Why start-ups avoid setting up legals

Why start-ups avoid setting up legals

It is all too common that setting up legals are a lower priority for new business owners.

So why should legals be a priority in start up phase? And why are they so often avoided?

This question was raised by members of a business mastermind in which I participate as a legal coach and mentor. A number of the business women in the mastermind commented that they did not know where to start with their legals.

I don’t believe people who launch businesses or are in the early stages of a business actively avoid legal responsibility. I think in most cases, it’s due to a lack of knowledge and focus on good business practice foundations. Start-ups often have a disproportionate focus on marketing and sales to build momentum. This often results in overwhelm. Commonly, business legals are tossed into the ‘too hard’ basket to be dealt with once they get their business rolling. The problem is that when momentum builds, there is even more things to do in managing the business.

If we looked at business legals as an important tool for a considered response to business relationships, they become an important asset to be implemented sooner rather than later.  

If you run into a problem with a client, no contract will save you if you don’t have a contract to begin with. Nor will it help if you do not understand the contract or your business completely.

Your legals are a platform for negotiation.

If you don’t have them in place, then you have no starting point to negotiate from. Having your own contract means that your terms provide a baseline to start from. Importantly, legals give you a framework for negotiation and compromise if things do go pear shaped.

Negotiation is a success quality in business and your contracts support your ability to negotiate effectively.

Legals are documents in your business that form agreements with those interacting with your business. In the context of your business, your legals are either a contract or policy.

The primary purpose of legals in your business, from your clients perspective is:

  • to educate them about your business and how to work with you.
  • they help your clients know of their rights and obligations in dealing with you when engaging your services.

The primary purpose of legals in your business for you is:

  • provide a blueprint and quality assurance tool that guides your business processes
  • define how you are conducting your business
  • ensure that you are operating in a legally compliant manner
  • assist you to navigate client expectations.

If you are providing a service as a business, regardless of whether it is for free or for a fee, you have legal obligations to your clients and your clients have protected rights under consumer law.

If/when a difficult situation arises with a client and you have rock solid policies to guide your response, that’s when you really LOVE your legals!

So where do you start with deciding what legals take priority?

At start up, the legals that take priority are agreements that cover you in the following circumstances:

  1. if you are providing one on one services or advice (for a fee, for free or contra)
  2. if you are selling a service or product via your website

When I interview or counsel a client about their legals, I look at their services and where money is changing hands or where advice is being provided.

This information determines what legals are required immediately.

Why?

Because this is the point where a customer will gain or lose from interacting with you.

This is where you need to have an agreement in place that educates the client about the terms of engagement with you and your business.

I invite you to download this checklist about Essential Business Legals. It is useful to determine which legals your business needs to protect both parties.

Feel free to discuss your concerns here, seek clarification or ask questions in the comments below so I may assist. Alternatively, take advantage of my free consultation service to see how I can help you navigate this important task of starting your business off on the right foot.

 

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