The Value of the Battle Never Fought

In his famous book, The Art of War, Sun Tzu makes numerous profound observations regarding military strategy – many of which have great applicability in the business world, and in the intersection between your business and legal matters. A couple of my favorites are the following:
• He will win who knows when to fight and when not to fight.
• He who wishes to fight must first count the cost.

I have always believed that there is great wisdom in these words – particularly in deciding how to approach (and equally importantly, how to anticipate and avoid) business disputes. After all, business is about making money, not winning battles.

Every business will find itself from time to time involved in disagreements. This is unavoidable and often outside your control – it’s just part of doing business. What is often (but not always) within your control, however, is how you anticipate, avoid (when possible), approach, evaluate, respond to and attempt to resolve these disagreements. Disagreements generally do not need to (and should not) rise to the level of adversarial disputes and/or litigation or arbitration – there is almost always another alternative which may or may not be acceptable, but should always be considered in a business-minded, even-tempered manner.

Owning and operating a business inherently involves risks, costs and uncertainty. However, with careful planning and conscious, deliberate strategies, you can generally predict and in large part control these factors and steer the company to a profitable outcome. Litigation, on the other hand, involves risks, costs and uncertainty that are often unpredictable, uncontrollable, and in some cases unacceptable. For these reasons I would urge you, the next time you find yourself in or approaching a possible business disagreement, consider all alternatives short of litigation, and only proceed with that alternative if you have considered the cost and made a reasoned determination that now is time to fight.

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What Does Strategic Really Mean?

Strategic may be one of the most over-used words in both business and in law.  In fact, I may over-use it in this blog – after all, this is only my sixth post, and I’ve already used it in two titles.  The reason is that I believe thinking and acting strategically – in business and legal mattes – is perhaps the most important factor in determining the success or failure of a business.

What does strategic mean, and why is it so important to think and act strategically?  Companies form strategic alliances, have strategic partners, engage in strategic planning, seek strategic investors, etc.  Strategic, as I mean it, is a specific and well thought out or targeted approach adopted by your specific business to address a specific circumstance or bring about a specific outcome that is optimum for you – and better than the alternatives.

Let’s discuss strategic partners and  investors.  Strategic partners and investors differ from others by the simple fact that they bring unique and valuable attributes to your business that others don’t – not just money or products.  These may include:  relationships with potential customers or suppliers; management or industry expertise or experience; engineering, design or other skills that you may be lacking; complimentary products or knowledge; intellectual property; overseas contacts, capital resources or other factors.

The point here is when you’re considering entering into a relationship with a partner or investor, focus on more than just the product or money they bring to the table.  Chances are you have several parties that can bring those things.  Consider whether they bring other factors that can add additional value to your company without adding cost.  If they can, those are truly strategic relationships – and the ones that will benefit your company the most.

You Can’t Always Get What You Want …

“. . . but if you try, sometimes you get what you need.”  The Stones had it right – and even though they didn’t know it, their lyrics are right on for businesses and lawyers negotiating deals and the underlying documents.

In virtually all business negotiations, the objective is to reach agreement on fundamental terms that are fair, reasonable and mutually beneficial.  True, each party wants the best terms possible, and in some cases, there will be specific deal points that are non-negotiable; but the bottom line is, if the deal isn’t good for both parties, there will be no deal.  And businesses make money based on the deals they make – whether entering into a complex joint venture, selling products, or settling contentious litigation.

This means that businesses and their lawyers, in negotiating deals and even more so in drafting the underlying documents, will bring the most value and the highest likelihood of success (think ROI and EBITDA) by resisting the urge to overreach – particularly on issues that aren’t fundamental to the underlying business deal.  Instead, they should focus on reaching agreement on the most important business issues under terms that are fair and reasonable and don’t create unreasonable risk or liability to either party or unfairly allocate that risk or liability.  This is what leads to long term, mutually beneficial and profitable business relationships.

If you’ve ever participated in negotiations where the parties have reached agreement on all of the key business terms (e.g., price, payment terms, timing, duration, etc.) only to break down because they (or worse yet, their lawyers) can’t agree on choice of law, venue or what set of arbitration rules will apply if they have a dispute, you know what I’m talking about.

Negotiation and Deal-Making Advice 101 from BizB4Law – first, “get what you need” – then, maybe consider what else you “want.”  But, keep in mind, the business only makes money if the deal is made.

Strategic Relationships – Connections and Networks Matter

One of the most important determinants of success for a business is its ability to think and act strategically and establish strategic relationships. This is true in product development, sales and marketing, distribution, financing, joint ventures, etc. It should also be true in establishing relationships with consultants and service providers like lawyers. 

Your lawyer, for example, should bring more value to your business than general legal expertise.  After all, all licensed Iowa lawyers went to an accredited law school, and those who work at the larger respected firms probably got good grades and almost certainly have legal expertise – even specialized expertise. So what more can or should they bring to the table? 

In addition to expertise, your lawyer (and hopefully your other consultants) should provide an innovative problem solving approach, a can-do attitude, a stellar work ethic, AND a network of connections that can provide additional resources and value to your company.  In my case, those connections and relationships are close and personal and include accountants, bankers, investment bankers, placement agents, business brokers, venture capitalists, private equity groups, angel investors, technologists, trade associations, legislators, agency heads, economic developers, PR consultants and others, including any and all of my clients. Any time I believe an introduction or referral to one of the people or companies in my network will benefit someone else in my network, I make that connection. After all, this is Iowa– if you have character, integrity and professional talent, it’s easy to build a valuable network for your benefit AND for the benefit of your customers and clients – why not “pay it forward” and multiply the value of your network by sharing it with others. In the end, what goes around comes around.

If my network or connections can ever be useful to you, please feel free to contact me.  It’s just another example of the thinking behind BizB4Law.