Archive for the 'Legal' Category

Commercial real estate leasing: Part I

Published
by
Jim Blasingame
on July 20, 2011
in Legal and Real Estate
. 0 Comments

This is the first of a two-part series on leasing commercial real estate for your small business.

In most markets, one of the sectors that a small business can get a good deal on these days is commercial office and retail space. Whether you need more room or a better location, now is probably a good time to think about finding and negotiating for those new business digs.

But just in case you’re a little rusty on where to start the process, let’s focus on the initial steps of commercial real estate leasing fundamentals that will help you find and compare leased space that works for you.

1.  Don’t stop looking until you find at least two or three places that work. The extra shoe leather will pay negotiating dividends later.

2.  Don’t sign any lease until you know the entire expense picture, including maintenance, which we’ll cover next time

3.  Avoid emotional attachment until after you’ve negotiated lease terms you can live with. At this point, the only emotion that should enter into your decision is whether customers will get excited about the location. Love is for lovers - this is business.

4.  Ask for a pro forma copy of the lease as soon as possible and read it. Commercial leases are like belly buttons - each one is different.

5.  Create a comparables analysis in an electronic spreadsheet that allows you to compare the details of prospective properties. The basics include: leased square footage, unit lease price, incremental expenses (including maintenance), lease term required (how many years), plus pros-and-cons notes about each property.  The notes will come in handy later if you need a tie-breaker when you’re making the final decision.

Since every leased space is different in size and price, here is a handy rule of thumb to help you start the elimination process. Ask the agent or landlord for the unit lease price - $8, $14, etc. - which is the price per square foot of the space per year. Multiply those two numbers and then divide the product by 12 to get the monthly base rent. Use this only as a quick tool to compare properties of different size and unit price.

Taking these numbers and your preferences into account, by now you should be able to get your list of prospective properties down to a manageable list.

Now is a good time to look for a good deal on commercial space, if you know how.

In the next column we’ll wrap-up this project with the rest of the financial analysis and lease details, including types of commercial leases.

Should your business change its DNA?

Published
by
Jim Blasingame
on July 14, 2011
in Business planning and Legal
. 0 Comments

In nature, all life comes in two forms - plant and animal.

In the marketplace, all business entities are found in two forms - human and non-human. But unlike plants and animals, a human business can morph into a non-human entity.

The human businesses are sole proprietorships and partnerships. Of the non-human entities, there are three: C Corporation, S Corporation and the Limited Liability Company (LLC).

So why should your human business morph from human to non-human? There are three excellent reasons:

  1. To acquire certain tax advantages. Talk with your accountant about this.
  2. The “corporate veil” provided by a corporation or LLC can shield personal assets from legal obligations or claims on the business. Talk with your attorney about this.
  3. Many larger customer prospects won’t take your business seriously as a vendor unless you are a corporation or LLC.

If your business is very small, you might be able to spend the incorporating expense - $500 to $1,000 - on something more immediately critical, like a computer or marketing. But one concern is that you might wait until it’s too late. Here are three organizational and operating triggers that should help you decide when to morph from a human to a non-human entity.

  • When you hire the first employee.
  • When you enter into contracts on behalf of the business.
  • When you establish any credit, including with vendors.

Non-human entities do require maintenance to be able to sustain the benefits against outside interests. Here are a few critical maintenance tips:

  • Tell EVERYONE that your business is formed as a non-human entity.
  • Identify the legal ownership designation (like Inc., or LLC) on all documents, signage, etc.
  • Operate the legal entity’s finances completely separate from personal activity, especially checking accounts.
  • Maintain proper corporate documentation, like shareholder and annual meeting minutes.

And finally:

  • Don’t forget the triggers.
  • Be proactive, not reactive, about your entity.
  • Keep up the maintenance on your non-human entity.
  • Business entity laws vary by state.

Your business is not a plant; you can change its DNA.

Recently on The Small Business Advocate Show, I talked more about the legal structure of small businesses. Take a few minutes to click here and listen. As always, tell us your experiences in changing the legal structure of your small business.

The small business ownership transfer challenge

Published
by
Jim Blasingame
on April 9, 2010
in Partnerships and family business
. 2 Comments

One of the primary reasons most small businesses aren’t prospects for venture capital is because of incompatible thinking regarding the exit strategy. VCs expect to get their money back within a few years (less than 10 but closer to five) while a business founder typically thinks of running the business until he or she gets tired of it and/or retires.

Regardless of exit strategy goals, all business owners must think about how they’re going to exit the business they founded: selling to a new owner, going public, handing the reins to family members, or as in way too many cases, simply going out of business. But sadly, as much of a certainty as it is that a founder will exit the business, most fail to plan for this inevitability.  And the result of this failure to plan an exit often results in an expensive and painful scenario for the owner, and in the case of health problems or death, the family.

But all of this inefficiency, pain and brain damage can be prevented with a strong resistance to floating down that river called denial, plus some forethought and planning.  If you’re having trouble making this happen, your problem can be fixed by talking to professionals who know how to hold your hand and get you on the right ownership transition track, regardless of which exit scenario is most likely to be in your future.

Once you’ve come to grips with your ultimate departure from the business, you can start to accept that the way your business is operated and structured when you show up each day - let’s say, in the middle of your ownership tenure - will be different from the way it will look on the day you convey the business to the next holder of the keys, whether an arms-length sale or a family transaction.

Recently, on my small business radio program, The Small Business Advocate Show, I talked about the process of planning for the orderly and successful transfer of ownership of a small business with a member of my Brain Trust, Dr. David Gage. David is a leader in the field of business mediation, a founder of BMC Associates and author of Partnership Charter: How to Start Out Right with Your New Business Partnership (or Fix the One You’re In).

Take a few minutes to listen to this conversation and be sure to leave your own thoughts, including any business transfer stories you might have. Listen Live! Download, Too!

How judicial empathy harmed one small business.

Published
by
Jim Blasingame
on June 5, 2009
in Contracts, Lawsuits, Legal and Presidential policies
. 2 Comments

Upon the announcement of the retirement of Associate Supreme Court Justice, David Souter, President Obama announced that he wanted to replace Souter with someone who has “that quality of empathy, of understanding and identifying with people’s hopes and struggles.”

Days later, the president made good on that promise by nominating Sonia Sotomayor to replace Souter. Based on Sotomayor’s past rulings, as well as comments in speeches and participating on panels, Mr. Obama accomplished his “empathy” goal. In a speech at Berkeley, Judge Sotomayor said, “I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion as a judge than a white male who hasn’t lived that life.”

How does empathy, gender, race or experience reconcile with what is no less than the cornerstone of American jurisprudence, blind justice? What would empathetic justice look like? In my career as a business owner, I’ve had some experience with an empathetic judge who chose to peek under the blindfold she swore to wear when ruling on petitions brought before her. Here is that true story.

A salesperson was hired by me to call on prospects and customers of a company I owned. Since I knew I would be giving him proprietary pricing and sales strategies that were the intellectual property of my company, I asked him to sign a non-compete agreement when he was offered the job. By accepting, if he should leave my company for any reason, he would have to forgo operating in my industry within a reasonable geography and time frame. He signed and went to work.

Less than two years later, I discovered that he was making plans to quit, and in fact had already started his own new company which would compete directly with my business. Worse, he was actually telling my customers about his new venture in an attempt to subvert sales to him. Not only was his future behavior going to violate the non-compete agreement, but his disloyalty is against the law in our state. Immediately after he was fired for this infidelity, he opened his competing business with a storefront location.

In the subsequent non-jury lawsuit I brought to enforce the non-compete agreement, the District Court judge, who just happened to be a woman, listened to the facts, reviewed the evidence and ruled in my favor. The defendant should cease and desist operating his business for the period and geography he originally agreed to. Alas, he continued operating his business, in defiance of the court order.

Within six months, we were able to bring the man before the judge again with the evidence of his continued violation of the agreement and the court order. But instead of throwing the book at the defendant, incredibly, the judge instead dismissed her earlier ruling against him. Her reason? She had since discovered that her daughter knew a member of the defendant’s extended family who, as a teenager, had been killed in an automobile accident a few years earlier. The judge went on to say that she now felt the family had been through enough and, essentially, she didn’t want to place any more hardship on them.

Thus, I came face-to-face with judicial empathy and found it violated a valid contract, disregarded testimony, facts and evidence and preempted the constitutional right of this American citizen to petition the court with an expectation of receiving blind justice. My brush with touchy-feely justice cost me a few thousand dollars in damages and legal fees. But if empathy as a basis for deciding cases at the Supreme Court level becomes reality, I fear it will undermine two of the cornerstones of our nation: the sanctity of a contract and the judicial system that for more than 200 years has been the model for the rest of the world.

Recently, on my small business radio program, The Small Business Advocate Show, I talked about my experience with judicial empathy. Take a few minutes to listen, and be sure to leave your own thoughts and experiences.

The evolution of small business dreams

Published
by
Jim Blasingame
on March 6, 2009
in Cashflow - Credit - Collections, Entrepreneurship, Finance - Accounting - Taxes, Government, Home-based business, Innovation - Creativity, Inspirational and Motivational, Just-In-Time Inventory, Lawsuits, Management Fundamentals, Marketing - Branding - Advertising, Online technologies, Sales - Sales Management, Start-up, State and Local, Trade Secrets, Uncategorized, Universal health care and e-Business
. 0 Comments

The British playwright, William Archer (1856-1924), once remarked to a friend about how a “perfect plot” had played out to him and “evolved” in a dream one night. He saw “the whole thing, from beginning to end,” and when he awoke, put pen to paper.

Small business owners know about this kind of dream. It begins with what I call the founding dream, which is the first time an unconscious entrepreneurial inclination pops upon our consciousness radar screen.

At first a founding dream may be barely perceptible. And when one is remembered for the first time upon waking, the awareness is often more troubling than remarkable: What does this mean? What do I do with this?

But if the mind and the spirit are receptive, a founding dream “evolves” into more than a blip on the radar. Subsequent dreams become less impressionistic and more real. Animated dreams come next. Your nocturnal entrepreneurial visions play out with an actual cast of characters - sometimes in Technicolor.

Now you’re well aware of, and more comfortable with, your small business dreams and you start to do a little day dreaming. Day dreaming is the first step in the due diligence process - the research. You start asking lots of questions: What if….? How do I…? Where does this…? Who can…? When should…?

Ultimately, as the answers to these questions are revealed and accumulate, you begin to make your entrepreneurial dream become reality; you actually start living the dream of owning your own business. At this point the start-up dreams will stop. Since you’re now living your dream, why dream about it, right?!

Your founding dream now has a name, address, phone number and a tax ID number. It has “evolved” into the “perfect plot” for your small business.

The power of small business trade secrets

Published
by
Jim Blasingame
on February 11, 2009
in Cashflow - Credit - Collections, Innovation - Creativity, Intellectual property, Legal and Trade Secrets
. 0 Comments

Forgive me, because I know you’ve heard me say this many times before, but we’re not in Kansas anymore, Toto. We’re in the 21st century, and things here are different. And nowhere is this truth more evident than in the world of intellectual property (IP). You know: patents, trademarks, service marks, licensing, copyrights and trade secrets.

One of the cool things about 21st century IP is how easy it is for small businesses to create and leverage it. Unfortunately, too many small business owners get the idea that they don’t own intellectual property because they don’t have a big brand trademark like Nike’s swoosh, or they don’t have patented inventions, like Research In Motion’s Blackberry. But that’s like thinking you can’t cook a delicious steak on the grill at home because you don’t own a restaurant.

The truth is small businesses - including yours - create intellectual property all the time, just not always the flashy kind. One of the best examples of small business IP is a trade secret. This is anything that you’ve developed or discovered that gives your business a competitive advantage. It could be a delivery system or an inventory management scheme. It could be as simple as a finely-tuned payroll-to-revenue ratio, or as elaborate as a customer relationship management program that you’ve created for the way you want to track sales development and customer service.

Either way, it was created by you, your business is leveraging it and, therefore, it’s an asset that belongs to you - which means you should recognize that it has value and should take the necessary steps to protect it.

Recently, I talked about how to value and protect your trade secrets on my small business radio program, The Small Business Advocate Show, with Brain Trust member and intellectual property attorney, David Dawsey. David’s firm is Gallagher and Dawsey, based in Columbus, Ohio. I think you will benefit by taking a few minutes to listen to what this expert has to say. And be sure to leave your thoughts on this topic.