2019: Case Studies on the “Best” and the “Worst” of this Year

Business Planning Case Studies from 2019

2019 was an interesting year filled with legal and financial challenges for many of my clients. Thankfully through my own expertise and through the expertise of the resources I keep close to me, I was able to offer viable solutions for their business and financial plans.

Here, I share with you 2019’s Top Seven Lessons:

  1. Client bought a business in an industry they were not familiar with. As part of their agreement they sought transition assistance from the persons selling the business. The agreement failed to specifically identify what the sellers were going to perform as far as “transition services” and to make matters worse the terms of the transition services were subject to multiple interpretations i.e. they were vague. LESSONS: 1. When purchasing a business hire an attorney that has proven experience buying and selling businesses (at least 15 businesses) 2. If an important part of your agreement is subject, on any level, to multiple interpretations, then it is not a good agreement.
  2. Client was a small brokerage company. They did not invest time or money in creating a sales force. They shied away from developing their team. They failed to implement systems of continual follow up with prospective clients. They failed to consider the benefits of incentive-based referral networks. They failed to educate their sales team. All of their marketing efforts centered around just one individual (the sign of ultimate doom for any business). As a result, over a year later, they are no better than they were in the first 3 months of their operations. LESSON: Investing in your team and in the people that can make your business grow is critical. Delegating tasks, investing in people is the root of growth for all businesses. Creating systems that allow you to create a sales force is one of the wisest investments for most any business.
  3. Client bought a business that contained an unusual non-solicitation clause. LESSON: Be very wary of agreements that try to get fancy or creative. Keep things simple and straightforward when it comes to contracts. The fancier and more creative the agreement, the more likely it is going to be the subject of litigation down the line.
  4. Client has a family-owned business (a corporation) where one of the shareholders/directors/officers, a family member, was embezzling and misappropriating hundreds of thousands of dollars from the business. Client felt stuck and felt their options were limited. While we were distracting the wrongdoing shareholder’s attorney with litigation we ended up legitimately ousting the wrongdoing shareholder from all management aspects of the business through the procedures set forth in Business Corporation Law. LESSON: In the right circumstances, there are ways to legitimately force a shareholder out of the business, especially when they have a proven record of wrongdoing and malfeasance.
  5. Client invested in a business but failed to review relevant books and records of the business. He trusted the advice of his co-investor and purchased shares in the business. As it turns out the seller of the business made blatantly false representations regarding the business including the fact that he didn’t even own all the shares of the business that he was selling. LESSON: Due diligence is critical for the purchase or investment in any business. It doesn’t have to be an overdone extensive process. It can simply be reviewing corporate books and records to confirm ownership, reviewing licensing documents to confirm compliance with state and federal regulations, and reviewing basic financial documents to confirm the financial standing and tax compliance standing of the business you are investing in.
  6. Client sought to invest in a real estate development business with multiple investors. The agreement had a “capital call” provision requiring the investors to put up additional money if the company needed it for any legitimate reason. The company ultimately sought an additional $1M investment from the investor group. LESSON: These types of provisions can have a significant impact on your business and should not be taken lightly. Hire a business attorney to assist whenever faced with such a provision. Thankfully, we were able to take the position that the capital call was not enforceable because (a) the managers of the LLC did not comply with the notice or voting requirements set forth in the operating agreement and (b) the capital call provision ultimately had no impact on my client because there would be no consequences to him if he failed to meet the additional capital call — this was the result of a poorly drafted operating agreement by a so-called high-priced big business law firm in NYC.
  7. Client sought to enhance their debt collection process and finds ways to minimize exposure. LESSON: the inclusion of three simple clauses in most any contract can be critical: 1. legal fees provision – so that you can collect legal fees if you are successful in any future litigation, 2. indemnification provision to ensure that you are protected from claims brought against you because of the actions of your counter-party, 3. limited liability provision to ensure that your liability will be as limited as possible should you breach the agreement.


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