Lawyers often talk about how entrepreneurs should make their companies "investor ready". This uses the term "investor" in the widest sense, meaning everything from a bank loan, to a VC investment, to the sale of the business to Google that allows the owner to retire early in luxury. By "ready" we mean being able to easily survive investor diligence without risk of losing the deal or diminishing the value – by having taken all the right steps and having the right documentation for such things as an up to date corporate minute book, trade-marks for brands, documenting IP ownership, proper employment agreements, privacy policies, etc.
Our harping on this sometimes falls on deaf ears. Perhaps the owner needs to focus on its product and sales (being investor ready after all means nothing if there is nothing to invest in), or doesn't want to spend money on lawyers, or thinks it is important but not urgent.
I was one of three speakers last night talking about intellectual property issues at the TechAlliance Entrepreneur 1.0 course. All 3 of us mentioned this.
The best perspective came from Colin Macaulay – Director, Research and Development of Viron Therapeutics Inc. Its one we should keep in mind when talking to clients.
He said entrepreneurs should keep in mind that they themselves are investors in their own companies. They should be their own harshest critics and do their own diligence in order to maximize and protect that investment.
A person's business is probably the biggest investment they have, so owners should be vigilant to do what is necessary to maximize the value of the business. In essence, a business owner is better off doing continuous diligence on their company as if they have a continuous exit strategy. It leads to better decisions and doucumentation along the way. While it may seem like a daunting task, it is in reality far easier and better in the long run to approach things this way than to have to scramble to try to pull everything together after the fact to meet a pressing need, or to try to deal with problems that others find.
Some good points. As someone with a newly-minted consulting business, I see the beginning is when we are running to catch up to learn all we can, bring in the clients, and then get that work done. It is also the time when we may have the least available cash and so try to set up with the least cost. There are things I know I should do but think "when I am bringing in more work that is the first thing I will do." And then as with anything else it falls through the cracks unintentionally.
So, this is a timely reminder.
Your comment reminds me that a few years ago when I made the transition from in-house to private practice, I created a "legal audit" process where I would interview a client/prespective client on a wide range of issues, resulting in a recomended list of actions that the person could prioritize. For some reason, we could never get any traction with that, no matter whether we did it for free, or we charged for it.
There probably was the perception that it would cost them money. I wonder if you blogged about it, the items on the list and how much they would cost respectively, whether you could get traction that way.