Minimizing Legal Risk in Your Growing Business

Kathy (host):
Well, hello there, and welcome back to another episode of “Help! My Business Is Growing,” a podcast where we explore how to grow and build a business that is healthy and sustainable. I’m your host, Kathy Svetina, a fractional CFO and founder of the company called NewCastle Finance, a company where we believe that everything that you do in your business is eventually going to end up in your finances. So to get to healthy finances is to have a healthy business. Well, the question is, how do you get there? Well, the answer to that is, you can listen to this podcast, and we’re going to give you some good tips and tools on how to actually get there.

Kathy (host):
This episode is going to be about the legal infrastructure that you need in your business as your business grows because when you are growing, you’re going to have different legal rules and restrictions that you need to be aware of. You are probably going to have to change your contracts. You’re going to have to figure out how much risk you are willing to take in your business, and these are all the decisions that you’re going to need to be making on a regular basis. So this podcast is going to be about how do you think about risk in your business, how do you minimize that risk in your business, and what type of legal structure and legal tools do you have at your disposal to minimize those risks?

Kathy (host):
As a reminder, all of the episodes on this podcast have blogs and detailed timestamps, and we’ve linked all of those in our episode show notes. So if you’re interested in that, please go ahead and look at it.

Kathy (host):
My guest today is Michelle Bomberger. She is a strategic legal counsel and founder and CEO of the Equinox Law Group. She believes that every business deserves to have the same strategic law advantages as mega-corporations. Her experience as a business owner and entrepreneur gives Michelle unique insights into the emotional and practical aspects of owning a business and how important legal infrastructure is to growth and success. Join us.

Kathy (host):
Michelle, thank you so much for being on the show.

Michelle (guest):
Thanks, Kathy. I’m so happy to be here.

Kathy (host):
It’s really good to have you here. We’re going to be talking about legal risks in business, because, you know, an important part of the financial health of the business is mitigating risk, whether it be financial, legal, operational, whatever it might be. And from the legal perspective, when you think about risk as a business owner, how should you be thinking about that risk, and how do you actually minimize it?

Michelle (guest):
Well, that’s a big question to start with. I think it’s important for business owners to understand that risk is prevalent everywhere, and so much of it depends on the risk profile and tolerance of not only the business – so what kind of industry are you in? What kind of regulations support it – but also the risk tolerance of the owner and the leadership team? And so while, you know, we have folks who come to us and say, “Well, it doesn’t really matter, because I’m going to sign it anyway, I’m going to take this deal,” right? Well, that’s lovely, that’s great, and you’re going to sign it anyway, but what’s really important is to understand what it says. Because it’s going to have compliance requirements in there. And if you just go and sign it, there are going to be things that you’re immediately breaching because you haven’t really spent the time to understand what you’re signing.

Michelle (guest):

And even if you’re going to sign it anyway, at least then you can mitigate those risks, as you mentioned, by putting in place some of those requirements. Some good examples are, you know, many large contracts now require certain data security, data privacy, confidentiality, IP – all those terms are in there, and you may not, by default, be prepared to comply with them, and so you have to be ready to put those systems into place so that you’re not immediately in a breach. So really, just understanding in each relationship that you have in your business, what are those factors that should be thought through, what could go wrong in that situation, and what can you do to mitigate those potential risks that might show up.

Kathy (host):
So I’m hearing that essentially from my perspective, I think about contracts in two different spectrums: the contracts that you have with your vendors and the contracts that you have with your customers. So in terms of, if we separate this and we think about risk in terms of the contracts that you have with your vendors, your providers, what are some of the things that you should be looking at? So you said compliance is one of those, like, data security would be one of those. What are some of the other things that you should be looking at when you’re looking at those contracts?

Michelle (guest):
Yeah, it’s a really good observation, because I think that you should take every single relationship and separate it and think about that relationship. So in addition to those that you mentioned, customers and vendors, you also have employees, and you have landlords, you have business partners. So every single relationship that you have in the business, you need to think about that particular risk profile of the two parties and what could go wrong.

Michelle (guest):
So with vendors, for example, you know, you think about what is the length of that relationship, what is the value of that relationship, what is the potential impact if that relationship goes sideways? One of the things that lawyers are sort of, you know, called out for, is being so risk-centric. And we are so risk-centric, not only because we’ve seen a lot, but also because that’s kind of how we’re trained to look at the world. We’re trained to look at the world from a case study that says, “Okay, here’s a whole bunch of facts, here’s a whole bunch of data. What do you see?” And humans generally are not particularly good at evaluating risk, right? The idea of, what is the likelihood of something happening and what is the impact of something happening?

Michelle (guest):
And so I think that framework of looking at the relationship and saying, “Okay, what does this relationship look like in the short term and the long term? What could go wrong, what is the likelihood and impact of that happening?” And so when you think about going through that vendor contract, or any contract, really, but vendor contracts are a great example, you typically have what people call the boilerplate of indemnification, limitation of liability, you know, dispute resolution, choice of law, all of those things are a part of, how do we handle a dispute, a situation, a liability if it comes up. And so those are actually some of the most important parts of the contract, because they spell out the terms of, how do we get through a problem if it shows up.

Kathy (host):
And how about in terms of actually – before we go into that, I do have to ask, because you have mentioned a couple of legal terms, and for people who are not familiar with that, I would really like us to define that. For example, indemnification. What does that mean, and how does that actually relate to the business?

Michelle (guest):
Yeah, it’s a great question. Honestly, I would say that even as a trained lawyer, because in law school, they teach you how to think about problems, but not necessarily how to interpret the actual contract and read it. It took a while for me to even process through what indemnification does and how disparate these provisions are. When you see them – like again, when people think, “Oh, that’s boilerplate.” They are so important and they are so unique to each situation, it’s actually important to read them.

Michelle (guest):
So indemnification is the process for one party reimbursing and holding harmless another party for something that the first party caused. So if I go into your business, let’s say I’m an IT provider, I go into your business, I download a bunch of software. Now you have a virus that’s wiped out everything that you’d had stored on your laptop. That contract typically says that I will indemnify you for any third-party claims. So let’s say you had some data breach or something like that, I’m responsible for the damages that you sustained. So you’ll see in that language typically “hold harmless.” So that means that if there’s a lawsuit, I will provide the defense and hold you harmless and take that responsibility directly, and then pay for all of the costs associated with any claims or damages that you incur.

Michelle (guest):
And again, if you think about – I just used a whole bunch of different sort of variations on words – you’ll see that each one of these has a different level of protection, a different level of cost and benefit that goes into that provision. So it’s really important that it’s not just a drop-in something you found, but really something that’s specific to that scenario.

Kathy (host):
Especially if you’re in a particular industry. For example, if you deal with a lot of secure data, like, if you have social security numbers of people, or maybe if you have, I don’t know, that certain vendor deals with very secure data too – like, all of that needs to be taken into account. And one of the things that I always like to say to people, just don’t look it up online. Just get yourself a lawyer that would actually tell you, like, what do you need to put in? And you know, to what extent that actually makes sense for you. So we’ve talked about the details in vendor contracts. How about the customer contracts that you have? Are there any specific items, must-have items on your customer contract that you have to have?

Michelle (guest):
Well, again, every relationship is different, so it’s hard to say what you must have, but I would kind of almost flip the vendor relationship on its head, because now, rather than being the vendor, you know, you’re looking at it from kind of the customer standpoint, right? And so now you are the vendor in that scenario. And so what protections do you need from something that the customer might do? And what is a customer going to expect from you?

Michelle (guest):
So if you are, you know, providing some sort of deliverables, let’s say, if you’re a graphic designer or marketing agency, even in financial spaces, you’re providing the customer with a deliverable. Do they own it? Do you own it? That is something that’s really important. Or is it shared? Right? They have the right to use it, but you own it. So you want to think about those things, especially in a professional services type environment. What is it that you’re giving to the client, and what are you retaining for yourself? That’s really critical.

Michelle (guest):
I think the most important thing is to remove as much ambiguity as you can, and that’s something that lawyers really kind of focus on, is, how do we make this as clear as possible? Which is why there are so many words on the page. Which is not always the solution to clarity, but it is sometimes the tool that’s used to try to get through what is the most ambiguity in the relationship, and how do we get it as clear as possible?

Michelle (guest):
I think the other thing that’s really important is, if you have an ongoing relationship with a customer, it’s not just a one-and-done, but it’s an ongoing relationship. Ensure that contract is either automatically renewed, if that’s appropriate, or updated on a regular basis as well, because the liability or the risks that you have as a business might change over time, and you may want to adjust what that contract says. And so don’t necessarily assume that it just should sit there as is, without touching it.

Michelle (guest):
How do you increase prices? How do you address, you know, new regulations? Data privacy is a huge one. Data security is another one. So just being aware that it’s not one-and-done, I think, is probably one of the best things to do, and then have a contracts management process, which I know is something that most small businesses don’t have, but a way to review those contracts on a regular basis to say, “Hey, should we change – do they need to go back to the customer and make an adjustment?”

Kathy (host):
And this is so important too because there might be contracts that would be expiring and you are – and especially when you’re looking at – I’m looking at this from a financial perspective, right? When I’m forecasting certain revenue, certain sales, there might be contracts that might be expiring, but I’m not aware of that because I don’t have insight into the contract, because it’s not an easy way for me to actually access all of those. So you might be forecasting the revenue for the contract that is expiring and the customer decides not to renew that contract. That is super, super important, and I’ve seen big companies struggle with that as well. So it’s so important to have that central repository of all the contracts. It doesn’t have to be anything sophisticated. It could be just a spreadsheet where you have these are the contracts, this is how much they’re for, this is when they expire, so that you have that central view of all of your contracts for your customers.

Michelle (guest):
And sometimes there’s also a renewal provision that says, you know, if you want to cancel within – you notify them within a certain period of time. So if you decide you don’t want to renew the vendor contract, is there a notice period that you have to provide them? And especially with more and more of these automatically renewing contracts that are – this automatically renews for a year. You want to make sure that you know what those timelines are. And on the flip side, you know, not everybody has leases anymore, but leases often have a period to notify the landlord if you want to renew. If you want to renew, you need to, you know, have that conversation as well. So that’s another reason to have a contract management system that alerts you. And again, the spreadsheet’s fine, as long as someone’s looking at it – alerts you of these notice periods.

Kathy (host):
Yeah, I just went through this myself because I have a three-year lease on my office space, and I knew that it was coming up, because I actually keep track of that. But it was also nice because my landlord, the landlord agency, they actually sent me an email saying, “Hey, your lease renewal is about to, you know, expire for another year. Are you going to be renewing?” And I said, “Yeah, I’m going to do it.” But not everyone will do that. They will just assume that no news is good news, and just renew it while you on the other side you were counting on actually, you know, not renewing it for that particular year. So it’s really important to keep track of those. So we’ve talked about the vendor and the customer contracts. Let’s talk about the employee ones, because that, I think, can get really complicated. So what are some of the things that you should have in place for your employees?

Michelle (guest):
Yeah, employment is one of the highest-risk areas of being a business owner. It’s emotional. It’s personal, right? It’s variable like there’s so much that happens in that relationship that, you know, beyond just the constantly moving regulations, you have the emotion attached to it as well. So it is just an area that is sort of, you know, primed for potential risk.

Michelle (guest):
Something that we haven’t talked about yet when we think about just, you know, business risk generally – we’re talking a lot about contracts, but the framework that I like to use has multiple tiers of protections. And so the first is the contract, the second is insurance, and the third is your business entity. And so those three tools sort of work either independently or together, depending on the situation. I wanted to raise that – we can dig into it a little bit later, perhaps.

Michelle (guest):
But with respect to employment, looking at employment practices liability insurance is a really good addition to your tool set, because in most of the US, we are employment-at-will. Employment-at-will means that either party can terminate the employment relationship at any time, for any reason. And so typically, what we use with employee relationships is just an offer letter. So there’s an offer letter that says, “Hey, we want to offer you this job. Here’s the title, the reporting relationship, the salary, the benefits,” and it’s simply an agreement to come on board, and there’s no kind of further commitment by either party.

Michelle (guest):
In addition to that, you’ll sometimes see a non-disclosure agreement or a restrictive covenants agreement. Restrictive covenants agreement usually includes things like confidentiality, ownership of intellectual property that’s created, non-competes, which, again, that’s a huge thing right now. Those are going away for the most part in many states and possibly across the country, non-solicitation, so you can’t take the customers or the employees when you leave the business. So those types of things are in a restrictive covenants agreement, which often comes side by side with the offer letter, depending, again, on the nature of the employee and the industry.

Michelle (guest):
And then you would have your employee handbook and policies, again, that depending on the size of your business, how robust those are. And I think one of the trickiest parts right now is that during COVID, everyone realized that the talent pool was changing so much, and then the opening up of being able to hire remotely and work remotely. And so we have a lot of companies that we’re working with to clean up some of that reactionary hiring, which has turned out to be a great thing for most businesses, but the compliance piece has gotten a little bit lost, because employment law, for the most part, is state by state. And so if you’re in a state like Washington, where I am, you know it tends to be very employee-friendly, and California even more so, Colorado as well. And so being really aware that it’s not a one-size-fits-all solution with employment, but rather it’s a state-by-state requirement.

Kathy (host):
And what do you do if you have – if you’re a remote company that has multiple states, or maybe even that you work with people in other countries? Like, how do you navigate that? Do you get yourself a legal person? Should you get yourself a fractional HR person? Like, what should you do?

Michelle (guest):
Yeah, that’s a good question. I think it’s a mix, honestly. I think there are certainly some HR software companies, like Gusto or Paychex, that will do some of this for you, and they may describe what they do in a way that sounds complete, but may or may not be. Your fractional HR is really great at staying on top of what’s changing, and I think their greatest contribution is helping you to navigate the personal relationships, the performance relationships in the business. I think that is what fractional HR does an amazing job of, because many of us as managers and leaders are not particularly good at the ticking and tying of the performance and the compliance and all of that. And then I think legal is the truly nuanced part of compliance and implementation of the law. And so we partner a lot with outsourced and fractional HR folks to sort of, you know, gut check and do a final review of policies or handbooks, but for kind of a small business that maybe doesn’t have someone on staff or full time, finding those newsletters from the state employment offices, from the local SHRM, which is the Society for Human Resource Management, finding those places where you can stay up to date is probably the most valuable thing you can do, because employment is just changing so rapidly, and having at least the bug in your ear to say, “Hey, by the way, this is coming.” And then you can engage with the rest of your team to figure out how to implement it.

Kathy (host):
Yep, yep. It does get overwhelming, especially if you have multiple states that your employees are working in. So generally, if you, as a business owner, are just not going to keep up with it, then it’s sometimes best to engage someone in the fractional HR world, maybe even actually hire someone in your business if your business is big enough that you do need an in-house person in HR. And I would also say that the in-house person with HR sometimes actually needs to work with someone who is specializing in all the changes in laws, like yourself, in different states so that they can really be kept on top of what is changing and what needs to happen, right?

Michelle (guest):
Yeah, one of the things that we do for our customers is we provide a quarterly legal update that says, “Hey, here are the laws that are coming down the pike across the board,” not just employment, and then help them to get proactive in implementing them. Because ultimately, what happens a lot of times is by the time a business owner finds out that something is happening, they’re already behind the eight ball, right? They’re already behind. And so how do we help them to be more proactive, so that they are aware of it, and we can build the solution to fit them, not just react to the problem that they’re trying to solve?

Kathy (host):
And you’ve talked about – we’ve talked about contracts, but you’ve also talked about the framework, the infrastructure, of minimizing your legal risk. And you talked about how you have contracts, insurance, and business entity. Let’s dive deeper into this. And we’ve talked about the contracts already. If you have anything more to add to that, but let’s focus more on the other two of the insurance and the business entity. How does all of that come together to minimize business risk?

Michelle (guest):
Yeah, I really like to kind of share how these things work together and how they work independently sometimes, because they don’t all apply in every situation. So when we think about contracts, contracts are intended to insulate the risk of a particular relationship, right? We talked about removing ambiguity, having dispute resolution procedures, having a way to deal with some liability as it happens. And so you hope that the terms of that contract insulate it, and you’re done, right? We can handle this, but sometimes what happens in the relationship is not covered by the contract. And so then you’re going to look to your insurance. So you’re going to say, you know, “Hey, we were working together in this relationship, this bad thing happened.” Maybe I caused a trip and fall in your business. Maybe there was a fire or a data breach, whatever those things are. And there was a dispute resolution procedure in there. But now I have a liability, right? I have a liability to you because of this damage that I caused. So I’m going to go to my insurance and say, “Hey, I need your help.” And you want to look at your insurance for the kinds of situations that are likely going to occur, right? I may not have a high risk of, you know, data breach based on the business that I have – I actually do, and you do as well in our professional services – but based on the type of business you’re in, that may not be a huge risk. Most people don’t think that cybersecurity is a huge risk, but small businesses are the highest-risk business size out there for cybersecurity, and so that has become something new to talk about. Employment practices – well, I only have one part-time employee, so maybe I don’t need employment practices, but I get to like five or 10 or 20, when is it appropriate to start to backfill that liability? So really understanding what relationships you have, what activities you’re performing, and then kind of wrap-around insurance to cover those types of things. And this is where it’s really valuable to have an insurance broker who understands the size of your business, the industry you’re in, the kinds of activities you’re performing, and is up to date with what’s happening in the marketplace, so that they’re asking you those questions. And every year, you don’t just go and sign the same document, but they’re asking you, “Hey, what’s changed? Has your business grown? Have you added e-commerce? What has changed in your business?” so that they can then advise on what’s the right level of protection. So again, you know, you have this problem in this relationship. Contract doesn’t cover it. You have a liability. You go to your insurance, you hope that your insurance covers it, and if it doesn’t, let’s say that there was a fire that was caused by arson, right? Like insurance isn’t gonna touch that. And you’ve lost everything in your business, and you have a liability to your landlord. Let’s say you have the entity as a limited liability entity, typically a corporation or an LLC. That’s what many, many companies are set up as in order to protect your personal assets from that liability, right? So as long as you’re not the one who set the fire in this example, you know, hopefully you would be able to say, “Hey, you know what? I am not personally responsible for this liability. My entity protects me, and I can, you know, basically, close it and walk away from that.” Same thing with customer contracts. “I can no longer perform these customer contracts. Sorry, closing the business, walking away.” So this is where, as an owner of the business, you want to be really careful about protecting what’s called the corporate veil. Many people have heard of this concept that you treat the business as a separate entity from yourself, and it has its own bank accounts, its own checks, its own credit cards. And if you need money out of the business, you take it out as a distribution or a guaranteed payment from the business. But you respect the business as a separate entity or a separate person, for lack of a better word, so that you are protected personally, and you’re very careful about what personal guarantees you sign, because if you personally put your name on the hook, often with a bank loan or a lease, then obviously your personal assets are at risk. So with those three things, you can see situations where you know the entity is the only thing that’s really the protection, or the insurance is the only thing that’s protection. But in many cases, they sort of pile on top of each other, and all three of them give you sort of the belts and suspenders.

Kathy (host):
And this is a really good topic with the corporate veil. And I want to dive more into this. What would be some of the instances where that corporate veil is pierced, and how would that – should you say, “Hey, this was my LLC. It wasn’t me.” Then when you go into the court, the judge would say, “No. You were actually liable because you pierced the corporate veil”?

Michelle (guest):
Yeah, it’s a great question. So the common, you know, the really common, low-hanging fruit answer, is that you treat the company’s bank account as your bank account, right? So you’re writing, you know, checks for your mortgage or your car payment, or, you know, you’re paying your Venmo for dinner with friends out of your company bank account, right? So really thinking about what is a company expense and what is an individual expense, and keeping that very, very clearly separated. Again, easy, kind of low-hanging fruit.

Michelle (guest):
The other piece would be, if there are lots of conflicts of interest, where you know you’re just commingling so much of your activities together. There’s no separation of what you are as an individual and what the company is. And so there are business activities and personal activities sort of happening without clarity around those contractual relationships.

Michelle (guest):
So often you’ll see maybe even a single owner has multiple businesses, and they do different things, but they work together. So formalizing the contracts between those businesses so that it’s clear as the money going back and forth between them is a business transaction. You see this really commonly with businesses where the business owner also owns the real estate that the business operates in. A formal lease between those two businesses makes a lot of sense, or a formal lease between the individual owner, if they own it individually, and the business, because, again, you’re showing that intention to keep those two things separate.

Michelle (guest):
Another example, a more difficult example, is where you have the owner is the professional who’s providing the services, right, especially in licensed professionals. So physicians, you know, lawyers, architects – you have another layer of insurance for professional liability because the individual is at risk because they are the ones performing that professional service. And so that professional liability insurance is another tool, because they’re going to go after the company, and they’re going to go after the individual providing services. If that individual is your employee, then you’ve got this agency protection in the business. But if it’s a professionally licensed person, it’s another level of risk.

Kathy (host):
So in that case, let’s talk about the professional liability insurance and the E&O, the errors and omissions. How are those two different? And when would you need one versus the other? Do you need both?

Michelle (guest):
Yeah, I think they’re commonly confused. And so really you want to look at the policy coverage, right? So I think errors and omissions, and again, there’s not a right answer here and not a clear answer. So I would really encourage you to talk to your insurance broker when you go to do this. But Professional Liability typically deals with, again, licensed professionals, so people who have a license to perform certain kinds of services, and they are personally liable for that work, because they are the professional who is educated in that area. Errors and omissions, again, more applies to a failure of someone in the business to do something. You see this really commonly with boards and directors and officers, so errors and omissions coverage and directors and officers insurance are similar, where they’ve made some sort of a mistake that cost the organization something, and then they’re sued individually as agents of the company. So that’s where those typically come in. So what I would say is, in your business, if you think about the employees you have and the other agents that work for you, whether you have an external board of directors or other officers, thinking about the activities that they’re performing that are core to providing the business services and then managing the business, and then thinking about what those potential liabilities are and when an individual might be sued directly. And that’s the conversation I would have with the insurance broker.

Kathy (host):
And would you also have a conversation with your legal counsel with it as well, to see what is appropriate, and then loop in the insurance broker? Or how would you even start that conversation? Because one of the things that I see a lot of people think about is there – well, I need someone to talk to about, I don’t know, let’s say IP laws. Or I need someone to talk about insurance for whatever reason, or I need someone to talk about employment law. It’s very siloed, versus having someone that looks at business entirely holistically and says, these are some of the things that you need. Like, how would you go about that? Because there’s not, from what I’m seeing out there, there’s not a lot of lawyers that are holistically looking at the whole organization. Who would you go to for that?

Michelle (guest):
Yeah, well, you kind of hit the nail on the head, because that’s exactly what we’ve built at Equinox. And it is really unusual to find that. The industry, the legal industry specifically, has developed around sort of these siloed practice areas. And it doesn’t serve businesses particularly well, just as you mentioned, because if you have four or five different lawyers looking at different parts of your business, who’s connecting the dots? I think of it kind of as a primary care physician, right? You want someone who has that history. They know, you know, “Hey, I’m training for a marathon, and I sprained my ankle last year, and, you know, I had a brain injury 10 years ago.” Like they know that, and they can start to connect the dots when symptoms show up. And so I really do encourage businesses to find a corporate lawyer who can sit in that chair, at least from a corporate and business oversight. So they’ve got the experience to at least troubleshoot the areas like IP and employment. They may not be able to do all of the work, but they can at least troubleshoot that for you. They have enough experience across the board. So the generalist is really what businesses need, and there’s not a lot of them out there. So I would start with a corporate lawyer, because they usually have at least enough idea of how the business works. Ideally, someone with business experience who’s gone back to law later. Again, those are also not that common, but those are the experiences and the characteristics I would be looking for. And then if you need those specialists, ensuring that those folks are talking to each other so you still have that single point of contact. I think that is the most valuable piece as to how do you get all the information into one person’s hands, so that you don’t have these disparate activities happening in five or six different silos, and none of them know what the other person has done, because the cost of fixing that is a challenge. I think the corporate lawyer is also a really good place to go for just general thinking about risk, right? So talk to me about “I want to hire this person in Texas,” or “I want to contract with this company overseas,” or “We want to buy this business.” Talk about what I should be thinking about, and they should be able to help you think through that. Ideally, you’d have someone who could do a lot of that, but in the reality of the legal industry, that’s rare, but at least you have a central place to help you think about it.

Kathy (host):
Yeah, and is corporate lawyer the same as general counsel, or are the two different things?

Michelle (guest):
So general counsel is typically used as an in-house lawyer. So the reason that we use that term at Equinox is because we are trying to mimic what large companies have in their in-house roles. So most large companies have a general counsel, and the General Counsel is an extension of the management team. They sit in the Executive Session. They are part of board meetings, so they are at the strategic, not just the tactical level.

Michelle (guest):
And so I think that is also a really important distinction. How do you get strategic counsel for your business, not just firefighting? And that puts some onus on the business owner themselves to invest in that. Again, the industry has really taught businesses to be very reactive, and they’ve taught them that because legal is expensive, it is complicated. Often business owners feel like they’re not very important. They’re talked down to. The experience has been really challenging for many, many business owners to work with the legal industry as it currently sits. And so they avoid it.

Michelle (guest):
And so when they do call, it tends to be once in a blue moon, when something happens, they need some help, versus the strategic, proactive “How do I build this company for the future?” And so I do encourage – one, try to find somebody who really is the kind of lawyer who can help you be strategic. That’s how I would position a general counsel – that it’s more executive, rather than just tactical. But also have someone that you do set up a meeting with, you know, once or twice a year to just talk about where the business is and what you should be thinking about.

Michelle (guest):
And I know that’s not an expense that most people want to take, but if you think about it as an investment for the future, legal is such an incredible tool to give you the advantage in the market. You’re able to then compete better, because you’ve got your ducks in order. You know that if something goes wrong, you’re ready. And so I think this is kind of a two-way street, with the industry needing to make some adjustments, but also the businesses needing to, you know, really think about this as an investment and find the right person that helps them get there, because not everyone out there is able to do that.

Kathy (host):
And what are some of the things that people should – let’s say that you found someone that you really like, and they’re a good fit for your business, and they’re more strategic, and they can guide you through it. And now that you have them on your team and you’re meeting with them once or twice a year. What are some of the things that you should be talking about? What would those conversations look like?

Michelle (guest):
Yeah. So I think it’s really about how the business has changed. So if you look at what your one-year, three-year, five-year plan is for the business, if you know, if that’s shifting based on what you’ve learned, or how the market’s changing, or how your customers are changing, I think that’s a really critical piece. The big challenge is, you know, you don’t know what you don’t know, and you need them to help you with that. And so I think that’s an explicit question to say, what is changing out there.

Michelle (guest):
So for example, you know, many business owners aren’t paying attention to the data privacy laws that are occurring across the country, and they’re all different in different states. People weren’t aware of the sales tax issues and the Nexus, the economic Nexus issues that came out of Wayfair until they got the tax bill from some state on their desk. So what I would set up with that individual would be a regular cadence that says, “Hey, I’m coming to you so that you can tell me what I don’t know, what has changed.” And so, as I mentioned, we do this legal update memorandum. It would almost be something like that. Tell me what is relevant to my business that’s changed in the last six to 12 months.

Michelle (guest):
Now, again, get a sense of the cost. Make sure you kind of know what you’re getting into there, because you don’t want to show up with a $10,000 bill for this when you didn’t expect it. But I would set that expectation on here’s what I’m looking for. We have on our website something we call our business health assessment. It’s about a five to eight-minute survey, and it spits out a 30-page document that says, “Hey, based on your answers, here are some things you should be thinking about around the why of your business, your core values, your governance, your employees, your facilities,” and so something like that would be a good starting point because then you could bring that and say, “What do I need to know in these areas?” And you’re welcome to go and check that out and use it. You get a copy, and it’s great to use with your banker. It’s great to use with your finance person. It’s great to use with your insurance broker because it does sort of lay out some of these factors that are common risk areas and common areas that people just aren’t aware of.

Kathy (host):
And Michelle, I think you already answered my next question, so, but I will still ask it in case you want to put something else in front of our listeners. So if someone were to try to implement this in their business, like we’ve talked about a lot of different pieces, like, how do we bring this into the next actionable step that they can take in their business to get them into that better legal insight in their business and to minimize their risk? What should they do?

Michelle (guest):
Yeah, I do love that business health assessment, because I think that it does raise – it just percolates up things that may or may not be on your radar. And to me that’s one of the most important things is, you know, there are the very clear, you know, we mentioned vendor relationships, customer relationships, employment relationships. But you know, what else is there? Have you thought about your IP recently? Have you thought about, you know, who your advisors are recently? So it just percolates things up. And so I think that’s really great food for thought.

Michelle (guest):
And then I think the next thing would be just to build that relationship with someone, because the last thing you want is to have a major situation and then go hunting for someone that doesn’t know you. You don’t have a relationship with, and the vast majority of people don’t have, you know, deep ties with their lawyer. They hopefully have somebody that they go to but it’s not a relationship. And so I would say one of the most important things is just to already have that person set up. And again, if you’re willing to do that regular cadence, to keep them informed of what’s happening and to have that continuous learning, I think it will be really powerful to build that infrastructure for the business.

Kathy (host):
Michelle, where can our listeners find you?

Michelle (guest):
Yeah, I’m pretty active on LinkedIn, so it’s just Michelle Bomberger. I think there’s only one of me out there. You can also reach me through our website, Equinox.law. There’s a contact form there, or directly at michelle@equinoxbusinesslaw.com.

Kathy (host):
Awesome. So we’re going to put all of these in the show notes. Also the link to the Legal Health Assessment, so you can take that as well. Michelle, thank you so much for being on the show. That was really, really insightful.

Michelle (guest):
Thanks, Kathy.