5 Reasons Why You Should Fire Your Banker!
I have a great banker! Her name is Laquita Cyprian and she’s with Capital One Bank.
I always recommend Laquita to my small business clients, because I know that she’ll do a great job for them and that they’ll remember that I recommended her.
If this sounds somewhat like an advertisement, it is! An unpaid advertisement, but an advertisement nonetheless.
Laquita helped me to fire my old bank and to make a great decision to take my business to Capital One Bank. That was about 8 months ago. If you can’t answer yes to each of the five questions below, then you too should strongly consider firing your current bank or banker.
(1) Can you dial an actual local number and reach a real person who knows your name?
(2) Do you receive invitations to bank-sponsored training and networking events to help grow your business?
(3) Do you have credit card processing or merchant services through your bank to help your cash flow?
(4) Do you have reasonable access to your branch’s conference room facilities?
(5) Is your bank a customer, client or source of referrals for your business?
If these sound like a lot to ask of your banker, your expectations may be too low.
As a small business owner or manager you can’t afford for your bank to be just a place that you take deposits and pay interest and fees. Your banker should be a member of your business’ professional team – like your Attorney and CPA. Their success is tied to your success and if they don’t get it, then they just don’t get it!
One the flip side, I make myself a valuable customer. I don’t abuse the access that I have with my banker. I also RSVP and attend networking functions when I’m invited, and I took advantage of the merchant services that my bank offered to improve our firm’s cash flow. Just this past weekend I used one of the branch conference rooms in Beaumont for a client meeting. Oh, and when my banker does a good job I let people know.
It works both ways, but as a small business owner or manager you should never settle for chronically subpar service from your banker or any other vendor. There are just too many other options out there.
My Experience On “Inside Edition”
I recently had the opportunity to speak for one of my clients on the nationally syndicated program Inside Edition. The folks from Inside Edition were quite cordial and the ultimate article, although somewhat slanted toward the opposing party was something I and my clients could live with.
Olaide Banks, the Owens family’s lawyer, says, “To be perfectly frank, the only ones who didn’t make any mistakes were my clients.”
As I mentioned in an earlier article, my clients were the victims of someone building a huge house on their land without their permission. And all that it would have taken to prevent the situation we’re in would have been a simple survey. It turns out the the Realtors who sold the land, showed the buyers my client’s land but had a contract to sell an adjacent parcel. The placed the sold sign on my clients land after the contract was signed, the bank approved the loan, and the builder started building.
The only problem is that nobody got a survey. A survey is the most basic requirement of each and every real estate transaction, because each piece of land is unique. Nobody got the survey. So when my clients get a call some 8 months later saying that someone built a 6,000 square foot house on their land they almost passed out.
Here we are 6 months later without a resolution and I end up on Inside Edition responding to this story about one of the opposing parties.
Here is what I learned from the experience:
(1) Think long and hard before approaching the media with stories about your clients. I never initiated any media attention – one of the opposing parties did – but the result has not been what they expected. It has become more difficult to reach a settlement.
(2) Know what you’re going to say before someone sticks a microphone in your face. I didn’t prepare a script for my clients or for myself, but it was important that I let my clients know what to expect from the encounter. It turned out to not be a “gotcha” kind of article, but that was certainly a possibility. Additionally, the producers were inclined to favor the opposing party because they were “building their dream home” and my clients had “bought the land for investment purposes”. Something that simple in the framing of the story can have a big impact.
(3) Be conscious of possible stereotypes. Being tall with a “sturdy build” I have to be conscious about how I’m perceived. Even if it is not my intent, if I raise my voice in certain situations people are more likely to become intimidated or feel threatened. Some people advise me that this is just the other person’s problem, but especially if I’m representing a client – if I create a negative perception or reinforce a negative stereotype then I’m doing my clients a disservice. I also advise my clients of this. Dress and speak appropriately, think before answering, and never lose your cool.
When To Sue?
I recently wrote an article on my blog called, “When To Strike Back”. The focus was on when to take an adversarial approach in responding to some business disputes. Filing a lawsuit is probably the most adversarial approach that one can take in response to a dispute.
My law partner Patrick likes to say that as attorneys we are like police officers in one way. We too have a badge and a gun. Our license to practice law is our badge, and our ability to file a lawsuit is our gun. Good police officers rarely draw their weapon in dealing with the public. In most cases, they announce themselves as police officers and they are able to resolve the situation without force.
Sometimes our clients come to us after being wronged by another party, and after they have tried their best to resolve the situation on their own. We typically introduce ourselves to the offending party with a terse letter outlining how our client has been wronged, and how we’d like that party to atone for their wrongdoing – usually by writing a check. On very rare occasions, the bad guys whimper in fear and ask, “how much and to whom.” But for the other 99% of the time the response is more like, “no way, your client is to blame and by the way talk to my lawyer.” Believe it or not, this is not the worst case scenario. The worst case scenario is when the opposing party refuses to respond.
When the opposing party responds with a letter from his attorney, this opens up the lines of communication for a proposed settlement or some other resolution that does not require a law suit. If the lines of communication are open, even if the progress is slight, we only need to file suit if the statute of limitations (deadline for filing the suit) is nearing. We can save the threat of filing the suit until a later time when we need to move the process along.
When the opposing party refuses to respond then we’re almost forced to file a suit to move the matter along. If they fail to the respond to the suit, we have the opportunity to win a default judgment and so there is usually a response.
Even if we file the suit and win, the question that remains is can we recover? In suits between individuals the emotional investment is so high that just winning the suit and having the court confirm what our client has been saying all along is reward enough. Our client has been vindicated and has achieved something along the lines of justice. But for business it is more often about the bottom line. If the opposing party will not have the means to pay the judgment the client may spend a year and thousands of dollars to win a suit and then… Nothing.
Responding To Government Investigations
If you or your company are under investigation by any branch of the government you should immediately hire an attorney.
Whether it is the District Attorney, EEOC, or IRS you should always hire an attorney early in the process – before making any statements or submitting any documents.
Many people erroneously believe that they don’t need an attorney if they didn’t do anything wrong. An equally wrong-minded view is that the business owner can tell their story better than an attorney, and may be able to talk their way out of the investigation. Both of these inaccurate beliefs often lead to additional time, money, loss of business and even jail time for many business people.
One important consideration is that most government investigations are not made public until the government believes that it has enough evidence to win a suit or gain a conviction. At that point, the business or individual is at a severe information disadvantage and is literally put on the defensive. In attempting to work in good faith and assist the government you may be further disadvantaging your position.
Your attorney can work with you to assess your situation, help you to level the playing and work with your insurance provider if necessary to pay for your defense.
For these reasons it is important to work with a qualified attorney to conduct a thorough risk assessment for your business, and help you ensure that those risks are properly covered.
Successful business people spend little or no time complaining about the need to obtain adequate insurance and hire attorneys, because they realize that these are important factors in operating a successful business. Instead, they focus on the peace of mind they have when they can focus on what they do best – run their business.
What to expect during mediation
Recently, I spent the whole day in Austin attending a mediation representing my clients – a family who have lived through the horror of having strangers build a huge house on their property without their permission.
There is no indication that the other parties intended to steal my client’s land, but between the realtors, the bank, the “homeowners” and the builder there is enough fault to go around. My clients are literally the only innocent party.
Many people don’t fully understand the difference between mediation, arbitration, and a trial. Here are the basic differences. Mediation is a formal structured negotiation with an impartial party – the mediator – who acts as a voice of reason and balance throughout the process. Mediation is not binding. This means that there doesn’t have to be an agreement coming out of mediation. If there is an agreement it can and should be binding on the parties, but they can’t be forced to come to an agreement. No one really “wins” in a mediation. Both sides come out feeling like they gave more than they probably should have, but that it was probably worth it to avoid the headache of a trial.
Arbitration is usually binding on the parties and there is usually a winner. The arbitrator acts like a judge, listening to the testimony of the parties and reviewing the evidence. She then makes a ruling, which is typically not appealable.
A trial is more formal and sometimes includes both a judge and a jury. There are more formal rules of evidence used and the outcome is binding and enforceable by law.
Mediation is most times the most cost effective dispute resolution method, but given the interactive nature of the proceeding between the parties there is a high likelihood that there could be inflamed emotions, especially when the parties are not all business people. Indeed, even when the parties are business people the tensions can still flare up.
Dispute resolution is like making sausage as they say. Sausage is pretty tasty, but if you see how it’s made you probably wouldn’t eat it. Clients don’t usually expect the process to be as drawn out as it turns out to be, and they expect more of a sense of “Justice”. Sometimes, despite the best efforts of all involved, that concept of “Justice” doesn’t always work out.
In a criminal matter, in most cases the “bad guys” get convicted and thrown in jail, and the victims and their families get to confront the villains to express their contempt. The judge also gives the convicted person a stern talking-to. It doesn’t work that way in mediation and indeed in most legal disputes.
In civil disputes the result is usually a monetary payoff, which typically does not measure-up, or adequately compensate for the time and emotional exertion involved.
I always try to help my clients create realistic expectations – especially for mediation. Defining the minimum acceptable outcome before entering the mediation can really change the entire outlook on the back end.
Divorce and The Family Business
I recently read an interesting article in Fortune Small Business (FSB) about a couple who started a successful carpet company and as they prepared for divorce they planned to remain business partners. It got me to thinking about my small business clients and how they might protect themselves, their interests, and their family.
Family businesses usually don’t start out with the same level of formality as other types of business, and so they are very susceptible to messy breakups. Whether the issue is siblings looking to move in a different direction, a parent-child relationship, or just a good old-fashioned divorce it is absolutely essential to put a plan in place before it is really “needed.”
The term “succession planning” is a pretty hot buzz word nowadays for small businesses, but it is really more than a buzz word. It is important to discuss your ideas with your business partners and get a professional to help you to put the plan in place.
Here is the Fortune Small Business article called Opposites Unite.
When To Strike Back!
This is one of the tough questions faced by business owners and managers of all sizes and stripes. Sometimes it is easier to play the role of peacemaker, take the high road and push for an agreement. At times that is the most prudent approach, sometimes it is not. Knowing the difference – now that takes some thought.
A client recently faced some very negative and false statements being made on a pretty active and well read blog. The first time it happened the client was upset, but the rhetoric and innuendo got progressively worse and the client became furious after the third time.
When it comes to the reputation of your business, your personal integrity, and personal attacks – in many occasions it is best to be on the offensive. Especially for professionals and new business people, your reputation is your most valuable asset. Waiting and “playing nice” typically does nothing to help, because most outside observers rightly or wrongly expect that an innocent person would fight fervently to protect their reputation.
When it comes to disputes involving longstanding business relationships a more reserved and less in-your-face approach may be more appropriate.
Many business disputes arise from misunderstandings between low level employees who don’t have the authority, or the big picture view of the situation, to solve the problem. Sometimes, all that is necessary is a conversation between senior leaders in the companies who have a knowledge of the history of the relationship.
Make sure that your attorney has an appreciation for the difference. Some attorneys are great at dealmaking, and some are there to make sure that you don’t get steamrolled and when a deal goes bad. Each role has its merit. For large companies with in-house counsel, the in-house counsel may be adept at identifying which role is necessary and help the company to select the right outside counsel for the job. If you are an entrepreneur, or small business owner, you should have an open relationship with your “go-to” attorney and they should be able to advise you on the approach that would be most appropriate under the circumstances. They should help you to identify any specialized legal counsel that may be needed for your situation.
Choosing The Right Entity
One of the questions I often get is, “What do I need to do to setup an LLC?” To me this question usually means one of two things: (1) This person has really done their research, or (2) This person has really not put a lot of thought into this.
There are quite a few websites now that will charge a moderately low fee and register an entity with the Secretary of State and even provide a nice shiny leather package and seal. The major problem as I see it is that the buyers don’t know exactly what they’re signing up for, and whether it meets their needs.
When selecting an entity for a small to medium sized business, the major considerations are: limiting personal liability, minimizing the tax burden, providing a mechanism to raise and protect capital, and having an entity form that can accommodate the potential investors/equity holders.
The most basic entity form is the sole proprietorship. The major pro is that it is easy to setup. You literally don’t have to do anything. Sole proprietorships are disregarded entities so there is not the possibility of “double taxation”. One of the clear downsides to a sole proprietorship is that there is no limit on personal liability. So-called “C Corporations” are best at accommodating large numbers of diverse investors and are thus designed for raising large amounts of capital from various sources, but a major drawback is the “double taxation.” S Corporations can do many of the things that C Corporations can do, and they avoid double taxation. But S Corporations can’t have non-resident aliens as shareholders. There are also limits on the total number of shareholders allowed with S Corporations. Partnership entities designed to minimize the potential tax burden, and maximize limitations on personal liabilities have been complicated and unwieldy, and although we still see some LLPs and LPs they are not many people’s first choice to balance out the benefits described above.
So that brings us to the LLC. The LLC if structured properly, and if the members follow the rules, can provide limited liability, avoid double taxation, and can be an effective vehicle for raising capital when there are a small to moderate amount of equity investors.
For a closely held business, with similarly situated investors, who are not planning to take their business public – I’d take a close look at the LLC. But it wouldn’t be the only one I’d look at.
Negotiating in Politically Charged Environments
I recently spoke with a client I had helped in the past, and they told me about a public relations fiasco they recently encountered in a transaction negotiation with a governmental entity.
Basically, incomplete and negative information on the discussions was leaked to an unfriendly, but influential shaper of public opinion and from that time on, they have spent more time responding to negative press than actually getting the deal done.
More deals die on the vine because of situations like this than you might imagine – especially in small towns, international transactions or in highly charged political environments.
As a business leader you have to be realistic and honest with yourself about the polictical landscape and the impact of your deal on that landscape. It is important to know the players and influencers in the community – not necessarily from the standpoint of trying to schmooze or curry their favor, but in order to formulate your strategy. It is also important to have someone in the community as part of your team – your inner circle for the deal. Although this is counterintuitive, I wouldn’t seek out a political player as my local person for my inner circle. Beyond your basic distrust politicians, I think you’ll find that politicians are politicians and are just not that good at keeping things confidential and low key.
When I say politicans I don’t mean elected officials. For obvious reasons, elected officials should always be off limits for your inner circle. First, whether or not something illicit or illegal is going on – it just looks bad when elected officials are on the inside of transactions in their community.
At the risk of coming across as self serving, if possible I would always make my local person a lawyer. Make sure the lawyer is not a political player or someone with obvious political ambitions. The local lawyer will most likely have a greater appreciation of the need for confidentiality, and if he or she is a no nonsense business person they’ll understand that the success of your project directly benefits their professional future.
The local lawyer would not be my “lawyer” for the transaction. I’d have my own lawyer that I trust and use on every transaction also a part of the deal.
These are just a few of the considerations that you’ll have and will be part of your risk management plan for the transaction.
5 Essential Negotiating Tips
Click here to watch the video!
(1) Be organized,
(2) Know your strengths,
(3) Know your weaknesses,
(4) Know what’s important, and
(5) Hold your ground.
If you’re a small business owner or employee charged with negotiating your company’s contracts or subcontract agreements these may indeed be frightening times. With the economy apparently in an indefinite downturn you may feel that you have even less negotiating power than you had in the past. Each new contract could be the one that makes the difference between meeting the payroll and closing up shop.
I suggest to you that you have more power than you think!
Most large corporations, local government and federal government entities include a small business subcontracting requirement in all contracts for new work. A large business that fails to make a good faith effort to utilize qualified small business can find themselves in big trouble.
Your success is based on the old Boy Scouts’ motto “be prepared.” Below are 5 steps to get you there:
(1) Be organized. Before you pick up the phone to call, or sit across the table from the large business representative or the government representative you need to know the players, what’s at stake for each of the parties and why this work is important.
(2) Know your strengths. You have to know what your company does best and what you bring to the table. If you’re not confident in your strengths you’ll be at a weakened negotiating position. There is a reason you’re there in the first place. Know what that is.
(3) Know your weaknesses. You don’t need to be all things to all people. Focus on what your company does best and don’t try play up or downplay your weaknesses. Acknowledge them to yourself and to those around the table if necessary, but don’t belabor them.
(4) Know what’s important. Some things are more important than others in negotiating an agreement. For example, a draft subcontracting agreement may include some restraint on your firm’s ability to seek work from the ultimate client for some time in the future. Something this simple could hamstring your company’s options in the future. Jurisdiction, choice of law, and choice of venue provisions could also put your company in a deep hole – having to defend a suit or dispute in a far off state, based on unknown law. These are just a couple examples, but you need to know what’s important to you.
(5) Hold your ground. You’ve got to be willing to stand your ground on what’s important to you. Be willing to compromise of things that are less important to be able to hold out on the things that are more important. If you’re prepared you’ll know the difference. And by all means, never sign an agreement without having the opportunity to take it away and review it.
If you remember these five basic tips your negotiations will go much more smoothly.
