Reprinted with permission from Upsize magazine.
DID YOU EVER wonder why in "The Godfather" they couldn't have done a better job of just getting along in managing the family business?
Business success or failure is more than luck. It can often hinge upon being strategic and establishing good business practices that span the test of time, and it often involves the lawyer.
A good business lawyer will encourage the business owner to use best practices in finance and operations, as well as all of the other important aspects of running a profitable company. Here are a few thoughts and recommendations for building a solid business and keeping the drama where it should be — in the movies.
It is rare to find a successful company established and managed over time by only one person or entrepreneur. In most cases, even when the company has only one person or entrepreneur, that person quickly gathers a core of people in order to promote the business concept from its initial stages.
The composition of a management team from one company to another often varies, but generally includes, in addition to a chief executive officer or president, people with expertise in the following:
Marketing and sales. There are many advantages to engaging a person with marketing experience in the development stages. Such a person can influence the direction of such development and can identify marketing opportunities concurrently with the development.
Managing people. This person's function includes several activities, and key among them is making decisions with respect to staffing needs, recruiting and training the best employees, ensuring they are high performers, dealing with performance issues, and ensuring your personnel and management practices conform to various regulations.
Finance. This person is primarily responsible for managing the financial risks of the business or agency. This person is also responsible for financial planning and record-keeping, as well as financial reporting to higher management.
Outside advisers. An experienced outsider who can draw from experiences to help build up the company and create the necessary connections in the industry is key. Such a person on the board of directors, or as an investor, is an invaluable asset.
A solid management team is also necessary if one of the goals of the company is to attract investors. Investors invest in people, so they need evidence that the company is in the hands of people who are knowledgeable and skillful and who can take the business to the next level.
Investors regard the management team as the greatest asset of a young company, and often prefer an excellent management team with an average idea over an average management team with an excellent idea. If the investor is not satisfied with the company's management team, the investor will oftentimes either not invest in the company or penalize it with a low valuation.
Finally, a solid management team also ties into the exit strategy for the company. For the same reasons that investors are interested in a solid management team, so are potential acquirers. Just like investors, potential acquirers feel that a solid management team is a key component to the success of a company.
It is important to develop a standard form of agreement for the sale of products or services and to use it as often as possible. Not only does it make a company appear more organized and professional, but it may also provide the company with more favorable terms and allow the relationship to be finalized more quickly.
There is nothing more frustrating than thinking you've secured a new client or made a big sale only to be presented with a contract attempting to document the relationship that is disorganized, poorly drafted and one-sided. Why start from a disadvantage or delay finalizing a relationship when, with a little time and effort, you can develop a standard form of agreement that is well organized and fair to both parties?
Using a form agreement also provides for consistency among your agreements, so there is no guesswork.
It is also important to document the company's relationship with its employees and contractors. For example, consider whether it is desirable to protect your company's interests by requiring that the company's employees and contractors sign noncompetition and confidentiality agreements.
If employees and contractors are required to sign these types of agreements, then it is imperative that they are presented as part of the offer and signed on the first day of work.
Developing a strong and trusting relationship with your lawyer may help advance your business. Although not all lawyers are alike, good business lawyers oftentimes share the following traits:
The ability to relay information to you in a clear and concise manner.
A willingness to be proactive and on the lookout for changes in the law, potential problems and opportunities that may affect your company both positively and negatively.
A habit of calling you from time to time to discuss your business needs and the challenges you're facing, rather than always waiting for you to call first.
The ability to accept and respond to criticism to better serve your needs.
Access to a vast network of other professionals who can also help your business, such as accountants, bankers and other business professionals.
The relationship with your lawyer also extends to your lawyer's firm. Consider whether your lawyer's firm is in a position to handle your needs beyond your lawyer's area of expertise and what other resources the firm may provide. For example, many law firms send out free newsletters and hold events on topics that are of interest to business owners.
Be strategic and look to the future with your business, keeping these foundational ideas in mind. At the end of the day, you will want to know that you have done everything possible to position your company for success both now and in the future.
When was the last time you heard a story like this?
A start-up venture has come up with a killer idea. Put simply: a stomach clip. Taking the place of expensive, dangerous and permanent gastric bypass surgery, the stomach clip is minimally invasive, removable and performs the same function.
Click here to view the article on UpsizeMag.com