“The minute you read something that you can't understand, you can almost be sure that it was drawn up by a lawyer.”Will Rogers
Accountants are the pathologists of business. They can tell what wrong six months after the business died!Bill Erichson
Over the years, I have worked with hundreds of business people and I have found an important truth… business is too complex to run without professional advice. A well run business has three key advisors: a lawyer, an accountant and a business advisor. The trick is how to use the advisors in order to help you run a sustainable, successful business.
The Business AdvisorBusinesses need good business advice. This is what I do for my clients. In general, business advisors help the business owner see the big picture, mentor the owner and keep an eye out for the pitfalls that often lead a business down a dangerous path. Some business advisors are technical specialists and focus on particular industries. Others are business specialists, usually concentrating in on are such as marketing or finance. A good business advisor helps you make decisions that make good business sense! This is a critical factor when making decisions. The advisor helps you look at things from different sides, and often looks at unforeseen risks and unintended consequences.
The AccountantBusinesses need good accountants. Accountants, recent advertising notwithstanding address financial issues, especially around the preparation of financial statements and tax returns and around providing solid financial advice. Many business owners simply use their accountants as tax strategists, and in truth, many accountants look at business through a ‘tax lens’. Unfortunately, many accountants are not as expert as explaining things as they are doing things. As one client once told me, “Five minutes into my meeting with my accountant and all I see are dancing cows.” Accountants are essential, not only for taxes, but for helping entrepreneurs make good financial and tax decisions.
The LawyerLawyer jokes notwithstanding, it is imperative to get good legal advice. Contracts are tricky, whether we are talking about a lease, loan agreement or sales contract; all of these are contracts and are written by lawyers for judges! They are often incomprehensible to normal people, but the language of contracts is important. This way, the intent of the agreement between two parties is reflected in the legal agreement just in case anything goes wrong and the contract goes to court or to arbitration. Lawyers look at your business through the legal lens just as accountants often look at the business through the tax lens. A good lawyer is an essential part of any business.So, what is the problem? The problem is how many business owners use their advisors. I have a rule. See your business advisor first…your accountant second and your lawyer third. The reasoning is simple. If a decision does not make good business-sense then don’t do it. (I am always amazed that people make decisions to spend money because they can “write it off”. Remember, you have to write it on before you can write it off!)If a decision makes good business sense, then meet with your accountant so you can structure the decision to ensure it makes good financial and tax advice. This can include buy vs. lease decisions, to structuring contracts for tax purposes. If a decision does not make financial advice, then again, don’t proceed!Finally, if the decision meets the first two criteria, then see your lawyer. Ensure that the decision makes good legal advice and that you structure it correctly. Lawyers often see the differences between an agreement, as you understand it, and the contract as written. This is far cheaper than trying to enforce something not found in the contract, but something you are sure should have been there.You need all three pieces of advice. For example, if you decide to incorporate, it should make good business sense, tax sense and legal sense, and the legal agreement and shareholders agreement must reflect the intent of those involved. A shareholders agreement is developed to protect both the shareholders and the corporation from the future disputes that will inevitably arrive.So use those advisors. In my experience, they are on your side and are advocates and allies in your enterprise. Find good advisors and then trust the advice you receive. It will save you from harm, and help you build the kind of foundation to build a successful and sustainable enterprise.