Monday, May 5, 2008

A case for lawyers

A case for lawyers (although it’s not what you think), aka the small businessman grows up.

“Beware of the coming Military-Industrial Complex” Only history can judge the infamy of this quote by President Dwight Eisenhower. Certainly to some degree he was in effect signaling the changes in our society from a largely agrarian and small business economy into a post WWII economy of large business and huge government contracting that would form the cornerstone of the new age and world trade.

Fueled by the war effort, great industrial giants emerged to shoulder the load of wartime production. At war’s end these new manufacturing machines were not about to fold up and shrink back into the background noise of society. Industry had hit its’ stride in a new era of commerce. We went in just a few short years from the remnants of the 19th Century way of doing things into what would be the preparation stages for the 21st Century way of doing things. Sixty years ago our family doctor would come to our home to treat the kids, pass out a little wisdom on preventive health care and maybe even stay for a chicken dinner. The relationship was both personal and long lasting.

There were half as many of us then as there are now. Other than the sweeping social legislation of the Great Depression our laws and the way we used them had not changed substantially for ordinary citizens in half a century. A small businessperson could concentrate on running a business. Providing goods and services to the customer was the order of the day with some late-night hours devoted to keeping the books and accounting for expenses. The small business owner did not share the problems of big industry. Growing a business was the work of entrepreneurs. A good idea had a decent chance for success if the bank on the corner would see the vision and fund the venture. Our individual rights to pursue our future and to protect our privacy at the same time seemed more clearly defined. There was no perceived trade off between the two things.

As our society becomes more global, and with the population on what seems to be a never-ending upward spiral a lot of these things we have counted on to remain the same have been put to the test. As the exchange of information becomes more virtual our right to privacy is under a constant siege between the public need to know and our individual protections. With convenience and accuracy being the engine of change huge ubiquitous databases amass, collect and disseminate everything from our date of birth, our spending habits and our credit worthiness, to our employability. The definition of individual rights to employment and anti-discrimination laws have made for massive changes in the way business operates. A business owner can no longer measure a prospective employee by his demeanor in an interview and a nod from a former employer. There are now dozens of laws that business owners must comply with alone just to legally hire or terminate someone.

Business contracts are more complex than ever. Every thing from hold harmless agreements, terms of payment and performance, and a lot more even including terms of litigation if the deal goes astray have to be taken into account for almost any business contract today. The laws that govern business practices both on the federal and state levels fill rooms with volume after leather-bound volume.

Big business has had the advantage of consistent legal advice or even entire legal departments in some cases to carefully review every business decision and scenario before time, effort, and funds are committed. Corporate business decisions are rarely made without the consideration of legal opinion and liability weighed in the balance alongside that of the potential benefit to the business and the investors.

Just about every aspect of starting and operating a business has changed over the past 15 years or so to the point that simply running the business is often relegated to only a percentage of the business day.
“Marketing”, “brand recognition”, “market demographics”, are just a few of the new terms we hear in an ever more complex maze of specialties that have emerged just to keep a business competitive in the marketplace. The term “advertising” has nearly been relegated to the dustbin as an outmoded way to think.

The small business owner by contrast is in a sort of limbo. Quite often the small business owner is still using the frame of reference from the post war days that all he needs to know is how to sell his skills and goods. Very often he is both unaware of the new laws and how they can affect his business. He is equally in the dark as to how to increase the health of his company and to grow its’ customer base. A growing number of small business owners on the other hand are very much aware of the fact that in order to grow and protect their business they need access to the same tools their counterparts in big business have enjoyed all along. We see this in the trend of “third party” providers of services to the small and mid-sized businesses. Companies specializing in everything from finding and recruiting personnel to handling payroll and accounting functions, employee benefits, human resources, marketing, website design, the list goes on.
All of this is designed to level the playing field for the smaller business. And of course to create a new industry, that of third party support for existing businesses. This can be a benefit or a nightmare for the small business owner. These specialties have become so focused that it can take a string of several consultants to perform a single function.

Enter the one stop shop. Now the new generation of whole “solutions” consultancies has emerged. Built around an end to end model, these companies offer an array of services if only the client signs up for the complete package and thereby outsourcing a large portion of the functions of the company. With these kinds of arrangements another layer of complexity is created. Haul out the contracts on this kind of agreement and you will see the darker side of the new business paradigm in terms of shared liability, protection of intellectual property, employee relations, and not the least important safeguarding non-public information held on clients and staff alike from identity thieves. With information whizzing around at light speed the opportunity for errors or theft is tremendous.

The forward thinking business owner knows that the business needs an advocate. A law firm standing by to interpret those convoluted contracts, set up and audit employee hiring and termination practices, consult on compliance matters, and to help as counsel on any phase of business should be integral to every business, not just an afterthought. The risks of lawsuits and damages can be nearly the same for the small business operator now as it is to their larger counterparts. Unfortunately there are still a number of business owners who still believe that good product knowledge or skills are enough to operate a business in today’s world. They are not aware of the responsibilities and liabilities they face in the modern business world. Generally these business owners are the most vocal and quick to complain when something goes wrong after they failed to secure their rights or consulted an expert before getting involved in a situation they did not fully understand.

What does the business owner do to seek legal advice? At the current rates and with billing often in 6-minute increments a business owner often will think twice before getting on the phone with an attorney. Retainers are out of the question for most businesses operating on narrow margins of profit. Although nearly always “expensed” legal fees are usually seen as a cost and not as an investment in the business.

As I said earlier our family doctor used to visit the house and take a great deal of personal time with each patient. Doctors can no longer do this for a number of reasons. Besides having the tools and resources of the medical office a physician can see a lot more patients in the course of a day when the patient goes to see the doctor rather than the reverse. The medical profession has come to terms with the fact that in order to run an efficient medical practice they had to make certain changes to the way they do business. Considering the reality that they can no longer spend extended time with each patient the doctor has had to spend the time they have more efficiently. Another huge shift in the medical business is the concept of insurance. With the skyrocketing costs of medical care an industry emerged to fill in that gap between what physicians need to charge and what the public can afford to pay. Now medical insurance is a ubiquitous industry that serves to offset that cost from the public. The shift has largely worked, and the medical profession has continued to expand and become more and more efficient.

Returning to the legal profession we can see very much the same sort of thing happening.In an increasingly complex world of laws and regulations attorneys have had to focus more and more on very narrow areas of specialty in order to be current and effective. Also the cost of running a legal business has increased dramatically. Still, however, the profession finds itself trying to operate like the family doctor, one patient at a time. And with the spiraling costs of running a legal office the public and the small business community is faced with the very same problem. In this world of increasing complexity, and with the speed with which society is changing to adapt to this new complexity, the legal profession finds itself somewhat behind in providing the public access to the law. For the small business owner this can be a very real problem with far reaching consequences

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