During law school, Eleanor Gerhards saw that many of her classmates were fascinated with the action inside a courtroom. But while arguing cases had its appeal, Eleanor was more drawn to the corporate world, and specifically small business owners. Fast forward 14 years, Eleanor is known for negotiating contracts and helping clients map out a legal strategy that matches their business goals. “Contributing to the success of business leaders in my community and beyond is the most rewarding part of my career,” she says. Eleanor wants every small business owner to be aware of these six ways that working with an an attorney can help you level up.
Decisiveness and Flexibility for the Win
Eleanor notes a major difference between her larger clients and small business owners: “A small business owner rarely makes a quick or ra
sh choice. They are more likely to be confident in their decisions and flexible in pivoting or adjusting course when things do not go exactly as planned.” That quality, she says, is one of the best things about working with small businesses. “As a lawyer, I’m most effective when clients have a clear vision about their goals and how they want to accomplish them, so I can provide the legal support necessary to help achieve those goals.”
Every Business Owner Has a Secret Sauce
A business is a personal creation, a reflection of many hours of hard work followed by the business launch. The ideas that formed the business are assets and they need to be protected. Eleanor advises business owners to put in place systems that protect confidential information and intellectual property. “Maybe it’s customer lists, a method of doing business, pricing strategies, software code, a design, an operations manual or training procedures” Eleanor says. “A good business lawyer can provide cost-effective advice on protecting confidential and proprietary information. The tools of the trade here are enforceable draft forms, such as nondisclosure agreements, intellectual property assignment agreements and restrictive covenant provisions – like nonsolicitations and noncompetes – for employees and independent contractors.”
Services for Equity? The Good, the Bad and the Ugly
Small businesses owners are often hyper-aware of money flow. “Many small businesses operate on very lean budgets and narrow profit margins,” Eleanor says. “Startup and emerging companies often operate at a loss for a period of time.” Business owners try to handle as many tasks as they can to avoid extra spending. But Eleanor cautions that management needs to hire talent and delegate work. “They cannot, and should not, do everything themselves,” she says.
Eleanor sees a concerning trend among business owners, paying for services with equity –which doesn’t cost a business anything immediately, but may carry a steeper price in the long run. “Understand that anyone you make a shareholder, member or partner of your company will have certain rights and privileges under your state’s corporate or partnership laws. Often management underestimates the rights they are granting in these situations,” she says. An attorney can help a business owner structure these agreements to avoid giving up too much of the company and provide alternatives such as phantom equity or profits interests that better protect the business owner’s interests.
How to Spend Money To Make Long Term Money
There’s no shortage of cheap online legal resources, but Eleanor cautions clients against using cookie-cutter solutions. All businesses, she says, should strive to follow good “corporate housekeeping” procedures. “Online legal resources simply don’t provide the proper level of tailored legal compliance and practical advice.” Business owners should be aware of processes to obtain loans from institutional lenders and financing from potential investors. “For a non- lawyer or new business owner, sound legal advice is essential for securing these assets,” Eleanor says. “In the absence of legal guidance, the business owner’s personal assets may be at risk from claims by disgruntled or injured third parties.” Spending a little extra in legal fees now to get that one-on-one practical advice and best practices from a trusted attorney is the smartest step a business can take to (1) ensure it will be attractive to lenders and investors and (2) avoid potentially staggering personal liability exposure.
Contracts Impact Rights
Business owners are often being pulled in a dozen different directions, Eleanor says, and can’t be expected to read all the boilerplate language in every vendor or supplier contract. “I had a small business owner client ready to sign a contract with a software vendor for a customized product vital to the client’s business operations and ability to service its clients. The contract required a huge up-front fee and disclaimed any and all liability or damages if the product did not work. In other words, my client was going to write a large check for a product and services the vendor wouldn’t even stand behind. I helped negotiate progress payment over a longer period of time so the client was not paying for deliverables before knowing they worked. I also negotiated certain warranties into the contract so the client had leverage against the vendor to fix any issues or problems that may arise. I have had many clients over the years come to me after signing a form purchase order or contract and paying $10,000 or more for products or services that were never delivered or did not meet expectations. Often, when I read the contract after the fact, it provides absolutely no recourse. My advice: If a contract requires you to pay significant funds, or if you are purchasing products or services vital to your operations, consider having a lawyer review it. It will be worth it in the long run.”
Recent Small Business Success Story
Eleanor says insurance can seem boring, but it’s a vital risk management tool for businesses of all sizes. “I had a client who secured a general business owners’ policy through a brother-in-law who was an insurance agent. The problem was the bulk of the relative’s experience was in personal, not commercial, lines of insurance. After helping the client with some due diligence, I realized the insurance coverage did not meet the requirements in its lease and one of its largest customer contracts. As a result, the client was in breach of both the lease and the contract. The basic insurance also did not provide coverage for the vast majority of the specific risks of losses that the business could face. I introduced the client to a more experienced insurance broker and worked with the broker and client to secure coverage that met all of its business needs.”
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