Donald Rumsfeld – he of the 2003 Iraq invasion – is not someone normally quoted favourably by lawyers. But he articulated one situation that faces business owners all the time, which is very relevant to how to instruct a lawyer (or indeed, anyone):
“as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns—the ones we don’t know we don’t know. And if one looks throughout the history of our country and other free countries, it is the latter category that tends to be the difficult ones.”
Swap “other free countries” for “small businesses” and it is spot on. We don’t know what we don’t know, and it’s really annoying.
‘Known unknown unknowns’, if you will.
Before you instruct a lawyer
The second in the series about instructing lawyers (see the last week’s post here), this post considers what to do before instructing a lawyer.
As a founder myself, it’s a problem I face on a daily basis when considering which software developer to instruct, what insurance to use, who to do my marketing… Because where do you start? Or rather at what point do you give up and decide it would be better to pay someone else to do what you’re trying to do?
And for most businesses, the “unknown unknowns” in relation to instructing a lawyer are cavernous.
Incurring present cost in time and money for a future risk is difficult for small businesses to justify. Your business might not have any customers at the moment, so the idea of being sued in 5 years for a share of your unicorn tech startup seems like a ‘good problem to have’.
So you might wing it for a while, relying on such lovely notions as ‘trust’ and ‘friendship’ or even worse… ‘family’. And don’t think ‘common sense’ provides any guide either. When it comes to commerce and especially tax, the law can be utterly bizarre.
There’s that lurking thought: am I missing something? Is there a free way of doing it, if only I knew the right person to tell me about it…
How to bridge the gap?
Before you instruct a lawyer, you need to move those ‘unknown unknowns’ into the ‘known unknowns’ column (this is by definition tricky, as you don’t know what they are…)
Specifically, you can do these 5 things which are free (or inexpensive). They will afford a measure of protection and help you when it comes to instructing lawyers later on.
- DO use standard documents at the early stages of your business. They won’t be the best, but they will do most of what you need, and I cannot emphasise this enough, something is better than nothing. At least get the basics on paper and a governing law clause in there. This can save huge amounts of money later, if there are any disputes, and will help to avoid disputes in the first place. It’s cost effective for you and will make your lawyer’s life easier in the future.
- DO ask Adviserly, or your accountant, accelerator, business club, fellow founders etc. We can help point you in the right direction so you can appoint lawyers only when you’re ready to pay for them.
- DO talk to your business partners, contractors, employees. In fact, as a general rule, identify the conversations you least want to have, and have them. Figure out what it is you all want, make sure your views and expectations are aligned.
- DO keep good records. Insist on documents being signed and dated, either electronically or by hand. In most situations, electronic signatures are fine. Keep pdf copies of signed and dated documents in a folder. If you have signature pages on different pdfs, consolidate them into one document. This is free, doesn’t take too much time and will save you so much hassle in the future. Your lawyer and investors will love you for it.
- DO prepare. Once you have identified what you don’t know and decided to instruct a lawyer, prepare, prepare, prepare. Half of what lawyers have to do is figure out what the client actually wants and/or what has been agreed. The more you know what it is you want, and the clearer the discussions you have with your business partners, contractors or clients, the easier and cheaper this will be. The basics are WHO, does WHAT, WHEN and WHERE. Think about all the ways in which things can go wrong and TALK ABOUT THEM. Once you are clear and approach a lawyer, you will find it much easier to get accurate quotes that deliver what you actually need.
The best way of instructing lawyers is therefore to reduce those “unknown unknowns” and define your “known unknowns”. Do your research, ask for referrals (from, ahem, Adviserly) and ask specific questions of your lawyers.
This will mean you don’t have to change your mind, allow lawyers to price the work more accurately and get everything done on time and on budget.
If only Donald Rumsfeld heeded his own warning before invading another country. But it is not a mistake you have to make.