Category: Chapter 7: First, Let’s Kill All the Lawyers

Dick Butcher makes the famous comment captured in this chapter title in Henry VI, and it’s almost always misconstrued. Shakespeare was saying that we need them to keep us honest and killing them is like killing the messenger. (Of course, that was half a millennium ago.)

My point is that companies have legal departments for good reason, both preventive (keep us out of trouble) and contingent (get us out of trouble). With those charters, most legal departments are fiercely conservative, to the point that they wouldn’t even advise opening the doors if that could be avoided. After all, if you allow customers in, bad things can happen that are impossible if they’re not here at all.

Thus, lawyers are not exactly the apple of legal pursuits. 

When you must deal with the legal department, do so with caution but also in harmony. The worst thing that can happen is a dozen attorneys, paid to be conservative and without much else to do, will focus solely on you and your project. Like the Internal Revenue Service and an audit, once they take you on they will spend $50,000 to recover $5,000, because they must justify their efforts somehow. So don’t thumb your nose at them.

The worst part isn’t so much fee changes, because it’s someone else’s budget. They’re much more concerned about protection and contingencies, and those deliberations and negotiations can last months—often more months than your buyer is willing to wait, or more months than the issue will stay alive, or more months than you have available to feed your family.

There are several occasions where you’ll be told the legal department must be involved: 

• It is a rigid company policy.
• All vendors’ proposals must be vetted.
• The buyer is uneasy signing the proposal without support.
• Your proposal is in legal terms.
• There are exceptions to corporate policy being requested.

I think you know where I’m going with this: Where you can avoid it, do so. Don’t couch your proposal in legal terms (“third parties shall hold harmless”) and get rid of the “boilerplate.” We’ll talk more about that in the next section. Let’s focus here on when you really can’t avoid it. 

Ask your buyer what causes the attorneys to react poorly, or what they may require that’s missing. Find out if there are examples of proposals successfully  submitted and approved without delay. (Don’t forget, you’re about to write the proposal and already have conceptual agreement.) 

Ask if there is a specific lawyer who will receive the proposal and whether it makes sense to give that person a call. If so, ask directly what you can do to make the job easier and to comply ahead of time. Talk through anything out of the ordinary (you don’t have a separate contract, simply the proposal, for example). Note anything extra required: proof of your errors and omission insurance, proof of in corporation, possession of liability insurance, proof that you are a business within your country, nondisclosure forms, and so forth. Assemble these and provide them with the proposal to prevent delays.

Exchange personal contact information so that questions not involving internal issues can bypass the buyer and go directly to you, greatly reducing the time involved. Find out if the lawyer is working on a wide variety of cases and, if so, what your priority is. (I found out once that the attorney was leaving for a two-week vacation the next day and if the file wasn’t forwarded that day for reassignment, it would sit on her desk for the two weeks she was away and the additional week it would take her to sort things out post-return!) 

In a smaller firm, there may be a single general counsel and if the buyer is the owner there may be little needed other than a request to “make this happen.” But in larger firms, there are scores of attorneys, not all expert in these kinds of consulting projects, many of whom may treat you and the proposal and just another vendor contract as if you’re paving the parking lot or selling pencils. 

The most serious problem, however, may be the fee basis. Lawyers are notoriously time-based, so they may insist on seeing your hourly rates. Don’t comply with this. The point is that the buyer, whose budget is involved, is the one who is deciding about the investment and consequent value, and that’s not within the purview of the legal department. (Ironically, it’s usually HR people demanding hourly rates with the ferocity of a piranha, which is why you should stay out of that river.) 

Prepare your buyers for this, because you can compromise on that one. If they “back your fee” into hours they estimate, it will come out as $2,500 an hour or some absurd number, which will cause the entire machine to read “tilt.” They will not understand hourly based billing, but fortunately, that’s not a burden anyone should place on them. 

Prepare your buyer about that contingency. 

Those are the best practices for dealing with the legal empire. The primary  problem in delay, and that can be fatal—you don’t have a signed agreement yet. It’s far better to avoid this particular obstacle course, and fortunately you can do that if you’re careful and agile. Toward that end, not that you’ve seen what may await you, I’ve assembled the following preventive actions. 

The ideal that you must have come to realize at this point is to avoid the legal beagles. Fortunately, there are steps that you can take and that have been effective for me about 98 percent of the time over 30 years. In fact, the only time I’ve been unsuccessful in avoiding the lawyers is when there is a tough corporate policy demanding it, and even then I’ve sometimes evaded the seemingly inevitable (see the case study earlier about the buyer who could write checks but not sign agreements). 

The avoidance part is in your hands, and here are the basics: 

1. Don’t use your lawyer. 

In the next segment we will discuss when to consult with your own attorney but never start from that corner. If you use your attorney he or she will naturally be as conservative in your favor as the client’s legal force would be on its turf, and you’ll wind up with a transmogrified proposal that looks like a declaration of war on Lichtenstein. Your lawyers will be trying to protect you. Let me assure you that’s not what will happen. They will sink the agreement just as assuredly as if you took a torpedo amidship. So don’t make that call at the start. 

2. Avoid “boilerplate.” 

I provide proposal examples online as part of this book’s Appendix. These are meant to give you examples of the approach, just as the details earlier in the book have. They are templates. But you’ll notice that they contain no legal phrases, perse. Nowhere does it say “third parties shall hold harm- less” or “any disputes will be settled by courts in the state of North Dakota.” Once you insert this stuff you might as well have placed a salami in your suitcase amid all those sniffing beagles at customs when you return from overseas. You’re toast. (Well, you can’t bring toast in, either, as I think about it.)

3. Make the proposal a continuation of the conversation. 

The proposal, as we’ve established, is a summation, not an exploration or a negotiation. Keep your language conversational. You can see in my examples phrases such as “You will be accountable for . . .” and “I will be ac- countable for. . . .” It doesn’t say “Accountabilities established and agreed, the violation of which constitute rupturing the terms herein. . . .” If you write in the same manner as you’ve spoken, there shouldn’t be any tropism toward the legal library.

4. Forewarn your buyer. 

After achieving conceptual agreement but before leaving the buyer’s office, discuss the legal implications in this manner: 

I’ve found that we can begin rapidly if you and I can do so on a handshake, but occasionally the legal department becomes involved. Is there a way we can avoid what is inevitably a significant delay? 

The buyer might set you straight and say, “Oh, I work with legal all the time and if I say I need something back in 24 hours, I get it.” That’s great, then ask, “Is there anything that we’ve discussed to this point that might give them cause for pause, or any standard issues they tend to look askance at?”¹ Put a plan together that will try to avoid the legal quagmire, or at least expedite a path through it if it comes to that.

1. Don’t include penalties. 

I’ve always detested penalty clauses because they are inconsistent with a solid, trusting buyer relationship. They typically stipulate that interest will be added if fees are late beyond a certain point, or that extensions in the timing caused by the client’s scheduling problems may result in additional fees. Once you insert these kinds of caveats, the buyer has little choice but to solicit a legal opinion. After all, it’s the buyer’s signature going on the document, and it’s one thing to commit one’s budget but another to commit the company to possible expenditures that can’t be rationally avoided. (The buyer can’t absolutely control accounts payable or some other department’s cooperation in most cases.) Besides, if this is a trusting relationship, then you should trust the buyer to meet commitments without threats. 

2. Provide reasonable assurances. 

You have some strong leverage in the proposal in your favor, most particularly the terms of payment, which are minimally 50 percent on acceptance and might be 100 percent on acceptance minus a 10 percent discount. (Remember that some firms’ rules call for the automatic acceptance of discounts.) With that kind of money being paid—probably unprecedented with prior consultants unless they’ve read my work—the client will rest better with some “protection” or quid pro quo. That’s why I recommend statements in the proposal such as: 

We guarantee the quality of our work and performance of the accountabilities listed above. If that quality is deemed insufficient, or accountabilities are not met, and we cannot correct the deficiency within a reasonable time period, we will refund all fees paid. 

That may seem too open an interpretation to you, but it’s only an option for the buyer, it’s already based on a trusting relationship, and you’re not guaranteeing results (which would be unethical) but rather your standard of performance. This gives the buyer something to rely on in exchange for rather aggressive fees and terms. (I’ve had one client in 30 years, early in my career, ask for and get his fee back, because I over promised and dealt with people whom I mistakenly thought would be committed to the work. My fault. Like being hanged in the morning, this marvelously focuses your attention.) 

3. Be prepared to deal with issues about you. 

I’ve actually been asked on rare occasion, “What happens if you die?”! (I’ve usually responded, “I don’t know, but I do believe in heaven.”) A buyer will sometimes raise an issue about a solo practice that wouldn’t be asked of McKinsey & Co. Don’t stammer and waver. You don’t want the buyer to get a legal opinion. Mention that you’re in great health, there are others who may cover for you as you would for them (the real issue is sickness and disability, not death), and that in the worst case you hold the client funds in escrow and they are easily accessed and re- turned. You may note the longevity of your company and the types of clients with whom you’ve dealt. You want this to be a casual conversation, not nine paragraphs of legal literature. 

Now, what happens if, despite it all, you need to consult with your own lawyer?

There are attorneys and there are attorneys. I’ll tell you right now who you do not want:

• Any family member.
• Anyone who’s giving you a “break.”
• Anyone who is just starting out.
• Anyone whose expertise is not in professional services and contract law.

That’s probably insufficient. I was speaking to a group of consultants and one actually proclaimed, “My husband is an attorney, and he’s assured me that I do not need to incorporate or carry malpractice insurance, both are wastes of money. What do you say to that?” 

What I said was to get a new attorney and a new husband, but I doubt that she did either. 

So the first thing I need to make absolutely clear is that the attorney who closed on your house for you, or did the title search, or wrote your wills, or represented you in an auto accident, is probably not the right person for this. His or her firm may be appropriate, if they have multiple attorneys in different practices, and it’s always good to stay in one place if you can. But I have attorneys for contract, trademark, estate planning, and litigation—all different people in two different firms.

Ideally, your attorney should be adept at both contract work and the working of personal services firms. Thus, a seasoned attorney who has a private practice with one or two others and specializes in this area would be ideal, but they are hard to find because, by definition, they can’t specialize to that degree as independents and still make money (just as with consultants). 

The time to consult your qualified attorney specifically about the proposal process is at these junctures: 

• If you do not use my kind of template, but invent your own format and wording, you should pass it by your lawyer not to have it rewritten in legal terms but to ensure that you haven’t inadvertently shot yourself in the foot. Remember that you don’t have to accept all the attorney’s suggestions, but you should responsibly be aware of any potential risks the attorney unearths. You may have accidentally implied that your proposal can be applied to other areas at no extra cost, for example.

• When the client comes back to you with legal questions or the client’s own attorneys’ wording in lieu of your own in the proposal or on a separate document. This is particularly important in terms of non disclosure and/or non compete clauses.

A nondisclosure agreement merely demands that you will not reveal proprietary client information to anyone else. It’s reasonable and many clients request it, though the wording can vary widely. These are usually mandatory when requested, but innocuous. 

A non compete is far different. These agreements request that you refuse to work with organizations similar to the client—most likely, competitors—for varying periods of time. When you are asked to conform to this request, you should charge more in your proposal at every option level, because the client is removing a portion of your market for which you deserve compensation. Here you must ascertain the time frame, exactly which firms would be included (nothing vague, such as “anyone deemed to be a competitor”), and which of your services. You might charge a premium, for example, of $25,000 not to work with two competitors with a certain offering for a year, or $250,000 to never work with them in any area.

You’ll need your attorney’s advice to make any adjustments in the agreement, because the client’s lawyers will have structured this to their maximum benefit and to your maximum detriment. And this is something that your buyer really can’t help with. 

Another critical area is “work product.” Generally, you take out the intellectual property that you arrived with, the client keeps what was theirs to begin with, and you jointly own what was created during the project. However, the client will often demand that all “work product” created during the engagement be strictly theirs (so that it can’t be used with competitors, a version of a non compete), and may even try to insist that they own your original intellectual property to apply as they wish. This last provision would effectively make your client a competitor, if they offered, say, your strategy approach to a third party.

This is why you need a careful legal review and opinion on such matters. I’ve seen consultants essentially “frozen” out of a vibrant market and/or surrendered their intellectual property for what they thought was a nice project but which in actuality ruined them. 

As a rule of thumb, whenever your client returns an amended or additional document to you with words not your own, run it by your attorney. You aren’t compelled to follow the advice, but you should know all your options. I noted earlier that the 32 pages from the Federal Reserve attorneys didn’t really change anything, but that’s a rarity. Most of the time they are stacking the deck for the home team. 

You’ll also want to be sure that you’re not getting into unnecessary arguments. When Hewlett-Packard, for example, requests a copy of in-force errors and omissions insurance, that’s reasonable and you should simply comply. But when some other firms request that you make changes to your liability insurance coverage for the duration of your work with them, that’s both unreasonable and unnecessary and you should know that you don’t have to comply. In many cases, a legal department will try to obtain an advantage, knowing they won’t press the issue if there is resistance, but there’s nothing to lose in trying. 

Therefore: Consult your attorney once with your proposal template just to make sure there are no glaring problems, but don’t feel obligated to follow all of the ad- vice. Consult your attorney whenever you receive a legal form, advisory, or request from the client’s attorneys, even if it’s by way of your buyer. Then you make the decision about what’s reasonable and not (our next segment deals with compromise). Make sure that your attorney understands your type of business and your type of firm. 

But be master of your own fate. Attorneys aren’t adept in the consulting profession. In fact, almost all of them are still charging by the hour. 

Compromise is something you can live with, not something you would die for. 

There are times when irresistible forces meet immovable objects. When something “gives” in such circumstances, it usually means someone has won and someone else has lost. Not good in terms of acquiring clients! 

Thus, I suggest that you prepare yourself for the negotiable and nonnegotiable. And for that we need a brief digression. 

You and the client each have objectives for a project, some of which are mutual and some of which are partisan. That’s all fine and well. You both want the project objectives to be met and successful, for example, but you might want to be paid in advance and the buyer might want to pay you at the conclusion. You’re both merely looking out for what you perceive as your own best interests. 

Such personal objectives fall into two categories: must and want. 

A “must” has these characteristics: 

• Mandatory for your success.
• Measurable, so you know it when you see it (or don’t see it).
• Reasonable, in that you’re not asking for the moon.

A “want” is a desirable outcome or expectation that, while appealing, isn’t crucial to your success and without which having obtained success is still possible and reasonable. 

In negotiating, you never want to compromise on a “must,” which is why they are usually few and far between, but vital nonetheless. You can sacrifice “wants” but usually with some commensurate sacrifice or concession on the other party’s part. These dynamics are obtained in conflict resolution, persuasion, negotiation, and so forth. And that’s why they’re important here.

One “must” that you never negotiate is your fee. Don’t forget—we’ve established that the proposal is not a negotiating document or opportunity. So when is it appropriate to change fees, when you meet stiff resistance?

Glossary 

Objective: A result desired, either an improved condition and/or a minimized use of resources. Achieving the most possible with limited use of scarce resources is a highly desirable condition for objectives.

Must: An objective that is crucial for your success, without which you will have failed.

Want: A desire that you hope to achieve, but which you can fail to achieve but still be successful in the larger framework.

• The client simply chooses a lesser option. Option 3 may be attractive, but if there is simply no budget, well, that’s why we have an Option 2.

• The client makes quid pro quo concessions. That is, you remove value to justify the lowering of a fee. This may mean that you don’t include the international people or don’t provide quarterly visits, and so on. (Most buyers love to try to reduce fees, but detest losing value, so this technique is highly effective.)

• There is an alternative offer of value to you. The client offers introductions to a trade association, which is chock-full of your prospects, or offers to film an event for free, or offers bartered services that are attractive (don’t forget that these are taxable).

So, to preserve fee integrity, never lower your fee on any option without one of the conditions above prevailing. 

What you can negotiate and compromise on are your terms. That’s why I recommend such maximally attractive terms for you at the outset: 50 percent in advance and 50 percent in 45 days, no matter what the duration of the project or its size. The client (and the attorneys) may react poorly to that, or they may have some problem with the overall fee and you can use this to mollify them.

You can always “retreat” to 25 percent on acceptance (that’s not “commencement” but “acceptance”), 25 percent in 45 days and 25 percent in 90 days (assuming it’s more than a three-month project). I would advise to never accept less than a 25 percent down payment, and never accept monthly payments (excluding retainers, and even there you should be paid quarterly at the beginning of the quarter). Never, ever agree to payment “upon completion.” You’ll find in those circumstances that things are never complete, and if your buyer changes or conditions change substantially, you’ll never collect that final payment.

Keep your payments maximized toward the front end, starting heavily in your favor so that compromise is still quite good for you. 

Be careful about compromise on timing. You don’t want to have the project “hanging out there” and suddenly being requested when you’re committed to three others. So explain when you’re ready to begin under “timing” and when the client agrees to go forward to solidify the calendar start dates. 

Feel free to compromise on the small stuff. You may have anticipated 20 people in certain groups, for instance, but if the client wants 30 don’t look at it as a 50 per- cent increase, because you’re billing based on value, not head count. If the client requests the following, be big about it:

• Extra debriefing days.
• Larger class enrollment.
• Additional copies of materials.
• Discussions with key subordinates or superiors.
• Your presence at certain internal meetings.

But don’t agree to the following: 

• Additional work beyond the proposal (“scope creep”). 

• Transfer of your intellectual property without compensation (e.g., in licensed form). 

• Running more events (focus groups, meetings, and so on) than you deem are necessary for quality and communication.

• Presence at irrelevant gatherings (customer social events, unnecessary meals).

If you’re prepared for what’s in the realm of compromise and what isn’t, you won’t be caught suddenly saying “Of course” in response to a request that’s going to seriously cost you. Never default to the position that if you don’t do something you’ll lose the project. There are worse things.

Like losing your shirt. 

The transactions discussed here are based on a strong and trusting relationship, so it’s safe to make some assumptions based on the sequence shown in Figure 7.1. 

FIGURE 7.1 A simple business sequence 

Shared values about business (e.g., whether downsizing is proper, the role of outsourcing, honesty with investors) can lead to trusting relationships. On that basis, conceptual agreement about objectives, measures, and value is possible, after which a proposal with options can be submitted with high probabilities of acceptance. Once a project is implemented, the results serve to reinforce the original relationship.

Succeeding steps are built on original trust and the increased trust that ensues from working together as partners and peers. This is why I emphasize here (and in all of my work) that positioning yourself as a peer, partner, and trusted advisor is so critical to success. Once your own demeanor, response, insecurity, language, and other factors place you in a subordinated position, as they say in Vegas at the craps tables, “all bets are off.”

With that basis established, the “golden handshake” is the potential to begin a client based on the buyer’s word and nothing more. That handshake may be physical, but it’s just as likely to be by phone or even e-mail. I talked earlier about “pouring cement on the sale,” meaning to show up as soon as possible after the proposal is accepted to demonstrate work has begun, and/or to do so even earlier. This is the result of the golden handshake. 

When you have a trusting relationship and the buyer says something like, “It will take me a week to sign and return your proposal and generate a check, but there’s an ideal opportunity this week to meet with my entire team in one place, can you do that?” it’s time to spring into action. That’s a highly responsive, reactive action that will help to “guarantee” the buyer’s acceptance—you’ll be on-site, visible, involved, representing your partner, and so forth. It’s not impossible, but highly unlikely you’ll be told that you can’t go forward after that debut performance. 

However, there are also proactive means to enforce the handshake. The buyer may say, “We’re a ‘go,’ I just have to physically sign the documents when I return from London next week, but I wanted to alert you that we’re accepting Option 2 and want you to put aside the time.” 

To which you should respond, “That’s wonderful, why don’t I begin some of the initial interviews now to hit the ground running? May I call your assistant and obtain some of the contact information, and let’s you and I schedule a meeting for the day after you return.” 

In this case, you’re suggesting the opening act, which is hard to say no to because it’s basically noninvasive. Note the options. The buyer could say, “I need to talk to my people first, so hold off on the interviews, but let’s schedule that day together.” Or conversely, “I’ll be submerged for a few days, but do start the inter- views and let’s schedule the meeting for a week later, when I can also give you the signed proposal and check.” The more options you provide to begin, the more likely the handshake will be accepted.

In all of my experience, I’ve never had a contract reneged on or even changed once the buyer and I have agreed to initial actions even before the proposal is signed and a check generated. That’s why I call this “golden.” Pragmatically, you need to show up and begin. 

Not only haven’t I ever lost such work, but I’ve “saved” the contracts when intervening elements would have undone them. Natural disasters, deaths, terminations, competitive moves, market plunges, and other uncontrollable events would have at the least forestalled several of my contracts if I hadn’t shown up and begun work. 

You can’t beat being present. This can taper off as your project moves forward and your labor intensity declines as planned, but it helps to be there early and often if you can, prior to the formalization of the contract. The longer you wait for any- thing, the more bad things can happen.

I’ve tried to illustrate in this chapter that it’s wise to try to avoid the legal department altogether. That means not provoking the legal hornet’s nest by poking it with your own lawyers and/or legalese. Once it becomes inevitable, work with them or your buyer to minimize concerns and conservative frenzy. Under certain conditions, do consult your own attorney, but ensure that the resource you use is well versed in your type of business and concerns. 

You’ll have to compromise at times, but if you are clear about and prepared to protect your individual “musts” and trade away “wants” (maintain the fee, change the terms slightly if you need to) you’ll still have a great project and the client will feel that you’ve met halfway—even if it’s really your side of the field. 

Let’s move now to a not uncommon but nonetheless dreadful aspect of proposals—when they’re actually requested, which can be the worst thing in the world for your business interests.  

Notes 

1. These principles work well with procurement and accounts payable, as well. For example, with this question, the buyer might point out that payments cannot be made in two different fiscal years, and you’ll want to know that at this point.

2. Which leads to more business and referral business, the “second sale” made at the time of the first sale. For a detailed explanation, see my book Million Dollar Referrals from McGraw-Hill (2011).