Every day, business leaders balance risk and opportunity — in their contracts, hiring, expansion plans, and other areas of business. Their focus is on progress and their risk tolerance tends to be high — after all, risk is a part of the entrepreneurship game! But often they make these decisions with significant blind spots— they don’t know what they don’t know — and consequently can struggle with fully evaluating risk. However, they find themselves reluctant to bring in legal counsel. Why?
Small Business, Big Risk
Large companies tend to have a “general counsel” to help navigate the risk of a particular decision. This is someone who’s paid a salary to review, research, and inform the leadership team of strategies and pitfalls. Smaller companies don’t have this luxury. Legal is perceived as an expense to be minimized at all costs, only to be used for the most significant of situations. But how do they determine these situations? Typically, these are the decisions that stand out as different, or outside the ordinary course of business: lawsuits, mergers & acquisitions, or a new line of business.
However, the ordinary is often where the risk tends to lie. Regulatory and tax requirements for doing business or having an employee in another state, customer and vendor contract terms, leases, and ownership changes, to name a few, can all be areas where business owners meet surprising pitfalls. Furthermore, there’s misplaced confidence in the “experience” the leader has because they’ve been doing “it” for years. The common mantra of “I know how to read contracts, I’ve been doing this for 10 years….” belies the reality that the leader may be great at reviewing and negotiating the business terms, the finer details of a contract tend to be glossed over — especially when contracts start to look like all the others and “boilerplate”.
What leaders don’t understand is that the “boilerplate” is where many key legal protections reside: indemnification, insurance, limitation on liability, and governing law all matter. When there’s a dispute, this part of the contract is what makes or breaks your position — yet it’s the part where the least amount of time is spent by most. But even of those who know the “boilerplate” are critical, many find themselves avoiding legal help them in most situations. Why not?
This is mainly because the legal industry has done a poor job of demonstrating its value to businesses. For most, involving legal tends to make things slower, more complicated, and more costly — in many cases, they’ll kill the deal. Ultimately, it’s easier just to figure things out for ourselves. Oftentimes, legal is brought in for when a relationship or negotiation sours, only to do exactly what was dreaded: make it complicated and costly. And the cycle continues…
So what can they do about this?
Business leaders need a close team of advisors — people they have confidence in to deliver value to the business. As a business leader, if you aren’t talking with your key advisors regularly, they won’t have a complete picture of your business and their advice will be incomplete or even inaccurate. These professionals are not there to gouge you for more money, but rather to support you and bring their unique experiences and knowledge to your table. As you begin planning for 2023, consider where Equinox and your advisory team is needed in both planning and execution. Talk with them about these needs and ask them where they fit into the process. Understand what needs to be done for them to effectively help you accomplish
Legal Disclaimer: This article contains general information. Do not view this article as legal advice. Talk with counsel familiar with your unique business needs before taking or refraining from any action.