Reference Letter Policies: Giving A Reference For Former Employees

When checking references, its important to try and get as much information about the potential employee as possible. But when giving references for a former employee many entrepreneurs aren’t as eager to provide the same information. Here’s some information about why it is important to give a reference no matter what the former staff member’s history with the company was, as well as some procedures for every small business to follow to avoid legal ramifications.

How To Protect The Company When Writing A Letter Of Reference

When offering letters of reference or giving references over the phone, sharing a former employee’s negative experience can have serious legal and financial consequences. Yet keeping mum isn’t the answer either, as entrepreneurs have been taken to court for staying quiet on this very subject. Why? Because the former company didn’t disclose important information to the potential employer. Therefore, keep the following information in mind when writing a letter of reference:

  • Offer information in a letter of reference that only covers factual information that can be backed up.
  • Ensure the information provided is limited and offered only by someone who is trained in providing letters of reference, preferably a human resources specialist.

Suggested Company Procedures For Letters Of Reference

Avoiding legal issues before they start is something all entrepreneurs strive for, no matter how large the business is. Providing references is one of those activities that can be highly litigious, so keeping in mind some policies and procedures before offering up a recommendation is sound advice. To establish a legal defense, an employer would have to prove one of the following points. Keep these in mind when creating a company-wide policy for giving references.


  1. The alleged statement was not made. To avoid this type of legal debate, make it a company policy to only provide a letter of reference with no exceptions.
  2. What was shared regarding the former employee in the reference letter is true. If this is the case, it will need to be backed up with lots of documentation, such as employee evaluation forms and performance reports.
  3. Occasionally a former employee will feel that a reference was defamatory. To avoid this situation, use a sample reference template that only offers information that was clearly documented, and that covers the former employee’s job skills, not character.
  4. To prove that the former employee gave consent to the letter of reference, entrepreneurs must get the employee to sign a letter of consent to release any job related performance information to potential future employers. Another way around this situation is to draft a letter of reference before the employee leaves the company and have the staff member review it before they leave the company, as well as making exit interviews with all members of the organization mandatory.
  5. Sometimes the wrong person will provide a letter of reference to another employer, which can open up a huge can of legal worms for small businesses. To dispute this allegation, ensure that company policy is to have only one person write the letters of reference, and never deviate from this practice.

Please note that this article does not construe legal advice, and does not replace the work of a qualified lawyer. Contact a lawyer regarding the laws in your jurisdiction regarding letters of reference should there be any concerns.


Write a Business Plan: What to Include

Business plans need only be as big as what is required to run the business. Not all business plans are required to be a complete formal document suitable for submission to a financial institution or potential investors. Only develop and write a business plan which is suitable for the size of the company. A plan may be altered at any time, if or when circumstances change. Plans can start fairly simple and then be reconstructed as the new business grows and develops.

It is generally advisable to write a business plan before starting a new business. The planning process helps to get a clear understanding of the business, legal establishment and ways it may be developed. It is a way to help understand the purpose of the new business, marketing strategies and how to make potential profits. It is generally best to write a business plan in stages.

Sections to Include in Business Plans

A new business plan will generally have sections to cover different areas of the business. These generally include:

  • Executive Summary – An overview of the business plan to highlight key areas.
  • Company/Business Description – Describes the business, including legal establishment, history, purpose of the business and direction for the business.
  • Products / Services – Describes what the business will be selling or what services it will be providing.
  • Market and Industry Analysis – Provides analysis of current market and industry trends to establish the viability of a new business and projects the market share which the business may acquire.
  • Business Marketing Strategy and Implementation- Identifies the markets and methods to execute the marketing strategies. Includes projected sales budgets.
  • Operations and Management – Identifies how staff will be utilized, what systems will be in place, software which will be used and products or service development. Describes the management team and their responsibilities.
  • Financial Analysis – Includes any past available financial reports, projected profit and loss statements, cash flow tables and budgets.

It is also advisable to include a section for contingency plans. This section should identify potential risks to projected sales and marketing. Include strategies which may be implemented if these potential risks where to occur.

Business Planning – Where to Start

Preparing a business plan need not be developed in the above order, but started with Market and Industry Analysis. By identifying current market trends, customers’ needs, how to approach them, along with a general industry analysis may help determine how and when to start a new business. There needs to be a demand for a product or service before any profit can be made. This process helps to highlight opportunities, or lack of, that might otherwise not be obvious. Business marketing is a vital section to include in the plan.

Business plans need to be simple, specific, realistic and complete. A good plan will also require someone to follow up and check on it, to ensure all areas are being implemented. Developing a business plan helps to highlight the areas of strength and areas which will require the most attention. A business plan also helps determine if a new business is going to have a successful and profitable longer term outcome.


Business Structure Decisioning: Sole Proprietorships

The simplest business structure available to new entrepreneurs, sole proprietorship is a popular choice. But just because it is simple doesn’t necessarily mean its the best for your business. What follows is an explanations of the positive and negative aspects of being in business for yourself, and what options may be better choices if the bad outweighs the good.

What Is A Sole Proprietorship?

Before we discuss the positive and negative aspects of this business structure, let’s first define what sole proprietorship is. Sole proprietorship is a business structure that relies on one person to shoulder all of the legal ramifications of being in business, including financial and representation within the community. Direct sellers, contractors and consultants all fall within this category, as do any other businesses that are not incorporated or have limited liability status.

Advantages of a Sole Proprietorship

There are quite a few advantages to choosing a sole proprietorship business structure. They are:

  • Simpler Taxes: A sole proprietor files his or her taxes as if they were self-employed, and therefore will receive the same benefits. Additionally, there is only form to fill out (in the US this is IRS Form 1040; in Canada is the same form as everyone else, the T1);
  • Minimal Start Up Costs: Although in comparison to a corporation or limited liability company, sole proprietors have few (if any) start up costs to incurr when choosing their business structure.
  • Less Paperwork: When you are a sole proprietor, the need for paperwork is considerably less than for a larger business or corporation — such as payroll. If you are the only employee, then you can pay yourself directly out of your earnings instead of having to write checks.

Disadvantages Of A Sole Proprietorship

As with all business structures, there are both perks and drawbacks to every situation. Here are some of the disadvantages of becoming a sole proprietorship:

  • Liability Issues: There isn’t anyone else to take responsibility should something bad happen when you are a sole proprietor, like if a customer slips on the way up the stairs to your business or if your company isn’t able to stay in business after a couple of years and needs to declare bankruptcy. Therefore, if you are thinking about starting a business that has a higher-than-average risk of struggle (such as restaurants or manufacturers), you may be better off using a corporate business structure instead.
  • No Regulation of Financial Statements: Although sole proprietors still have to provide the governement with some sort of financial data at the end of every year, there are fewer requirements than with a corporation. And with less attention to the financials, many entrepreneurs flail before they realize they are in trouble. Ensuring that you’ve got a solid financial structure set up before you get going will alleviate this concern.
  • Higher Risk of Loneliness or Depression: People who work for themselves are often by themselves, and frequently becoming a sole proprietor means losing the water cooler social aspect of working for someone else. Make sure that you’ve incorporated social time into your work day, whether through networking or other means, so as to reduce isolation.

Methods For Licensing Inventions: Preparing New Product Submissions

Companies that are potential licensees can be found by looking in magazines or catalogs that feature products by companies that are within an invention’s field of industry or one can go online and search using terms on search-engines that describe an invention and find companies that way. It is important to secure a patent pending before presenting an invention to manufacturers for licensing consideration.

Research Potential Licensee-Companies

The manufacturing/marketing company an inventor licenses his invention to, is called the “licensee” and the inventor or his agent is referred to as the “licensor.” If an invention is in an industry such as pet supplies, fishing tackle, health & beauty aids, etc., then one simply gathers information on companies that are in the invention’s field of industry, so that those who look reputable can be contacted about reviewing the new product-invention.

The advantages in securing a License Agreement for an invention include the following:

  • Ongoing royalty payments
  • marketing expenses are the licensee’s
  • an established company can gain wide exposure for inventions
  • product liability and patent-related legal issues are the licensee’s responsibility

Following Up

When methods used for locating potential licensees, yield lists of companies that look to be high quality and reputable in their industry, one can then contact them by written-letter or by email to request an opportunity to submit an invention to their new product buyer.

One can then either follow-up on letters/emails with a phone call or it can be requested that contacted companies reply to the letter sent, to confirm receipt of it and/or interest in a more detailed submission. The advantage of mailed letters is that they can be sent return-receipt, so that an inventor knows it was received, on a specific postmarked date.

It is usually more effective to state in a letter or email that it will be followed-up with a phone call. When one receives responses from manufacturers interested in further reviewing an invention, one can either send a product sample/prototype and further written details about the invention or request an appointment to present the invention in person at their buying office.

Rehearsing and Timing Presentations

A presentation should be practiced before making one in person. An inventor should be well prepared to make a presentation for their invention but should also insure that the presentation is timed, so that it does not exceed a reasonable time-limit.

A presentation generally should not exceed 20 minutes in length because executive buyers with manufacturing companies are usually extremely busy and a shorter power-presentation can be effective and is usually the best approach. A buyer can extend the length of a presentation if he chooses to, by asking questions after an inventor is done with the initial presenting.

Composing a License Agreement Proposal

An inventor should compose a sample license agreement that shows all of the terms and conditions that need to be included in the contract, leaving certain terms blank, such as the amount/percent of royalty that will be paid and the length/term of the contract in years that it is initially in force. Having a proposal on-hand gives an inventor the readiness to negotiate terms, should a presentation meeting reach that stage of interest by a buyer.

Terms and Conditions

An inventor may wish to set the term that a License Agreement is in force with a manufacturer (length of time) for only one or two years, with an option for renewal at the end of the term. This way, renewal depends upon the initial sales performance of the licensee. An inventor might also wish to include the condition of minimum sales that are accomplished per contract year by the manufacturer/licensee.

It might also be a good idea to include a clause in the contract that gives both inventor/licensor and the licensee the right to terminate the license agreement. This offers both parties a protective clause in the event for example that the licensee fails to pay royalties at the set contractual time periods or for other legitimate reasons. A licensee might also respectfully terminate a License Agreement in the event they feel they would be unable to fulfill their obligations, so that the inventor/licensor can pursue better options.

Requiring Timely Payments

The royalty-payment conditions can require royalties, to be calculated and paid, quarterly (4 times a year) or monthly, etc., and should the licensee become past-due in making royalty payments (by 10, 15 or 30 days, etc.); the licensor has the option to terminate the contract in writing – such as with a 15 or 30 day notice.

Inventors should take their time in pursuing License agreements carefully. Being in too much of a hurry to license an invention, can result in bad decisions when entering into contracts that are binding and that must run their full terms unless terminated due to violations of terms. It is in an inventor’s best interest to fully consider his options when entering into a License agreement and to do so with the help of an attorney if necessary.


Starting Small Businesses: Professional Success Steps

Many people choose to start a small business from a former hobby in hopes of earning profit. While many entrepreneurs succeed in their endeavors each year, a handful of people are left scrambling to keep up from day one, unable to get ahead.

What distinguishes between those who succeed and those who fail lies within their managing skills. Learning and perfecting these aspects of small business ownership will help in becoming one of those who succeed.


One of the most important aspects of a successful small business, organization can be the life or death of a dream. If a business owner cannot keep track of his invoices from orders, how will he be able to track profit and loss properly? Organization of important documents is the first aspect that must be mastered.

For example, failure to track tax information can result in an IRS audit and a lot of hassle. Professional and successful small business owners usually have an organized office where they can find everything filed under appropriate categories. Purchasing a filing system is a must for small businesses, since it helps to keep organization swift and easy.


Treating the business as a professional affair goes a long way in small business success. Since many people choose to turn their hobby into a business, this step up in professionalism puts the business one up on competitors. Those who continue to treat their business as a hobby will find themselves left with ship-shod work, offices and manners.

Approach the business like a job instead of a hobby to ensure success. This includes creating separate office and work areas as well as ordering business cards to alert others the service or product will be handled in a professional manner. People are more willing to do business with someone who designates themselves in this way rather than with the one who ‘does this little thing on the side’.


Small businesses usually take a while to get running. Sometimes the legal and financial hassle of starting one is enough for some to lose sight of the dream. Do not let the technicalities blind the passion for starting the business in the first place. Keep a mission statement or vision for the business in view at all times. Consistently think of new ideas or unique products that the company can provide. This will lead to success, because determination beats all other odds.


Starting a small business is exciting and can be rewarding, both financially and emotionally, if one employs the proper skills for success. Organization and professionalism are key components of a successful start-up. But the quality of perseverance is unprecedented in small business success stories.

Holiday Gifts for Entrepreneurs: For The Business Owner in Your Life

The following is a guest post from Avky Inc co-founders Kyle Uchitel and Aleksandr Vasser of Phoenix, Arizona.

For those with a loved one that happens to also be an entrepreneur, finding suitable holiday gift ideas can be a challenge. What do you get someone who wants to increase profits and productivity, decrease costs, and enhance their customers’ experiences? Something from this holiday gift list, of course.

Holiday Gift Idea for Entrepreneurs #1: Wireless Headset

There are few people who talk on the phone more than an entrepreneur. A wireless headset lets them multi-task even more than before without being tethered to their phone or computer. If you can find a headset that also looks good on their noggin during a teleconference, you’ll have found a holiday gift to be gushed about for years to come.

Holiday Gift Idea for Entrepreneurs #2: Fireproof Safe

If you are buying this holiday gift for your spouse or partner, you may want to use one of the other gift ideas instead, as a fireproof safe is more of a practical gift than a romantic one. However, if saving money is something that really excites your loved one, this holiday gift may be the perfect choice as not only will it keep their business’ valuables safe, but it will also reduce their insurance costs.

Holiday Gift Idea for Entrepreneurs #3: Magazine Subscription

Magazines.com offers a large selection of magazines for every hobby or interest, including entrepreneurs. Three magazine subscriptions for a year are only $30 USD (in the US only) and are a great way to extend a holiday gift throughout the entire year. Alternatively, you could try sending them a magazine from one of these Free Business Magazines.

Holiday Gift Idea for Entrepreneurs #4: A Retreat for the Senses

Your loved one works hard. Why not pamper them for a day and let them know how much you appreciate their efforts? There are two ways to go about giving this kind of holiday gift: either make your own “gift certificate” for a day of solace (including hot chocolate or a glass of wine, a bubble bath, massage, candlelit dinner and so forth), or purchase a gift certificate from a company like SpaFinders.com, which offers spa packages ranging from $25 and up for retreats all over the world.

Holiday Gift Idea for Entrepreneurs #5: Membership in a Business Group

Most entrepreneurs already belong to and pay dues for associations and memberships that relate to their business entity, such as the Better Business Bureau, Chamber of Commerce or specialty associations. Take a look around and see if there are other groups locally that they may want to either participate in or belong to – like a networking group, Toastmasters or the Guerilla Marketing Association, or even a business conference they may want to attend.