People often think that lawyers are ruining America. This can be especially true for entrepreneurs with new businesses, who often find that dealing with the law is one of the most frustrating parts of growing their businesses. They say that their lawyers hold up negotiations and the closing of deals that need to be done quickly to bring in much-needed money. All that, and they’re too expensive!
As a former lawyer and businessperson who now works as a venture capitalist to help startup founders reach their goals, I know that bad legal management can kill a startup’s chances of success. Entrepreneurs who know how to manage their legal counsel will have a better chance of getting customers and financing, which means they are less likely to run out of money. A CEO and her lawyer should work together like winners in a three-legged race, moving smoothly in step with each other, each knowing what their job is and how to react to what the other does.
To manage your relationship with your lawyer, you must first understand how the legal mind works. Entrepreneurs who run startups are used to wearing many hats to make their businesses successful, and they usually like to work in a way that is quick, cooperative, and doesn’t involve a lot of conflicts. That’s not how the minds of most business lawyers work.
Law schools teach that the adversarial process is the best way to find the truth and come to the best agreements. That means starting from the best (or most extreme) position for the client in a contract and fighting with the “opponent’s” counsel over every point. This way of dealing with relationships and partnerships tends to get on people’s nerves, requires finding flaws in the way the “other side” thinks, and takes a lot of time. It’s a way of thinking that solves problems by making big moves and arguing hard. People who like to work with others often feel uncomfortable. “A countryman between two lawyers is like a fish between two cats,” said Benjamin Franklin.
But lawyers work this way for a good reason: it is their moral duty to be “zealous advocates.” Because of this, lawyers have to protect and fight for your interests within the limits of the law. But there is a thin line between being zealous and being too zealous if the client doesn’t tell the lawyer that the business’s needs come first.
Lastly, your lawyer is only an expert in the law, so you can only hold him or her responsible for legal advice. You have to figure out how to balance the legal advice, the speed of the negotiation process, and the legal costs with the needs of your customers and the strategic and financial value of any business relationship or partnership to your business as a whole.
It’s important for an entrepreneur to understand how the law works, but she also needs to know her own role:
- You are the expert on what your business needs, not your lawyer.
- You are the only one who can make business and legal trade-offs, not your lawyer.
- You make the final decision; your lawyer is there to give advice. “Acting against the advice of counsel” may be the right business choice sometimes.
Here are five ways to get the most out of your lawyer:
Find a Pragmatic Lawyer
A good place to start is by hiring a lawyer who has worked in a startup before and has a similar work style. You want an attorney who knows that winning means growing your business, not getting every little legal win. For instance, a lawyer negotiating a contract between a new company and Google should know that the most important thing is to get the deal done. If Google wants an indemnity, it doesn’t make much sense to argue with such a big company. Without such a term, it’s not likely to move forward. So, it’s better to focus on managing the risks to the business of giving the indemnity, such as avoiding actions that could cause your partner to be sued, limiting the amount of money that the indemnity could cost, or getting insurance to cover the risk.
Set Clear Priorities
Your lawyer needs to know if you need to sign a contract this week to meet payroll obligations. Also, tell your lawyer if you need a payment up front or a certain schedule for getting paid. Effective leaders will say what their top priorities are and what trade-offs they might be willing to make.
Set Time Limits
You shouldn’t just ask a lawyer to look over a contract. Tell her to spend two hours looking over a contract and to set up a half-hour call with you to talk about it. Before the call, you should read the contract yourself. Write down anything that worries you or any questions you want to ask. This cuts down on the time an attorney needs to spend explaining the contract and carefully writing an email. This approach fits with the agile way of thinking that most startups have, and it lets the executive and legal counsel work together in a productive way. You might also want to set deadlines for closing a deal, not just for how long the work will take. Deadlines are important to lawyers.
People often think that lawyers go to law school because they are good with words and not with numbers. Unlike doctors, who can tell you about the risks of a procedure (like how likely it is to work or how likely you are to get an infection), lawyers can’t do that because it’s against the rules of legal ethics because it’s not legal advice. So, if your lawyer brings up a problem, you should ask questions to help you figure out how dangerous it is.
For example, you could ask the lawyer how many cases or contracts like yours he or she has worked on and how often this problem has come up. Then, ask about how bad the results would be and how much it would cost to take the risk. Knowing whether the worst thing that could happen is a minor inconvenience, a fine, time in jail, or bankruptcy makes it easier to decide whether or not to take a risk.
Just keep in mind that your lawyer knows the law and how other lawyers act. She has also been taught how to talk about both sides of a problem. So, when you get to a contentious issue, ask your lawyer what advice the other lawyer might give his client, who is your customer, and what arguments she might use to support his client’s position. This could make you want to give in or stand your ground. Like in chess, it’s much easier to win a negotiation if you plan out your opponent’s likely moves ahead of time.
A clear line of authority and clear communication about what is needed and when can make a big difference for many companies just starting out.