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Look at what was in their contracts...

5-year office lease

$180K annual client services agreement

$180K annual client services agreement

 Early termination penalty buried in Exhibit C: 12 months  remaining rent PLUS loss of security deposit PLUS $15,000  "administrative fee."  Total early exit cost: $73,000  The lease also had a "personal guarantee" clause Marcus  didn't notice—his personal assets were on the line. 

$180K annual client services agreement

$180K annual client services agreement

$180K annual client services agreement

 Payment terms said "Net 30" but required: - Purchase order approval (7-10 days) - Three-level internal approval (up to 21 days) - Monthly payment batch processing (up to 30 days)  Real payment timeline: 58-91 days  For a $180K contract billed monthly ($15K/month), she was  essentially providing a $30-45K interest-free loan to her client. 

Equipment maintenance agreement

Partnership agreement with distribution partner

Partnership agreement with distribution partner

 Annual price escalation clause tied to "vendor's published  rate sheet" with no cap.  Year 1: $24,000 Year 2: $26,400 (10% increase) Year 3: $29,900 (13% increase)   Year 4: $34,400 (15% increase) Year 5: $39,600 (15% increase)  5-year total: $154,300 vs. expected $120,000 (if 0% increase)  They'd budgeted for 3% annual increases max. 

Partnership agreement with distribution partner

Partnership agreement with distribution partner

Partnership agreement with distribution partner

 "Exclusive distribution rights" clause meant: - They couldn't sell through ANY other channel - Partner could sell competing products - No minimum purchase requirements for partner - 2-year exclusive lock-in  If the partner didn't perform, they were stuck for 2 years  with no other way to reach customers. 

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