Strategic Planning and the Often Missed Legal Element
In strategic planning, leaders often address financials, marketing, and operational aspects while leaving one critical area overlooked: legal analysis. Neglecting this area can expose businesses to risks, resulting in costly disruptions. Integrating essential legal elements into your planning process can help prevent avoidable issues and position your company for a smoother, more secure year. Here are key legal considerations to include in your next strategic plan.
Key Legal Areas to Include in Strategic Planning
Intellectual Property Protection
Protecting intellectual property (IP) assets is essential for safeguarding the unique value your business brings.
- Identify IP Assets: Determine what qualifies as IP, such as brand logos, trade secrets, and proprietary processes.
- Secure Your IP: Evaluate the need for copyright, trademark, or patent applications. For confidential information, consider confidentiality agreements and clear labeling to establish enforceable protections.
Contract Management for Key Business Relationships
Contracts serve as the foundation for stable relationships, both internally and externally.
- Identify Core Relationships: These may include suppliers, contractors, and especially key clients or customers.
- Review and Strengthen Contracts: Ensure contracts are designed to protect your business interests and clarify terms such as continuity, exit conditions, and dispute resolution.
- Safeguard Key Connections: Protect essential relationships from disruption due to employee turnover. Non-compete and non-solicitation agreements can secure relationships vital to business continuity.
Employee Policies and Accountability Systems
Well-structured employee policies and accountability systems reduce internal conflicts and help secure valuable company knowledge.
- Create Clear Employment Policies: Cover key areas such as hiring, termination, and accountability, while documenting performance expectations and disciplinary protocols.
- Establish an Accountability System: Dashboards and scorecards help track and measure employee performance reliably.
- Implement Legal Safeguards: Use non-disclosure agreements (NDAs) and exit interviews to protect sensitive information from misuse by former employees.
Corporate Structure and Compliance Requirements
Maintaining a compliant corporate structure supports both operational efficiency and legal security.
- Verify Your Structure: Ensure your structure aligns with state laws and regulatory requirements.
- Complete Required Filings: Regular filings help maintain compliance and protect the legal standing of your business.
- Follow Board and Shareholder Protocols: Observing formalities with board meetings and shareholder communications is essential to avoid legal issues.
Data Privacy and Security
Data privacy and security are increasingly important as cyber threats grow. A proactive approach minimizes risks and ensures compliance with regulations.
- Enhance Data Security: Safeguard company data against breaches by implementing both technical and legal protections.
- Meet Regulatory Standards: Comply with data privacy regulations such as GDPR, CCPA, or any industry-specific requirements relevant to your business.
Tax Planning for Optimized Financial Management
Effective tax planning can lower liabilities and contribute to financial stability.
- Consult Experts: Work with a CPA or tax attorney to identify ways to reduce tax liability legally.
- Review Eligible Deductions: Identifying eligible expenses can maximize tax benefits and increase profitability.
- Consider Growth Implications: Take into account the tax impact of expanding or diversifying business operations.
Litigation Risk Management
Preparing for potential litigation helps reduce disruptions, costs, and reputation risks.
- Assess Litigation Risks: Consider potential vulnerabilities based on your industry. Each industry faces unique legal risks.
- Obtain Insurance and Other Protections: Industry-specific insurance can help cover risks; discuss additional steps with your attorney as needed.
- Implement Preventive Measures: Establishing internal processes to manage risks and address disputes proactively can reduce your chances of litigation.
Regulatory Compliance
Following industry regulations avoids costly investigations and penalties.
- Identify Regulatory Requirements: Make sure your business complies with OSHA, EEOC, IRS, and other relevant bodies.
- Maintain Records: Good record-keeping demonstrates compliance with legal standards and simplifies audits or inspections.
- Stay Updated: Regulations change regularly. Assign someone to monitor legal updates and integrate necessary changes into company policies.
Engaging Legal Counsel Proactively
Business owners may assume their attorney will raise these issues, but attorneys often respond to client-identified needs. Start a conversation with your attorney about these areas to gain thorough legal support.
Benefits of a Proactive Legal Strategy
Incorporating these legal elements into your strategic planning minimizes potential disruptions, lowers the risk of legal issues, and reduces overall costs. With protections in place, your business is free to focus on growth, customer satisfaction, and innovation, without the distraction of preventable legal complications.
Video Transcript
Legal Analysis as the Often Overlooked Element
Strategic planning typically involves doing a SWOT analysis. So, strengths, weaknesses, opportunities, threats. Strategic planning involves looking at sales, marketing, branding, different divisions, opportunities, and innovation. Maybe some cost-cutting measures. Of course, strategic planning involves taking a look at the financials. But there is one huge area of the business that is often left out, and because of that, companies often have an Achilles’ heel. The area is legal analysis. I will quick legal review, and it doesn’t have to take much.
Simple Legal Topics to Cover in Strategic Planning
Today, I am going to talk through some easy, simple topics to make sure you address in your strategic planning for your company. By doing this, you have some significant benefits. First, you make sure you avoid all the cost and distraction that comes from an audit, investigation, lawsuit, or some other legal dispute. Second, you start the year confident that you are protecting your intellectual property. Your most important relationships have your attention. And you have lined up all the legal pieces to ensure that you are poised for strength and for growth this year.
Intellectual Property and Identifying and Protecting Your Assets
Let’s get into the list. First off, let’s talk about intellectual property. What is your intellectual property? What can you protect by copyright, patent, trademark, or trade secret? What are the important assets that you have? So first, once you have identified what those are, then you can talk about, “How do we protect them? Do we do a copyright registration or a trademark registration or a patent application? Do we need to make sure that certain secret confidential information is protected within the company, and how do we do that? It might be through confidentiality agreements with vendors. It might be through properly labeling or marking confidential information as confidential so that if there is ever a dispute later, you can demonstrate that you made reasonable efforts to keep that information confidential. So on the topic of intellectual property, first identify what is your intellectual property in the company. And step two, how do you protect it?
Contracts and Business Relationships
The next category is contracts. What are the big relationships in your business? What relationships does your business depend on? This is either who you buy from. You might buy services. You might receive services, whether that is tech, consultants, independent contractors, or some other vendors. Or it might be products, suppliers, people you buy goods and products from.
Clients and Customer Agreements
That is one piece. The second is, who do you sell to? Your customers, your clients, those people who rely on your services, who pay you money. Typically, that is going to be the largest portion of your gross revenue. Who are those big relationships? And are they protected by contract? Or at least protected with some intentionality on the part of the company leadership?
Protecting Key Employee and Executive Relationships
Similar to that, is there a risk of employees of yours, maybe even on the executive team, leaving the company and taking some of those key strategic relationships with? If so, what protections can you put in place for the company to protect that important relationship?
Accountability for Employee Conduct and Confidentiality
On the topic of important relationships is the employees, the people who are on your team. As you may know, often the most harmful individuals to a company are the employees who have left and who are angry about something and now are sharing from their tainted perspective what happened. So thinking about, “Do you have the proper employment policies in place, procedures, discipline, discharge, accountability systems, scorecard, or dashboard? What does your accountability system look like?” Maybe you use an entrepreneurial operating system. Maybe you use some other system. Regardless of what that is, thinking through both the practical accountability component and the legal aspect of that helps you walk into the new year strong and emboldened by knowing you have comprehensive protections in place to avoid losing key people or having them end up being a competitor or otherwise hurting your company.
Reviewing Your Corporate Structure and Legal Documents
Next, reviewing your corporate structure and legal documents. Are you making sure that you are staying compliant with state laws, you have proper filings in place, and you are treating the shareholders and the board with the formalities that are required by law?
Data Privacy and Security
Next. Data privacy and security. This is a huge important area because AI has exponentially improved the ability of computers to get past security and gather data. So not just thinking about the AI and computer security side of this, but also the legal side. If there is a data breach, what legal protections do you have in place? And are you staying compliant with all of the different government laws regarding data privacy and keeping computer data confidential?
Tax Planning and Minimizing Tax Obligations
The next area is tax planning. This is a great opportunity to work with your attorney or CPA to think about, “How can we reduce taxes? How can we pay our fair share but not overpay?” Let’s look at all the lawful ways to reduce taxes and minimize what we are paying in taxes so we can maximize profits for the shareholders.
Litigation Risk Management and Business Protection
The next area is litigation risk management. This means just stepping back and thinking about, “If we were sued as a business, what would we be sued for? And can we get insurance to protect ourselves? And is there anything else we can do proactively to protect ourselves?” This really depends on the type of business you are in. Obviously, a construction business and a newspaper business will have very different risks around getting sued. But thinking as a leadership team, what is it that you could get sued for this year? And then what can you do about it? Either insurance or other steps you can take internally to mitigate that risk.
Regulatory Compliance and State and Federal Laws
The next area is regulatory compliance. This involves making sure that your company is following all the state and federal laws, including regulations, rules, and other laws that you are governed by. Often, business owners have no idea what those are. And so unfortunately, those rules can create an Achilles’ heel for the business. All of a sudden you have an OSHA investigation, an EEOC investigation, or an IRS investigation or audit. Attorneys general may initiate investigations. By thinking ahead strategically and making sure you have dealt with all of those things, you can avoid the distraction and the expense of bringing in attorneys after the fact. “An ounce of prevention is worth a pound of cure,” as the old saying goes.
Working Proactively with Your Attorney
You might say, “Why hasn’t my attorney ever talked to me about this?” Well, normally, attorneys who are more technicians, they are trained to solve the problems you present to them. It is not typical for an attorney to start jumping into your business and asking you all sorts of questions about topics that you didn’t bring up.
Taking Initiative in Legal Strategic Planning
Normally, what an attorney will do is wait for you to bring up a problem or a topic. And then discuss that topic with you. So, if you are interested in making sure all these issues are covered in your strategic planning, consider bringing them up with your attorney. I am not suggesting that I be that attorney. Rather, I am suggesting that you have a conversation with your attorney about these different areas. Say to your attorney, “I want you to think proactively. Will you help me think through all of these areas, so we make sure our business is protected?” This is one practical step you can take as a company leader to improve your strategic planning at the beginning of each year to strengthen your company, minimize losses, minimize legal distractions, reduce legal fees, and allow you to focus on what you love, which is growing a company that serves your customer base rather than being pulled in to all the legal entanglement of audits, lawsuits, investigations, and other legal action.
Free Resource for Business Owners at AaronHall.com
Now, if you would like to know more about how to avoid trouble like this, I have a free resource at AaronHall.com/free. I provide information for business owners of small to mid-sized companies on how to avoid common legal problems. That includes a PDF. It includes videos talking about important issues. You can go to AaronHall.com/free. I am Aaron Hall. I am an attorney for business owners and entrepreneurial companies. Thanks for joining me here today. If you would like, subscribe to this channel so you can get more educational content like this.