive already looked into Professional Indemnity insurance, but policies only cover you if everyone of your suppliers also has PI at the same or greater level of cover as you. Ive called 2 of our suppliers already and neither have PI, so this wont help us.




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RESPONSES

  • Posted by mgoodman on 5/31/2008 at 7:25 PM Accepted
    When you make your proposal to the client, you need to make it clear that you are an agent, not a principal. The client accepts the responsibility for all costs incurred for work they approve.

    You get paid for what you do. Suppliers get paid for what they do. If someone screws up, there is no liability on your part. It's the client's problem.

    Your job, and your reputation, are based on your ability to select suppliers who won't screw up, to manage them and provide the necessary oversight and leadership to make sure they deliver what the client has requested. But you cannot and should not accept financial responsibility for someone else's performance.

    If your client can't handle that arrangement, then they should try to find another agent who is dumb enough to swallow the full responsibility and guarantee the performance of suppliers outside their control.
  • Posted by clpsf on 6/2/2008 at 8:20 PM Accepted
    First off, you only pay the printer a deposit, so if there is any loss, it won't be more than the deposit. The smaller the printer and the riskier your position, the smaller the deposit you should pay. Because this printer has no insurance and you don't appear to have sufficient experience with him/her, then I wouldn't pay more than 20% of the contract amount to get the job off the ground.

    The balance of the contract amount is paid upon delivery of the completed product, subject to your review and acceptance. This is made a part of your Agreement with the printer and the design shop.

    Secondly -- and this is also in the contract -- the print job isn't run until you *and* the client have reviewed a sample and approved it, in writing.

    As tempting as it may be, don't accept rush jobs that will shortcut any of the "must do's," particularly the sample review and approval, at least not until you and the printer have gotten to know each other's habits and styles and you trust each other implicitly.

    You should have a similar arrangement with your client. Get a deposit, larger than the one you pay to your printer. The burden is on the client to approve the sample in writing. If the client isn't happy with the result after (s)he approves the sample, and the sample is exactly as approved, then the burden is on the client to accept the job as is and to pay you in full.

    Further, your contract with clients should always make transfer and assignment of the copyright or license to use the end products that contain the intellectual property subject to your receipt of full payment from the client.

    By doing this, your client has the burden to ensure the print job is as he likes and he can't use the design until he pays you in full because the intellectual property belongs to the designer (which brings up another step in the process).

    When you engage a third party designer, you should obtain a signed non-disclosure agreement, a non-compete agreement (or a non-compete clause in your Agreement for Services, assuming it's legal where you live -- it's not in California), and a Transfer and Assignment of Intellectual Property, which states that the designer is doing the work for hire and (s)he transfers all intellectual property for works (s)he will be engaged to produce on behalf of your company.

    I strongly encourage you to have a lawyer (or a knowledgeable paralegal, or the equivalents in the UK) prepare the documents for you. You will also need an insertion order, of course, and I recommend that you have your clients complete a credit report. This isn't always good for business especially if you're a new company, so when you get your first check from each client, make sure you record the bank information, the name of the person who signs the check, and the checking account. This will allow you to go after the funds if they renege on the contract.

    As for your service providers (designers, printers), you should always get references and call them. Ask the designers and printers to show you work they've done. Mentally make a note of the clients for whom they did the work. Call them also.


  • Posted by clpsf on 6/3/2008 at 3:12 AM Member
    Two corrections for clarification of the message from clpsf on 6/2/08. I was rushing when I wrote my response to your question. Sorry for my failure to be clear on a couple of points:

    1st CORRECTION: Paragraph 5, 3rd sentence:
    I mistakenly said: If the client isn't happy with the result after (s)he approves the sample, and the sample is exactly as approved, then the burden is on the client to accept the job as is and to pay you in full.

    SHOULD BE: If the client isn't happy with the result (i.e., the finished product) after (s)he has approved the sample, and the print run matches the approved sample, then the burden is on the client to accept the job "as is" and to pay you in full.

    2nd CORRECTION: Paragraph 9 (next to last paragraph), 3rd and 4th sentences: I said, "You will also need an insertion order, of course, and I recommend that you have your clients complete a credit report. This isn't always good for business especially if you're a new company, . . . "

    SHOULD BE: You will also need an insertion order, of course, and I recommend that you have your clients complete a credit application. Asking for a credit application is always good business. However, some business operators become concerned that they'll anger their clients for appearing to mistrust them. If you prefer, you can obtain some of the key information that would go on a credit application by photocopying the deposit check you receive, making sure to record the bank information, the accountholder's information, the checking account number, and the name of the person who signs the check. Should you ever have to sue or to seek collection, you will have information as to where the client banks and who the primary principal is.

    On another note, if you engage a business attorney or paralegal to prepare your business documents, negotiate the lawyer's fee up front at a flat rate. Most business attorneys have these documents already prepared and all they do is tailor them to your needs. Keep searching until you find a lawyer who will agree to a flat rate.

    If you've been in business before and you're comfortable with legal documents, then perhaps you can find appropriate samples on the Internet and modify them to suit your needs. I suggest, however, that you at least have a lawyer or paralegal review them. Be particularly careful with the Default and the Indemnification provisions of your Agreement.
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