One of the biggest mistakes I made early on as an entrepreneur was hiring cheap lawyers or not using an expensive lawyer nearly enough, thinking I was saving money for my business. But over the years, the school of hard knocks taught me just how expensive cheap legal help can be.
I don’t recall ever meeting anyone who actually enjoys writing a check to an attorney. Frankly I can’t recall meeting many people who enjoy lawyers at all – not the individuals themselves, but the idea of having to have a lawyer in the first place. Heaven would be a world where the need for lawyers didn’t even exist – where everyone could be trusted to uphold their word, where no one would ever have misunderstood expectations in their agreements, and where a simple conversation could settle any dispute that arose. But we aren’t in heaven – not yet anyway – and we certainly aren’t living in a perfect world, so the cold hard truth is that when push comes to shove, you better be hoping to heaven you have a great lawyer there to have your back.
Let’s start with the importance of a contract. When I first started a business I was embarrassed to even mention the word contract. I thought that by even suggesting it I would morally offend the other party, causing them to believe I didn’t trust them. I wanted to be the person that took people at their word and believed that everyone had good intentions. Asking for a contract, in my mind, went totally against that. It wasn’t until one day I had a call with my father, who happened to be a former FBI agent, that I first understood why my thinking had been incorrect.
When I shared with him my embarrassment about asking for contracts, he simply stated that the contract wasn’t to say “I don’t trust you.” Rather, the contract was there to make sure that I had laid out in writing exactly what my expectations and understanding of our agreement was, and so that the other person could review those and make sure that they expected and understood the exact same terms that I did. Putting it in writing, he explained, was about entering into a relationship with open and honest expectations from both sides up front, so that everyone was clear from the get-go on what they understood.
His explanation was like a light bulb going off in my head. No longer did it seem like an offense to do a clear contract with someone. Instead, it was a service to one another to ensure that the relationship would produce a result that both parties could be happy with. From that point forward I became a huge advocate on the importance of having a contract that was very clear and detailed, that laid out every expectation, leaving no room for interpretation or misunderstanding, not out of a lack of trust, but out of a value and respect for the relationship with the other party.
Next came learning the importance of selecting a great lawyer. Again, early in my career I thought that a good lawyer must be the scariest lawyer – the one who would never back down and who would fight like a gladiator on your behalf. WRONG! I cannot express enough how wrong that was. A fight to the death, take no prisoners lawyer, is one who will alienate everyone around you that you ever try to do a deal with; they will drain your pocket book by dragging the fights out to the bitter end; and they will convince you that settling is not an option because you are right and you shouldn’t give in. In the end, a lawyer like that wins for one person and one person only, themselves. You on the other hand get to pay them for every hour they were able to convince you to let them keep fighting.
I finally came to learn, after many years of trial and error, what the definition of a truly great lawyer is: A truly great lawyer is one who will start the contract draft out fair and balanced, rather than trying to make a one-sided agreement with the hope the other party will just sign without reading. A lawyer who is looking to take advantage of the other party is not the kind of lawyer you want because business is about ongoing relationships, not churning and burning from one client to the next. A great lawyer is also one that will help you get a deal done! They will educate you on what terms you need to be more reasonable on as you negotiation with the other party, pointing out which points are truly important to have kept in the agreement and which points are really not worth fighting over. A lawyer who will help you find a balanced win/win for both sides, while making sure that no one takes advantage of you, is the best kind of lawyer there is, and they are worth every dime you pay them, regardless of their hourly rate!
When I met Chip Lion with Morrison Foerster in San Francisco, he was representing one of my investors across the table from me in a negotiation. You heard me right; he was on the opposite side of the deal. But I was so impressed with the way that he handled the negotiation of the terms during that deal that I turned around and hired him for myself the moment that deal was closed. That experience helped me realize that I only wanted attorneys working for me who knew how to negotiate a fair and balanced deal where the two sides didn’t have to hate each other when it was done, or where one party walked away feeling cheated while the other celebrated their win. Great attorneys are dedicated to facilitating a win/win. Do I still choke when I get a bill from Chip? Of course. But I never regret paying it because I know that he is worth every dime.
I believe that a company should have multiple attorneys they work with, picking lawyers who specialize in each different area of practice. Law is so complex that no one attorney is going to be the expert on every matter. Some lawyers specialize in corporate law, while others specialize in tax law and others in litigation and employment law, etc. Having lawyers from each specialty available to advise you is critical as you grow your business. And don’t shy away from forming those relationships early on in your company. The more the lawyers can grow with your company, the easier it is to keep them in the loop on your needs and goals for the future.
For example, Cass Butler of Callister Nebeker & McCullough represented my companies on employment and litigation matters for over 15 years. I continued to use him because he was an expert on our local employment laws and he kept us out of litigation as a company rather than encouraging it. He took the attitude of settling matters early and fairly so they didn’t have to escalate and be drawn out. I can honestly say that I have never had a regret paying a bill from Cass because he too is worth every dime.
The only regrets I have ever had when it came to legal bills and lawyers was either not spending enough money to hire the good ones, or the times I thought I was saving money by hiring the cheap ones. Go ahead and make as many lawyer jokes as you want to (because let’s face it, some of them are just plain hilarious!), but never forget that nothing will be more expensive to your company than hiring cheap lawyers, and nothing will be more painful than hiring the wrong ones.
Published on Forbes