Get it Right the First Time

Ever hear the expression – “you never get a second chance to make a first impression”? It’s true in business transactions, and particularly in contract negotiations.

So, what’s my point? After all, many contract negotiations go on for weeks, or even months, and countless drafts are exchanged. So, don’t you really get many opportunities to “get it right”? The answer is, generally, no. Let me explain.

Twice in the past week, I’ve had clients send me a contract for “final review,” only to find out that the contract had actually originated with my client and had already been provided to the other side for review and comment. The problem was, in each case, the contract provided to the other side had substantial problems for my client. By problems, I don’t mean language that I preferred had been worded differently or minor clerical errors. I mean material issues that were overlooked or improperly drafted in such a way that it put my client at substantial risk – business and legal.

This scenario causes problems for a number of reasons. First, it limits your options. Do you (or really, can you even) go back to the other side and ask that substantial changes be made to the contract? If so, do you now have a lack of trust or credibility? Do you give the impression that you are disorganized, or worse yet, unprofessional?

Second, assuming you do go back with changes, do you highlight issues that may have been perfectly acceptable if they had been in the original draft, but that now are subject to strong objection? After all, the initial proposed contract was all about mutual give and take and compromise, whereas these changes are now almost certainly entirely in your favor. Will you have to give something back in return?

Third, by going back, do you delay the process, and perhaps threaten the deal entirely?

And finally, have you placed yourself in a position where you really can’t go back to the other side, and instead simply have to accept the contract as-is?

The moral of the story is, carefully consider the deal (hopefully in cooperation with legal counsel) before you present the first draft of the contract. If you don’t, you may find that you never get the deal that you wanted – or at all.

Is Your Lawyer Disruptive? Shouldn’t He/She Be?

When people think of the qualities they want in a lawyer, disruptive doesn’t always come to mind – in fact, it rarely does. However, this is one of the most important qualities in growth stage and entrepreneurial/start-up companies wanting to revolutionize their market segment and change the world. So why don’t clients (especially the kind mentioned in the preceding sentence) insist that their lawyers – in addition to being outstanding technical lawyers – be disruptive? After all, doesn’t it make sense that the most innovative and forward-thinking lawyers would relate best to the most progressive companies and clients? Sadly, I think the reason people don’t generally seek out these qualities in their lawyers is because they don’t know they exist. And, why is that? Because lawyers and the legal community have set the bar so low when it comes to innovation, creativity and client-centric business practices – choosing to require clients to conform to the traditional attorney-client model, rather than the attorneys focusing on what the clients want and need. In my opinion, clients should insist on more – and lawyers should deliver more.

So, I ask, is your lawyer disruptive, and if not, why not? The answer, of course, depends on what it means to be disruptive as a lawyer and whether/how that disruptiveness can benefit you and your company as a client and consumer of legal services. When I think of disruption in the legal world, I don’t mean reckless, hasty, rude or destructive. Rather, what I mean is not just the ability, but the desire, and in fact the affirmative goal, to think outside the box and provide creative client-driven solutions to your business and legal challenges – not canned or pre-scripted “one size fits all” responses from a dusty legal treatise.

With the foregoing definition in mind, you may say, “thank you but no, I don’t want my lawyers to be disruptive – I want them to provide the same “buttoned-down” black letter responses that their forefathers provided to my predecessors and leave creativity to me. If so, then this article probably hasn’t resonated with you. If, however, you like the idea of a creative, disruptive thinking lawyer and law firm, find one – they’re out there!

Does Your Business Need a Little “Spring Cleaning?”

Spring is an exciting time. It signals the end of a long, dark and sometimes dreary winter and the beginning of a new season of growth, opportunity, color and activity. It’s also the time when many of us make a long “to do” list filled with tasks that we tackle with energy, enthusiasm and excitement – knowing that truly the seeds we plant today will yield a bountiful harvest some time down the road.

Unfortunately, very few of us have a similar seasonal signal that it’s time to clean up, get organized and plan(t) for the future. Instead, we’re so wrapped up in the day-to-day activities of running our businesses that we never get to the “spring cleaning.” Since spring is literally upon us, I want to make a pitch for a seasonal sprucing up from a business and legal standpoint.

As business owners, you know far better than I what sorts of projects will most benefit your businesses – but I’ll take a shot at identifying some that might yield value (while sticking with my spring cleaning analogy):

• Reset the Clocks – businesses and their owners need to reset priorities and revise strategies from time to time, or you simply run out of time in the day.

• Clean Out the Garage – businesses develop “clutter” just like households. Take the time to clean up and eliminate it so that it doesn’t distract you from your mission.

• Plant the Annuals – annuals are like near term goals for a business. With a limited amount of effort they can blossom and yield immediate benefit, but only if you do the groundwork at the right time and in the right way.

• Plant the Perennials – perennials are more like long term business objectives. They require more planning and nurturing than annuals, but yield long term rewards.

• Do It Yourself and/or Hire the (right) Lawn Service – this is a big one. As the owner, you need to decide where your time is best spent and who the right people are to handle the rest. Do what you’re best at and enjoy most and hire the rest. BUT, don’t hire the first service that sends you an attractive brochure. Make sure your advisers understand you and your business.

Spring is a time of great energy and promise. Make sure you harness both for the benefit of your business.

The Pros and Cons of the “Just Do It” Mentality

I’m showing my age with this one, but hopefully most reading this will at least vaguely remember the old Nike ads urging you to, “Just Do It.” They were filled with pictures of great athletes “giving 110%,” “going the extra mile,” and otherwise living the “no pain, no gain” mantra. I’m a big believer in that portion of the message and note that it would seem to have equal applicability and validity in the business world as well as the sports world. After all, it’s not easy to excel or reach the top (or even your own best) in any activity – without extremely hard work and complete focus and dedication, you’re not likely to get there in sports, business or life.

However, the other message that some people got from the “Just Do It” slogan is extreme urgency – the need to move immediately, take unreasonable chances and bet it all to succeed – throwing caution to the wind in exchange for moving quickly. While that may (or in fact may not) be a reasonable thing to do in your sports and fitness training, I believe this approach is both imprudent and generally unnecessary in your business matters, and sometimes leads to disaster.

The bottom line is, I think “Just Do It” is a great mantra for buying shoes – and even for bringing out the inner athlete, inner entrepreneur, or inner risk-taker of virtually any kind in all of us. After all, great ideas, great people and great companies usually start with someone discarding the status quo and opting instead to take a risk by introducing some sort of “disruptive” idea or concept. However, I don’t think it is a great strategy for running your business. In that regard, I prefer one of the famous quotes by the late John Wooden – “Be quick, but don’t hurry.”

Negotiating a Deal? Be a Mediator, Not a Gladiator

What’s the primary goal of most business negotiations? I don’t mean negotiations in the context of a dispute – I mean in the context of a prospective business deal or relationship. In that setting, the primary goal is to reach agreement. And that generally means emphasizing mutual benefit and necessary compromise to reach the desired outcome for both parties, not just one – after all, if your negotiations are so “successful” that the other party has lost everything, there’s really no reason for that party to proceed at all. In other words, you may “win” the negotiation battle but “lose” the deal.

So, how should a business person (and that business person’s lawyer) approach negotiations? Simply put, I think it’s better to assume the role of mediator than that of gladiator; be a problem-solver not a competitor. That doesn’t mean that you must avoid confrontation and disagreement in all cases. What it does mean is you should pick and choose your “battles” carefully; and where possible, avoid them entirely by finding creative solutions.

Negotiation is not generally possible without some level of disagreement. If that weren’t the case, we’d never need to exchange multiple drafts of an agreement, since all parties would simply agree to the first draft. Disagreement is not the problem. Confrontation, however, often times can be – particularly if it’s not handled with professionalism and diplomacy. If disagreement is necessary, try and explain to the other party why your position is reasonable, and why the issue is important. If it’s a potential “deal-breaker,” explain that too. In the end, I believe it’s most productive to avoid confrontation when you can. Disagree when it’s important, but even then seek compromise where it’s possible and makes business sense. Be creative and seek to find win-win solutions. Remember, the goal is to get the deal done on terms that benefit everyone – not walk away after “fighting a good fight.”

The Agreement is Signed – Now What?

Ever heard someone say, “Now that the contract is signed, we can put it in a drawer and never look at it again.”? I understand this thinking – if it means the business terms are so clear, and the relationship is so good, that they don’t need to obsess over contractual minutia. In other words, compliance is sort of on auto-pilot. What I’m opposed to, however, is not knowing, or directly ignoring, the requirements of your contracts.

Businesses ignore their contracts for a variety of reasons, including:

 • Things are going so well from a business standpoint that they don’t care what the contract says.
• Conversely, things are so bad that they don’t care.
• They’re too busy, or compliance is too much of a hassle.
• Or, finally, the contract simply doesn’t accurately state their business arrangement.

None of these are good reasons to ignore your contracts. Non-compliance means risk; risk means exposure; and exposure threatens the success (and sometimes survival) of your business.

Here are a few suggestions to ensure contract compliance:

• Keep your contracts as simple as possible.
• Try to match your contract terms with your general business practices and processes.
• Seek uniformity in your contracts (and make sure your lawyers do this when they draft them) on both business terms and more standard “boilerplate”terms.
• Have the same person negotiate the same types of contracts.
• Assign a specific person to be ultimately responsible for performance, oversight and compliance for each contract – preferably the person who negotiated it or someone who is directly involved in performance.
• Prepare executive summaries of the material terms, and review them periodically.
• Make sure those directly involved in the performance each contract know its terms.
• And finally, don’t enter into contracts that don’t accurately state your business agreement, and amend them if circumstances change so that they no longer do so.

Think of it this way – if the deal was important enough to enter into a contract, then it’s important enough to make sure that contract is accurate and to comply with it.

Strategic Alignment Goes Beyond Your Workforce

Business consultants frequently discuss the importance of having an aligned workforce – one with an identified and accepted culture, common values, a shared vision for the future, and a uniformly adopted strategic plan for getting there.  I would suggest for businesses of all shapes and sizes the need for alignment extends beyond your workforce to include, at a minimum, your legal counsel and other important advisers.

Why, you might ask, is it important that your outside advisers be “aligned” with you and your business?  In the simplest terms, having aligned advisers results in: (i) less wasted time; (ii) less wasted money in both consulting fees and lost opportunities; (iii) less frustration and misunderstandings; (iv) more productive negotiations and transactions; and (v) more meaningful and direct accomplishment of your business goals.

So, what does it mean to have aligned advisers, and how do you get them?  Here are a few thoughts:

•         First, choosing the “right” advisers is critical – different advisers have different personalities, approaches and philosophies – choose those that share yours from a big picture perspective.  But understand that this alone is not enough.

•         Remember, you set the course – not them.  Aligned advisers adopt your approach, not theirs – so they need to know what your approach is and what your objectives are.

•         In addition, your advisers must know what tactics and methods you want to use to achieve your objectives – overall and in each transaction or circumstance.  Make sure your directions are clear in this regard.  Think joint venture versus distributor, or even 50-page agreement versus handshake deal.

•         Make sure your advisers are informed as to changes in culture, philosophy, tactics, objectives, budget, etc.  They can’t execute what they don’t know.

•         Finally, periodically evaluate your advisers and their alignment.  If they don’t get passing marks, make a change.

The value of alignment cannot be overstated.  Make it part of your consulting and advisory relationships.

Even Start-Ups Need to Remember Their Audience

One of the really fun things about working with both start-ups and more established businesses is the contrast – in terms of company stage, funding, decision-making, processes (or lack thereof), culture, attitudes, etc.  Most start-ups – including those established by successful and sophisticated “serial entrepreneurs” – have a more carefree and spontaneous character, which in many ways is what allows them to be more creative, adaptable, energetic, responsive and dynamic than more mature companies.  These are qualities that you generally want to promote and retain in a start-up.  However, it’s also critically important to remember that these qualities – and perhaps more importantly, the behaviors that those qualities sometimes promote – may not be appropriate for all settings, circumstances and audiences.

My purpose with this post is not to stifle or discourage the free-spirited character and spontaneity exhibited by most start-ups.  Rather, my point is to emphasize that these qualities aren’t somehow inconsistent with professionalism or a businesslike approach and attitude – especially when a particular audience, event or circumstance demands the latter.  Remember, not all third parties that may be important to the success of the start-up business will share or even appreciate some of the more casual qualities of even successful start-ups – especially (and most importantly) in the wrong context.

So what’s my real point here?  Know your audience and respond accordingly.  You’re not somehow selling out by wearing khakis (or even a suit) to a meeting with your banker, taking the profanity out of your presentation to the Governor or the local economic development agency, or cleaning up the office before a visit by a key prospective investor.  Keep in mind, while many like to say how much they admire the idea of start-up businesses (and they usually really do), most of them still work in an environment where casual means “business casual.”

Subtlety Has Its Place

As the title to this post indicates, subtlety has its place – just not in business negotiations or contracts.  This is not to say that people shouldn’t be tactful, courteous and professional in these contexts – of course, they should be.  I’m not talking about manners; I’m talking about clarity, precision, directness and transparency – i.e., the things that avoid uncertainty and minimize the risk of disagreement (and litigation).

Occasionally, clients will ask me to word a provision in a contract so that it isn’t as clear or explicit as it might be, so that it’s “less conspicuous,” or in a way so that “later, we can take the position that it meant X. . . .”  This is almost always a bad idea.  After all, a contract is meant to be a clear and complete expression of the parties’ mutual intent and agreement – trying to “finalize” the deal while simultaneously avoiding clarity and completeness in order to avoid points of disagreement is NOT a recipe for success; to the contrary, it is a recipe for future disputes.

So, what does this mean for your negotiations and contracts?  Quite simply, items of potential disagreement should be identified and discussed (and hopefully resolved) early on, just as items on which the parties agree should be discussed.  Dispute resolution at the point of negotiation/deal-making and as part of the contractual process is healthy and productive.  It generally leads to one of 2 outcomes – either the parties ultimately reach agreement through compromise, concessions, etc., and they move ahead with the deal; or they don’t, and the deal doesn’t get done.  Either result is far better than signing a contract or entering into a relationship only to end up in the other kind of dispute resolution – the kind that comes after the contract is signed and involves 2 teams of lawyers, a judge, jury or arbitrator, and words like injunction, breach of contract, damages, and legal fees.  Don’t be subtle . . .

Nice to Meet You – Let’s Get Married

Only fools rush in.  We’ve all heard that expression many times and probably think we’re far too wise and experienced to be such a fool.  However, you’d be amazed at how often businesses and individuals rush headlong into business relationships or contracts only to find out they should have used more discretion, patience and judgment.  Remember, before you date someone, you usually want to know at least a little bit about them; before you go steady, you want to know a little more; and before you get married, you really want to know them well.

Consider applying some of these dating lessons and clichés to your business and legal relationships and contracts, and you may find you have fewer emotional breakups or (more importantly) fewer bad marriages that end in messy divorces:

  • Ask around (a/k/a, do your due diligence) – learn all you can about a person or company before you engage them, become partners or enter into a long term binding contract.
  • Trust your instincts (a/k/a, if it doesn’t feel right, don’t do it) – unless there’s some compelling reason you have to work with a specific person or company or you have to jump into a deal with both feet, if you’re getting a bad vibe, don’t proceed.
  • Go slowly (a/k/a, – start small) – whenever possible, start with a smaller project or a short term relationship and see how it goes. There’s usually time and there will almost always be more opportunities to work together if the first one goes      well.
  • Build in an escape hatch (a/k/a, don’t put all of your eggs in one basket) – even if you’re ready to hire someone or enter into a contract, make sure you have the ability to terminate or get out of the relationship.
  • See other people (a/k/a, avoid exclusivity) – exclusive relationships are serious commitments and have high risk (and potentially, high reward); take your time.
  • There are more fish in the sea (a/k/a, know when to say when) – ending a bad relationship is always hard – whether personal or business – but when your gut tells you it’s not right, then it probably isn’t. Cut your losses and end the relationship (in the right way, of course).

The bottom line is, business and legal relationships resemble personal relationships – with the same types of risks and rewards.  Look before you leap.