As business attorneys we often meet business owners who, when talking to them about the operation of their business, will respond and tell us that they have never had a need for an attorney. Whenever we hear this we ask one simple question, “Have you signed off on a contract for your business?”
Everyone answers “yes” and at this point we let them know that they have potentially left themselves open to unnecessary liability and risk, which could potentially cost them a lot of money.
Let me explain….
A business owner that we know owns a professional services firm working with businesses in the area of marketing and advertising. This individual, in an effort to save costs upfront, decided to do a Google search to find a contract that they thought looked good. After grabbing a contract offline, the individual made a few changes and started to use this contract in the pursuit of business. Now, this business owner is a very sophisticated individual in their chosen field, however they have not been trained to identify certain peripheral dangers that are associated with every business contract.
For a while, this contract worked great; the individual had clients that were easy to work with and clients that handled business with such integrity that the provisions of the contract never really needed to control the relationship. But one thing that we attorneys are all taught in law school is that you draft contracts for the worst-case scenario, because while we all hope for sunshine and roses, periodic storms are inevitable.
This business owner entered into one particular significant contract that required a lot of time and effort; in turn there was going to be a pretty lucrative payout. The issue was that the other side pushed back on a few clauses in the business owner’s contract. The business owner accepted the negotiation points and signed off on the contract.
This contract, however, did not accurately account for project milestones, payout schedules specific to this particular relationship, certain phenomena that were out of the business owner’s control when it came to finishing the project, or ways in which either side could exit the contract. And because it didn’t account for certain triggers that would allow either side to exit, it also didn’t set parameters for how to measure what would be owed to the business owner should the contract be terminated early.
Long story short, the two parties quickly hit times of extreme discord and the business owner did not complete performance because the client ended up not paying for any of the services rendered. All of the issues that were encountered could have been accounted for in the original contract, but were overlooked due to not using a trained professional. Instead of the business owner cashing in on this lucrative opportunity, over $20,000 in revenue (between going to court to try and recover reasonable fees and losing out on realizing the full payout of the contract) was left on the table.
The irony is that it would have cost the business owner less than $2,000 to have a proper contract drafted by a trained attorney.
This situation is not rare by any means; business owners don’t know they need an attorney until it is too late. Hiring an attorney upfront is a much cheaper option than having an attorney come in at the point where crucial mistakes have already been made. At that point, you can almost always expect to pay ten times more than what you would’ve paid had you elected to use an attorney upfront.
Attorneys, accountants, and other professional service providers should be viewed as a necessary business investment that will help your business become more efficient, remain protected, and realize greater potential through collective expertise.
Don’t wait until it’s too late.