Lawyers don't think that way. They're trained to focus on protecting their clients. Businesspeople focus on achieving their goals. Lawyers think their primary duty is to make sure clients aren't exposed to potential liabilities. Businesspeople know that you sometimes have to be exposed to potential liabilities or you won't get anywhere. Yes, you want to minimize the risks, but you can't eliminate them altogether. You need to train yourself to weigh them carefully against the anticipated rewards and learn how to think several steps ahead, knowing that you won't always be right.
That said, I can't lay all the blame on Polly's lawyer. Part of the fault was hers. She'd gone to him asking for advice when she should have been asking for information. She should have inquired about the potential consequences of following this or that course of action, with the understanding that she would then make up her own mind about what to do. Like many first-time entrepreneurs, she wasn't yet ready to take responsibility for her decisions. Once you really, truly understand and accept that responsibility, you become very selective about whom you go to for advice--and you don't go to people whose main concern is to keep you from taking risks.
I listened to her story and said, "I usually don't give advice, but I'm going to make an exception in this case. Lawyers are not businesspeople. The advice your lawyer gave you is the worst I've ever heard. You absolutely should not do the lease first. You should do the investment document first. If you don't, I can guarantee you that this deal will never happen."
I listened to her story and said, "The advice your lawyer gave you is the worst I've ever heard."
Polly was taken aback. "Listen," I said. "You're telling me that your biggest potential investor is a guy who negotiates to the nth degree." She nodded. "You also tell me the landlord is a guy who likes to make things simple and get things done." She agreed. I said, "Well, look at this from a businessperson's perspective. You're going to negotiate the lease and get ready to sign it. Then what are you going to do?"
"I'm going to work on the investment agreement and take it to the guys to sign and give me the money," she said.
"You're going to take it to someone who negotiates to the nth degree and expect him to give you the money right away?" I asked.
"No, that will never happen," she said.
"Right, never happen," I said. "He'll want to make changes. I know that I would if I were the main investor. So is your landlord willing to wait 30, 60, 90 days while you get the money?"
"Never," she said.
"Right," I said. "He'll say, 'Come back when you have the money.' Even if you get it pretty quickly, you've planted a seed of doubt in his mind. You said you had it, and then you didn't have it. He has to wonder about whether he can trust you to keep paying him for the next 10 years. You've lost credibility. Do you get the picture?"
"I'm beginning to."
"Your attorney shouldn't be giving you business advice," I said. "It's nice that he doesn't want to waste your money, but he's going to kill the deal in the process because he's not looking at the whole picture and he's not taking into account the character of the people involved. If it were my business, I'd have already done the investment agreement and told the investors, 'Let's sign this, and I'll put the money in escrow pending your approval of the lease. It will be there accruing interest for you in case things don't work out.' Then you could tell the landlord, 'By the way, I have a million dollars in the bank, subject to the lease being approved. You don't have to worry about getting paid.' A big difference, right?"
"Yes," she said. "I hadn't thought of that."
"What are the investors going to get for their investment anyway?" I asked.
"We haven't discussed it yet," she said.
Then I really knew she'd gotten bad advice. If you've ever tried to raise money, you know there's a huge difference between a verbal and a written commitment to invest. There's an even bigger difference between a written commitment and the actual transfer of funds. At the last minute, people come up with all kinds of excuses as to why they can't come through with the money they've promised. "I didn't know you wanted it so soon." "I just had a big margin call." "My wife won't let me do it." Getting the capital was the biggest hurdle Polly faced. It was pointless to spend time working on a lease until the investors demonstrated their commitment by putting money in an escrow account. Once they did, moreover, Polly would have other options even if she wound up being unable to get acceptable terms on the space she liked. She could always come back to the investors and say, "This deal fell through, but I have another possibility if you're still interested--subject to your approval, naturally."
Lawyers don't think that way. They're trained to focus on protecting their clients. Businesspeople focus on achieving their goals. Lawyers think their primary duty is to make sure clients aren't exposed to potential liabilities. Businesspeople know that you sometimes have to be exposed to potential liabilities or you won't get anywhere. Yes, you want to minimize the risks, but you can't eliminate them altogether. You need to train yourself to weigh them carefully against the anticipated rewards and learn how to think several steps ahead, knowing that you won't always be right.
That said, I can't lay all the blame on Polly's lawyer. Part of the fault was hers. She'd gone to him asking for advice when she should have been asking for information. She should have inquired about the potential consequences of following this or that course of action, with the understanding that she would then make up her own mind about what to do. Like many first-time entrepreneurs, she wasn't yet ready to take responsibility for her decisions. Once you really, truly understand and accept that responsibility, you become very selective about whom you go to for advice--and you don't go to people whose main concern is to keep you from taking risks.
