Small Business Owners Don’t Know What Small Business Lawyers Do — And It’s Costing Them

What do small business lawyers do? How can small business owners use them to build their business? The answers come from knowing the difference between the two types of attorneys: fighters and builders.

If you ask most people what small business lawyers do, they will probably answer with some variant of: “sue people”, “say no to things”, “wear suits”, “go to court”, “charge a lot of money”, “argue”, and so on. And us lawyers have done little to provide more insight than that. And it’s killing small businesses.

When most people think of lawyers, they are generally thinking about litigators, who are the fighters of the legal world. They are mostly not thinking about transactional lawyers, who are the builders of the legal world and are strategic partners that can help business owners avoid disputes and seize opportunities. Because many business owners do not understand the role that builders play in their business, they are wasting money and risking their long-term success.

So let’s understand that difference between fighters and builders.

The Two Types of Lawyers: The Fighters and The Builders

When most people think of lawyers, they are thinking of the fighters. These are the lawyers that we know from movies and TV; incredibly well-groomed, fluent in the courtroom, argumentative and slick.

In the legal world, these types of lawyers are called litigators. And they are indispensable when there is a legal conflict or when something goes wrong. They can go to court and they can make your case for you, hopefully saving the day and beating out the other person.

Litigators are the fighters of the legal world. They can help you when things go wrong.

Litigators are extremely valuable, but they are also extremely expensive. When you hear about eye-watering legal bills, they are typically coming from litigators. Litigators can charge from tens of thousands of dollars to millions of dollars to resolve your legal issue.

But this is money that should be put to better uses.

The other type of small business lawyer — and the one that can create the most value for small businesses — is the builder. Less glamorous than the fighters, builders work behind the scenes to make sure that businesses function well and stay out of legal trouble.

In the legal world, builders are called transactional lawyers. They function as strategic partners and coaches for their clients. Good transactional lawyers can advise their clients on the law and how to use the law to actually grow their business. When a transactional lawyer does their job right, the business actually makes money by hiring them.

A transactional lawyer is a builder that can help business owners create organizations that avoid disputes and take better advantage of opportunities.

The builder helps business owners spot opportunities, avoid bad deals, quickly resolve disputes before they go to court. In short, a transactional lawyer works with the business owner to use the law to their advantage.

However, when most small business owners think of lawyers, they think of the litigators and think that because they are not in a dispute, they don’t need legal counsel. This misunderstanding hurts small businesses.

PS: While there may be some lawyers who are good fighters and good builders, they are rare. Most lawyers will excel at one or the other, and almost never at both.

How Misunderstanding The Types of Lawyers Hurts Small Businesses

If you approached medical issues the way that most businesses approach legal issues, you would do this: you would avoid regular checkups; you would get all of your medical information from WebMD (or less reputable sources); you would ignore weird pains, rashes or other symptoms; you would attempt to set your own broken bones. Ultimately, you would address all of your medical issues on the surgeon’s table or in the emergency room. Or the morgue.

Waiting until a legal issue turns into a legal problem or legal dispute is like waiting for a mild medical symptom to turn into something that requires an operation. And imagine that insurance doesn’t cover the operation and the doctor won’t operate unless you pay a good portion of their bill in advance. This approach is expensive, disruptive and potentially deadly.

Solving legal problems only in the courtroom is like solving medical problems only in the operating room. Expensive, messy, and disruptive.

Yet this is how so many small businesses approach legal issues. They avoid talking to lawyers until they need the attention of a litigator and their correspondingly high bills. That’s like solving all of your medical problems in the operating room.

But, by addressing legal issues early and regularly, small business owners can actually decrease their chances of needing a litigator’s services. Not always — but often (just like we can’t always avoid needing surgery, even if we do everything right).

By seeking out a transactional attorney early on and before you think you need one, you are actually investing in your business by ensuring that all of its components are functioning as well as they can. You are being proactive and making sure that, for instance, the brand name that you have chosen can actually get trademark protection or that your contracts actually work in your favor.

I am fond of saying that one of my primary jobs is to keep my clients out of court (or out of conflicts more generally). By doing this, my clients save money, time and frustration and can put their resources towards the things that will actually grow their business: marketing, sales, product, etc.

By getting the legal issues right the first time, businesses can actually put themselves in a better position to maximize other investments. They can get better terms from suppliers or partners, ensure robust brand protection and make sure that they have chosen the right type of business entity for their venture. Finally, by having a relationship with an attorney that’s a builder, small business owners can nip potential legal issues in the bud, when they are cheap to fix.

No matter what, all small businesses should know that legal will be part of their budget. The difference is that by hiring a builder early on, and working with them as a partner as your business grows, you get to control how that money is spent, instead of waiting for a litigator to present you with a bill.

Jonathan Tobin is an attorney who helps creative businesses grow by advising them on copyrights, trademarks, contracts and business formation. His law firm, Counsel for Creators LLP, developed the world’s first legal subscription program designed for new and growing businesses, the Creators’ Legal Program. If you have questions or comments about this article or want to know how you can be more strategic about how you approach legal issues, you can email at jon@counselforcreators.com or call (323) 657–3380.