If you are like many entrepreneurs, your business plan may focus on growth, marketing or product development – or sometimes just day-to-day survival. In the middle of all the noise, you may not have taken the time to step back and assess whether the legal foundation is in place to protect the long-term health and sustainability of your business. You are certainly in good company! In the same way you look out for your personal health by having an annual check-up, it's important to have a periodic legal check-up of your business. Unfortunately, as with physical check-ups, many of us put off having our legal condition examined.
Legal checkups are defensive in nature in that they identify risks, which, if not identified early, can lead to serious harm to the business. Business life has become more complicated with ever-expanding regulations. Unfortunately, because many business owners do not understand their legal obligations, they may continue for years violating important regulations. This can result in serious and sometimes fatal legal consequences. As with a medical checkup, a whole lot of grief can be avoided in the future if these legal risks are identified and addressed early.
In addition to minimizing risks, business checkups can also help you identify and exploit wonderful opportunities. Periodic legal check-ups should be part of any long term exit strategy. Owners are often not aware of legal tools that can create value and sustainability and make the business attractive to a future purchaser. A legal check-up can help you identify and protect valuable assets (such as intellectual property, contracts, non-competes, etc.) and ensure they are transferable to an eventual buyer.
Adding value by ensuring a healthy legal condition does not happen overnight. It is a process which takes time and continuous attention and planning. Ideally this process should start as early as possible in the company’s history. Approaching business growth as a process toward eventual acquisition can add substantial value, whether or not the company is actually sold. If there is an acquisition, this increased value will lead to a higher sale price and better payment terms. It’s often too late to start this process when a prospective buyer appears at the doorstep with a letter of intent. You should view the legal check-up as a worthwhile and even an enjoyable exercise. You may be surprised at the opportunities and hidden treasures you unearth.