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.

Know Where You Want to Go Before You Start

You’d never leave on a family vacation without knowing where you’re going and what you’ll do when you get there. So, why would you begin a business negotiation without knowing what your objectives and acceptable outcomes are? My answer – you shouldn’t.

So, am I saying you need to know exactly where your negotiations must conclude before you even begin discussions? Of course not – negotiations necessarily involve multiple parties, all of whom have their own goals and expectations. It would be foolish to think you can predict and control all possible outcomes, and short-sighted and unrealistic to believe the only successful outcome will be exactly the one most beneficial to you. After all, successful negotiations almost always require give and take from all parties to ultimately arrive at a win-win arrangement. Without this, at least one party will, presumably, have no incentive (or not enough incentive) to do the deal.

What is critical, however, is that you not enter into negotiations without giving careful thought to what your objectives are, the ways that you might be able to achieve them, and the outcomes that would be acceptable. Note that I’ve said objectives, ways and outcomes – plural. Just like the old saying, “there’s more than one way to skin a cat” – there’s almost always more than one way to structure a business deal.

I recommend you follow these basic suggestions before entering into business negotiations:

• Identify your ultimate objectives – the primary reasons you’re considering this deal.

• Consider the various ways that you might be able to achieve those objectives.

• Identify your secondary objectives – things that would be nice to get, but are not essential.

• Consider the various ways that you might be able to achieve those without compromising on the primary objectives. Also consider things that you would view as deal-killers.

• To the extent you’re able, go through the same analysis from the other party or parties’ perspective – see the deal through their eyes.

• Now, once again, consider how you can achieve your primary (and hopefully secondary) objectives AND how the other parties might also achieve theirs. Hopefully there are several ways to get there – some of which may be more or less desirable to you, but all of which would be acceptable.

• Having gone through this exercise, it’s now time to negotiate.

Remember, your best way to achieve a successful outcome is to consider what that might look like before entering into negotiations, rather than looking back and wondering what went wrong.

How to Begin a Project With Your Lawyer

I was working on an international dealership project with a long time client this week, and something caused me to ask – why is there mention in this email string of a third party that isn’t part of our deal?  Oh, my client responded, you remember that we work with them and they get a piece of each deal “like this” – meaning not like their standard deal.  In fact, it’s been 4 years since we worked on the contract with the third party, and we haven’t worked on a deal “like this” since then (although we’ve worked on many that were not like this) – so, no, I didn’t remember.  Thank goodness I asked about the third party’s involvement, because it was not evident from any other information my client had provided so far, and without knowing this, I could have missed some key issues.

What does this scenario tell me?  It tells me that even in longstanding attorney-client relationships (and maybe especially in those relationships – since sometimes clients forget that the lawyer has many other clients and is not immersed in the client’s business 24/7), we need to always focus on the basics of the deal.  This starts with a detailed description from the client of all relevant facts, circumstances, concerns, interests, etc., and a specific identification of the ultimate business objective.  Next, the attorney should restate his or her understanding of the deal, and ask any specific questions and gather any specific information necessary to fully understand the project and properly advise the client.  This exchange between client and lawyer may be verbal or in writing, but the point is, when it’s complete, the attorney should be clear on what’s happening and what’s most important to the client.

The above process may seem obvious or even tedious, but I can assure you that it will better protect the client’s interests than the “ready, fire, aim” approach that is often the case.  An added benefit is that it will reduce legal fees and the time it takes to consummate your deal – it’s a real win-win.

What is International Law?

Like many areas of the law, “International Law” is somewhat of a misnomer – what I mean is, when was the last time a business said “I need help with an international law transaction” (or securities law, or antitrust law, for that matter)?  Generally, lawyers talk about international law – clients, on the other hand, usually say they need help with an acquisition, setting up a dealership or entering into a supply agreement – it just happens that the other party is located in another country.  With that in mind, although I didn’t think this would be the case when I graduated from law school, I’m now an international business lawyer, having worked on deals in the last 6 months involving parties in Mexico, Canada, Australia, England, Poland, Qatar, Saudi Arabia, Dubai, Taiwan and China (and maybe other countries I can’t think of off the top of my head).

So, what does it take to be an international business lawyer?  Not surprisingly, there’s not a lot of magic – for the most part it takes the same basic skills as it does to be an effective business lawyer on domestic transactions – plus just a few other qualities, skills and tools.  Among them are the following: 

  • First, the modesty to understand that you don’t know everything;
  • Second, a receptiveness to legal principles, business customs and trade practices that are different than those in theU.S., and as a related matter, the flexibility to accept those differences, and in fact embrace them when necessary to negotiate and close the deal;
  • Third, the willingness to accept advice and input from local counsel; and
  • Fourth, access to a network of capable, qualified and talented law firms with experience and integrity that you can tap into early on and as necessary throughout the deal.

What I’m really saying is, international law, in most cases, is almost the same as domestic law – it just happens to involve 2 or more countries.  So, there’s usually no need to over-complicate things.  Determine your business objectives; identify your business strategies; engage local counsel to work cooperatively with your trusted domestic business counsel; and execute your deal.  And, of course, one basic legal rule – always insist on arbitration, and don’t accept venue (or particularly exclusive venue) in any country where you don’t want to sit in a courtroom.

Even Legal Problems Have Solutions

Have you ever noticed that some (maybe most) lawyers tend to have a “glass half empty” view of the world?  What I mean is, they look at challenges as road blocks that can’t be circumnavigated and immediately jump to the conclusion that the deal can’t be done.  They even speak that way in initial meetings regarding a project or transaction, informing the client that the desired outcome is not achievable – often before they’ve even gathered the necessary information to fully understand what the overall goal/objective is and how the proposed deal will help reach or further that goal/objective.

In my opinion, businesses don’t (or shouldn’t) hire lawyers to merely identify problems or tell them what they can’t do.  If that were the case, they’d be better off saving the legal fees.  Rather, we’re hired for the purpose of, and we should view our primary role as, (a) first, fully understanding the desired business objectives, and then (b) finding a way to achieve them, even (especially) when that way is not easy or obvious.  Furthermore, a lawyer should be constantly thinking and advising the client as to how the deal could be even better from a business/legal standpoint – whether that means restructuring to achieve a more favorable tax outcome; eliminating, reducing or shifting risk; reducing costs or administrative burdens; avoiding unnecessary complexity; or minimizing uncertainty.

Certainly, there will be times when the best service a lawyer can provide is to advise a client that a deal cannot or should not be concluded or structured in a given way (or at all) due to legal constraints.  However, even then, in almost all cases there’s still a work-around or alternative strategy that’s at least worth considering to accomplish some of the client’s goals.

Most lawyers are, by their nature, cautious, conservative, skeptical and critical.  Business people, however, make money by taking (calculated) risks and closing deals.  Their lawyers need to understand this and provide advice with the same “can-do” attitude that has allowed their clients to succeed.

The Legal Memorandum

The legal memorandum is a perfect topic for BizB4Law.  Remember my central theme – business issues are more important than legal ones, and the legal strategy and approach, therefore, must always follow from the business objectives and realities.  So where does that leave the legal memorandum?

The legal memorandum has its proper purpose, although it sometimes gets lost.  The purpose is not to protect the lawyer from the client or allow the lawyer to avoid providing real legal advice and recommendations.  In fact, although it happens all too often, there’s almost no business value in a legal memorandum that states something like:  “Given our limited understanding of the facts as you’ve explained them, and in light of the substantial uncertainty as to how the project will proceed and how a court might analyze this particular situation, we believe it is more likely than not that your proposed legal structure will be found to be permissible.  However, we must qualify our opinion by . . .”

The purpose of a legal memorandum is to provide necessary analysis so that an informed decision can be made by the client in light of specific and complex legal issues or challenges impacting the business objectives.  In other words, the process starts with the specific business goal and the existing facts and circumstances – if, based on those, there are complicated legal issues that must be addressed, a memorandum may be appropriate.  If not, you don’t need one.  Then, the research should specifically analyze how the law impacts this situation (not some abstract or unlikely situation in the land of make-believe).  And more importantly, the memorandum should provide actual advice and recommendations as to how the business objectives can be met even in a challenging environment, and even when the client’s desired approach may need to be modified.

The next time you read a memorandum from your lawyer, I hope it’s consistent with this article – if not, you may have detailed legal analysis but still be left questioning the business value and purpose.

We Need to Simplify, Not Complicate

Have you ever ready anything like this in a legal document:

  • “Know all men by these presents that . . .”; OR
  • “Now, therefore, the party of the first part does hereby covenant, acknowledge, agree and warrant to and for the benefit of the party of the second part, and the party of the second part has relied thereupon, that . . .”?

Did you wonder what in the world the document (or worse yet, the lawyer that prepared it) was trying to say, and why on earth they said it that way?  After all, the parties had, presumably reached some sort of agreement, and they didn’t think of it or phrase it like that.  By the way, the first language means almost nothing other than – we’re about to tell you what the parties’ agreement really is; and the second language means little more than, Party A has represented or promised certain things to Party B as part of the contract.

Legal documents need to simplify, not complicate.  In fact, we shouldn’t even call them “legal documents?”  They’re really business documents – their purpose is to memorialize the parties’ business agreement as clearly and simply as possible, so as to avoid misunderstandings and disputes and protect the parties from both a business and legal perspective.

At BizB4Law, we want your business objectives, relationships and agreements to determine the content of your business/legal documents.  We’ll advise and protect you from the legal side, but after all, it’s the business deals that drive the bottom line.