I had a delightful day yesterday with about 90 people who teach entrepreneurship in about 90 different places across the U.S. I was doing training related to my online curriculum, mostly, but we had a chance to talk about a variety of related topics.
One thing that came up in discussion and generated total consensus in the group was that the business plan document written by an outsider isn’t useful. I referenced my worst-ever consulting engagement, one of my favorite posts on this blog. Everybody in the room agreed that business planning is something you do, not something you buy. It’s a process, not a finished document.
Which reminds me of the idea of the hired gun, taken from cowboy movies. One of my favorites in the old days was Have Gun Will Travel, in which Richard Boone’s character, named Paladin (ha! the good old days) would ride into a new town every week, hired by somebody to solve a problem, all resting on the assumption that a stranger with a big gun and a fast draw was the solution. And of course it usually was, on the TV show.
But in real life? I do think there’s room in entrepreneurship and small business for experts to come from the outside and help with some problem or other? Does the hired gun idea work?
I think the answer is yes, sometimes, for some kinds of work. Outside experts, consultants, and professionals can be very helpful, if you have the money to spend. But they are not for doing the core thinking and decision making and management you have to do yourself. I’ve had success with outside people doing packaging, and with attorneys and CPAs, and copy writing, and other tasks that have relatively well defined deliverables. And regarding strategy, I think there are experts who help you take a fresh look, and apply a new framework. Getting a vendor to do web design, or hiring a designer to do your logo, that works well too. But there are a lot of core management things you — the owner, the entrepreneur — simply have to do yourself.
I admit I probably shouldn’t be posting this because I’m not an attorney, so I don’t give legal advice. This is just anecdotal, based on what I’ve seen in my business experience. Consult your attorney. I worked for years with a smart, honest business lawyer who — well, let me get to that later in this post.
First, however, here’s what I’ve seen in several decades of running a business.
Your should always get the specifics of a deal down in writing. They should be discussed, negotiated, agreed, and and signed. But that doesn’t often mean “a contract” negotiated with and by lawyers. A simple letter, and in many cases an email, is sufficient.
The real purpose is getting an agreement defined well. Contracts are for special cases. In my opinion.
I’ve never seen a contract end up with some judge or legal authority reading its details and deciding what gets done.
I’ve spent excruciating hours, several times, working through the details in a contract full of formulas and hypothetical situations, none of which made any difference when the business relationships fell apart.
In every one of those cases, we ended up in mediation. It all came down to negotiation at the end. The detailed contracts were just framing.
I’ve several times failed to get a contract enforced when a big company was on the other side. “We don’t agree with your interpretation,” I was told in once instance. The unspoken challenge was “so sue us.”
The real value of the vast majority of contracts is only the same as in a simple non-legalese written agreement in email or as a letter. It gets both sides clear on what they’ve agreed, and serves as a reminder later. And for that, you can get as much utility in a well-written non-legalese short letter as you do in an excruciatingly detailed contract. Do get it in writing. Do agree and sign. But call that a letter, not a contract.
I’m not knocking contracts where they’re needed: employee-employer relationships, confidentiality, non-disclosure, consultant, programmer, author and publisher … these are usually boilerplate. They aren’t worked to death for each case.
This is just my opinion, and I’m a business owner, not a lawyer. Regarding the smart business lawyer I mentioned, he warned me more than once that spreadsheet and-of-contract formulas would be hard to enforce and would probably be moot anyhow, since disputes would most likely end up in mediation.
With due respect to the do-it-yourselfer incorporation and legal tools, and particularly my long-term friends at Nolo Press, if you are going to have your own business then you want a long-term relationship with a business attorney.
This is a litigious world. Avoiding attorneys is false economy. Normally you start with a small business attorney. As you grow that might expand to include an intellectual property specialist and maybe an employee law specialist.
I’ve worked with several excellent attorneys. I’ve made some mistakes, and I’ve learned a few things. Here’s my advice on that:
1. Take time to select carefully.
If you own a business you need to have relationships with at least one attorney and at least one accountant. Take the time to find compatible competent professionals. Start by asking around (friends, relatives, business people you know) for recommendations.
Don’t just jump with the first person recommended by your friends or relatives, find at least three candidates. Look at their websites (an aside: I won’t deal with professionals who don’t have competent websites; it’s 2011), see if you can find their content offerings in blogs, follow them on twitter if they’re there, and – by far the most important – meet them and talk to them. Ask them about rates, and average monthly costs. Ask them for a client list and check references. If they’re shy about giving you names, that’s a warning sign.
If you have an attorney in the family, think about this example: The smartest attorney I ever worked with was my older brother. It’s great to have somebody you trust. But that also got awkward occasionally because he worked for me for free, and it was hard to ask for help when it was free. When I changed attorneys because we moved, my next attorney was delightfully proactive with making sure we had proper filings and minutes and such.
Forget all the mythology about sharks (and I have to apologize for my choice of illustration here; I couldn’t resist). I’ve run into some nasty dishonest attorneys, but I’ve had no trouble finding smart, honest, and easy-to-like attorneys. The attorney jokes and all that are the obvious phenomenon of a few bad apples giving the whole barrel a bad reputation.
2. Do your own homework to minimize costs
There’s so much good information and advice available, on the web and in books, that you can reduce legal fees by doing your homework first on things like choosing between sole proprietorship and corporation or LLC or partnership, for example, so you understand the main terms, and the most obvious tradeoffs. Then you optimize your situation by going into the attorney talk already knowing a lot of the basics. Let the attorney help you with the fine tuning.
3. Watch the billing details carefully.
Be straight with your attorney about money. If there is an occasional business lunch or social meeting, make sure you’re clear about whether any of these are non-billing occasions. Be clear with phone calls too. I liked to set the terms myself, specifying as I got into the conversation that I wanted some legal advice over the phone, and that I expected to pay for it; or, in some cases, that this was just social or community work or logistics, and I didn’t think of it as a billing call.
Then read your bills. Look at the time charge amounts, and question them when they aren’t obvious. Question them when they are bundled up into general categories only, like research, for example, rather than itemized down to the detailed incidents.
4. Distinguish between legal advice and business advice
Help your attorney manage this important distinction. You want your attorney to give you legal advice, but the borders get blurry. For example, you’re trying to do a contract with a big company and their contract has disputes being settled in their home jurisdiction. That happens a lot, and when it does, the biggest dog wins. If you don’t handle the difference between legal advice and business advice well, you can end up with your attorney wasting your time and money, and even screwing up the deal, by insisting on controlling the theoretical venue of theoretical future disputes.
Great moments in attorney business: I worked for years with an attorney named Tom Hoyt who had the sense to make the distinction clear. “That’s a business decision,” he would say. “My job is to tell you the legal side, but you have to decide whether or not you want to take the business risk.” That avoids the awkwardness that happens when the attorney advises one thing, for legal reasons; and you do the other, for business reasons.
5. Demand and accept responsibility
There are some things attorneys are supposed to actually do for you, as professionals, rather than just advise you. For example, keeping files of corporate minutes, fling the annual paperwork for the corporation, tasks that involve just doing, not asking. Tell your attorneys in the beginning of the relationship that you expect them to take responsibility for these tasks; you will be billed, but you won’t be paying the penalties incurred if they do it wrong.
And, as the reality of point number 4, accept the responsibility for choices you make because you have to, the business choices, when they have bad outcomes.