Why don’t people use lawyers? Part two – “risk averse”

Looking out from a lawyer’s eyes it seems strange that our profession gets criticised for being “risk averse”. After all, that’s what our training is all about – identifying, avoiding and mitigating risks.

But if risk avoidance is all you are selling, clients tend to see you as a “necessary evil” and engage only reluctantly. When I bumped into an old school mate last weekend who is a dentist I realised that his profession faces a similar marketing challenge. We all know that if we go to the dentist regularly our teeth will benefit – yet many of will avoid booking a check up for years on end. Maybe that’s why advertisements for dentists no longer show images of tooth decay  - these days they are filled with images of dazzling smiles and couples kissing. It must work – when I tell my teenage son that he should brush his teeth regularly to stop them falling out when he is 40, it doesn’t have the same effect as when I point out that girls like kissing boys with fresh, minty breath and shiny teeth.

So how do we apply that to our practice? Well, take the “terms of trade” that every business needs to contract with its customers (and often its suppliers). There are plenty of businesses who write their own without involving a lawyer. If I want to convince a prospective client that I need to be involved in preparing them, the risk avoidance arguments like “it will help you recover the goods that you supplied if you don’t get paid” or “we will include clauses that will limit your liability if you get sued” aren’t as powerful as the positive benefits like “having clear/compliant terms and conditions will help you sell more goods/services because they will show your customers that you are a professional organisation”. This is particularly important if your customers are other businesses that are bigger than you.

Just as the teenage boy with the fresh breath and shiny teeth may attract the attention of prospective girlfriends, a well written customer contract can help build the trust in a prospective customer that leads to the big sale.

A good commercial lawyer understands that approaching any situation only looking for ways to eliminate risks will never get the deal done. People and companies go into business to make profits and my job as your lawyer is to maximise the chances that you will be successful. One of the ways to maximise your profits is to assume the risks that you are in the best position to manage. For example, if your customer is worried about the reliability of your product, you can offer a longer warranty and charge extra for that warranty protection.  Or if your customer needs the flexibility to cancel the contract if their circumstances change, you can offer a break fee to mitigate their risk (and yours).

The value of a good lawyer will far outweigh any fee you are charged. The key is to make sure you and your lawyer have the discussion about what “adding value” means to you before you get started.

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Why don’t people use lawyers? Part one – “expensive”

There’s been a quote flying around the internet lately from Red Adair (he’s the guy who put out the oil well fires set by Iraqi troops in Kuwait back in the first Gulf War) which is: “If you think it’s expensive to hire a professional to do the job, wait until you hire an amateur.” 

It got us wondering what’s stopping people from hiring lawyers. Why do we only hear from people when the wheels have fallen off ? Why does it take a crisis before you hire a professional? The phrases that describe how people feel about lawyers include “necessary evil”, “risk averse”, “deal killer”, “pedantic”, “un-commercial” and of course “expensive”. Wow. Why would anyone want to do a job like that? And why would anyone hire someone with a reputation like that?

Let’s deal with the “expensive” description first. “Expensive” is a relative term about price but it says nothing about value. You’ll buy an expensive bottle of wine or an expensive car if your perception is that they provide good value for money. Otherwise everyone would only buy $8 bottles of wine and drive 20 year old Japanese imports.

So maybe the criticism is actually “poor value for money”. We don’t do conveyancing, but let’s look at the standard house sale transaction. You pay your real estate agent 2-4% of the sale price and your lawyer (say) $2,000 for their work. But you complain about the lawyer’s bill even though it is 5% of the real estate agent’s fee. Why?

It’s probably because the lawyer has done a terrible job of explaining the value he or she has added to the transaction. That’s because most of the value is tied up in risk avoidance. Your lawyer’s job is to make sure that the sale goes through – the purchase price ends up in your bank account and your mortgage gets paid off. It sounds simple, but there are dozens of things that could go wrong.  If you only call your lawyer after you’ve signed the sale and purchase agreement, then your lawyer has no way of preventing any of the problems that may be lurking in that contract. Your buyer may slip out of that contract leaving you back at square one or, even worse, if you’ve failed to disclose information about the property, you could be sued years after the sale goes through.

The same goes for all of the work we do for our clients – if you only call us when you’ve “done the deal” or signed a term sheet or want to get out of your contract, our ability to add value is limited. We can do a Red Adair and put out the fire, but if we are consulted early we might be able to recommend installing a sprinkler system, buying a fire extinguisher or maybe selling out of the Middle East oil well business altogether…

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Spreading the news

Lawyers get a daily deluge of inbox traffic about the latest news affecting our industry – court cases that have been decided, new statutes and regulations that have come into force and legislation that is being proposed. There’s a steady stream of lawyers’ commentary on all of these developments and industry news like what’s happening in law firms and who’s been appointed as a judge or QC. Often there’s information in there that would interest our clients and readers of this blog. Here’s a sample from the last week or so:

  • The Canadian Federal Court of Appeal has thrown out an appeal by Canada’s professional engineering body (the equivalent of IPENZ) against registration of trade marks that include the words “engineer” and “engineering”.  
  • Closer to home, Coca-Cola failed in its bid to stop PepsiCo from using a “silhouette” shaped bottle for its soft drinks.
  • The Ministry of Business, Innovation and Employment (MBIE) released a set of best practice guidelines to deal with cases of workplace bullying.
  • From 1 April 2014 companies wanting to raise equity through crowdfunding will be able to do so if they meet the criteria for exemptions set out in the Financial Markets Act.
  • Long time Auckland Crown Solicitor, Simon Moore QC will become a High Court Judge sitting in Auckland.
  • MBIE is calling for public submissions on its proposal to allocate a business number (NZBN)  to every business in New Zealand (not just companies). This would mean that sole traders, partnerships and trading trusts would all have a unique number that they’d use to deal with government agencies. This is similar to the ABN system used in Australia.

We plan to make this update a regular feature of our blog. Please let us know if there’s anything else you’d like us to cover.

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Our innovation challenge

Since I last posted I’ve (a) ticked another item off the bucket list (watching an Ashes (cricket) test at the Melbourne Cricket Ground) (b) celebrated my 18th wedding anniversary and (c) begun studying for my MCE.

Going back to University 23 years after I finished my law degree is the biggest challenge – and one that I’m loving so far. What I’ve already had confirmed is that the pace of innovation in every aspect of our lives is increasing exponentially (that’s a mathematical fact, not just hyperbole) and requires a new mindset about how we build our businesses to take advantage of the new possibilities that are being created. Old dogs have to learn new tricks.

This includes the way that we practice law. We are constantly reviewing our technology set-up – we already use cloud solutions like Google mail, Actionstep, Dropbox, Carbonite and Xero to run our business but we are looking at whether our hardware/operating system combination is also best practice – we love our iPhones but do we need Windows 8 tablets? We’re also looking for ways to remove even more paper from our lives – there are some hard copy “original” documents that we still need to keep in physical form, but most of our filing is now electronic. The great thing about this technology revolution is how it allows smaller firms to get ahead of their larger rivals – we can implement a fleet of new iPads or deploy a new cloud-based application in an afternoon if we want to. Just try doing that in a 100 (or 1000) person company!

 

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Christmas round up

As another year draws to a close, I am sure that my 2014 resolutions will include posting more blogs to stay in touch with our loyal band of clients and followers. In November Nick Hodson Lawyers had its 4th birthday. That time has passed in a flash. We have loved every minute of it (well, maybe not every minute…) and it has been fantastic to see our clients not only survive the GFC, but thrive as the economy has come right. This year we’ve worked on some great jobs and with some really interesting businesses. These include Konnect’s latest capital raising and expansion into Australia, Mercer Group’s North American licensing deal for its new sterilisation technology, Navman Wireless’s new service offerings, NZ PGA’s merger discussions with NZ Golf (and re-structuring of their main tournaments), Merlot Aero’s sales to a range of international airlines, and the birth of some cool new companies like taxi app developer, Zoomy.  We’ve also expanded our SME network by joining BOB (business over breakfast) clubs in Mt Eden and the city – which has been great fun and put us in touch with a new group of businesses.

2014 promises to be a busy one too. In my spare (?) time I will start a MCE (Masters of Commercialisation and Entrepreneurship) at the University of Auckland Business School and Jeremy will be getting married to Jackie in March. Our office will also have a new roof (currently being installed) which will hopefully spell the end to surprise floods.

But before then, there’s the summer to enjoy. Best wishes to you and yours for a relaxing and re-charging holiday.

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The law’s on my side – but is that enough?

In an age where it seems that anyone can google the answer to every imaginable question, why haven’t “experts” like lawyers been consigned to the historical dustbin? I think that there are two possible explanations – the first is that finding the right answer depends on being able to ask the right question. Secondly, despite the massive advances in computing power, there is no substitute for the experience and judgment that a seasoned professional can offer.

A short story (taken from some real life episodes) may help to illustrate the point. Continue reading

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New Year’s resolutions

New Year’s resolutions seem to be easy to make and even easier to break. What’s needed is an incentive to follow through on those promises that you made to yourself on holiday this summer.

A carrot is generally a more powerful incentive than a stick – I’ll follow through on a resolution to call my customers more often because there will be an immediate pay off in the form of higher sales. In contrast the “reward” for following through on my resolution to get my company’s contracts reviewed and tidied up by my lawyer is that I may avoid a legal dispute or a bad debt at some undetermined date in the future. Continue reading

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Jeremy’s update before the silly season gets here…

Is it really November already?!  In one of our last business-related blogs for 2012, we discuss the new consumer law changes and force majeure clauses in ICT contracts.

NZ consumer law reform

The Commerce Select Committee has been knee-deep in the Consumer Law Reform Bill which heralds the most significant changes to our consumer law since the Consumer Guarantees Act came into force in April 1994.  Although the Bill is a while away from becoming law, you should be aware of the thrust of the proposed changes – and there are some things you can be thinking about doing right now to prepare for it. Continue reading

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Spring is here – must be time for a blog

New offices: Our big news is that we have moved into new offices in the Konnect Building. A small, but perfectly formed, space became available in August and, after a quick fire makeover under the guiding hand of Jackie Jones Interior Design, we moved in at the start of September. It’s exciting to share a building with two fantastic growth companies – Konnect and Lanzatech. We hope some of their success will rub off on us. All our contact details remain the same – but please drop in and visit if you are in Parnell.

New lawyer: We are going to be sharing our new offices with Rachel Colley’s new firm – AXIS IP. Rachel is a trade marks and intellectual property specialist with tons of experience advising owners of local and global brands about how to get the most out of their IP. Rachel’s on assignment in Sydney this month, but we look forward to her return in November. Continue reading

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The Perils of Statutory Demands

Legal blogs often look at the impact of the decisions in court cases on how people do business. As commercial lawyers we try and steer our clients clear of court and the eye-watering costs that litigation involves. Today I want to share some recent (real life) experiences that we have had with statutory demands. A statutory demand is a tool available under the Companies Act to allow a creditor to apply to have a company wound up if it doesn’t pay an undisputed bill.

For creditors it seems like a relatively cheap option – get your lawyer to prepare a short statutory demand, serve it on the company, wait for 21 days and if no payment is forthcoming, head off to court to get the debtor wound up. Continue reading

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