Legal Tip of the Week: Don’t Just Work In Your Business—Work On It

Most small business owners are very good at what they do. They know their customers. They know their industry. They know how to sell their product or perform their service. They are often the person everyone calls when something needs to get done. But there is a trap that comes with being a small business owner: spending so much time working in the business that you don't have enough time to work on the business. Running a successful business requires more than doing good work and keeping customers happy. It also requires building the legal, financial, and operational systems that protect the business and allow it to grow.

Here are a few areas every small business owner should regularly consider.

1. Review Your Contracts

Contracts are not something you should think about only when a dispute arises. Your customer agreements, vendor contracts, leases, independent contractor agreements, employment agreements, and other business documents should reflect how your business actually operates. If you've changed the way you do business, added new services, started working in new markets, or experienced problems with customers or vendors, your contracts may need to change with you. A good contract should not simply document what happens when everything goes right. It should also address what happens when something goes wrong.

2. Don't Let Accounts Receivable Become a Business Model

Revenue on paper doesn't pay the bills. Small businesses can get into trouble by doing plenty of work but failing to collect what they're owed. Establish clear payment terms, communicate those terms to customers, invoice consistently, and have a process for dealing with delinquent accounts. Your agreements should also clearly explain what happens if a customer doesn't pay. The goal isn't to be difficult about collecting money. It's to make sure everyone understands the arrangement before the work begins.

3. Build a Consistent Client or Customer Intake Process

As a business grows, informal processes become increasingly dangerous. You should have a consistent process for bringing on new customers or clients. Depending on your business, that might include:

• Obtaining the necessary customer information;

• Confirming pricing and payment terms;

• Signing an agreement before work begins;

• Identifying potential conflicts or problems;

• Establishing expectations about communication and timing; and

• Making sure everyone understands exactly what is—and is not—being provided.

A good intake process can prevent a surprising number of problems later.

4. Learn When to Say "No"

Not every customer is a good customer. This can be difficult for a growing business. When you're trying to build revenue, turning away business can feel counterintuitive. But some customers consume disproportionate amounts of time, refuse to follow your processes, don't pay on time, or have unrealistic expectations. Those customers can cost you far more than the revenue they generate. Part of building a healthy business is learning to recognize red flags early and deciding when a particular customer or engagement simply isn't worth the risk.

5. Turn Repeated Tasks Into Systems

If you do something several times a month, ask yourself whether you should have a system for it. That could be a checklist, template, workflow, form, or standard operating procedure. The goal is to reduce the amount of time you spend reinventing the wheel.

Systems also make it easier to delegate work as your business grows. If everything exists only in the owner's head, the business becomes dependent upon that one person—and that's difficult to scale.

6. Protect the Business From the Things You Can't Control

Business owners spend a lot of time thinking about growth. They should also spend some time thinking about risk. Consider whether you have appropriate:

• Business insurance;

• General liability coverage;

• Professional liability coverage, if applicable;

• Cybersecurity protections;

• Written agreements with employees and contractors;

• Appropriate waivers or releases, where applicable;

• Intellectual property protections; and

• Business continuity and succession plans.

You don't need to eliminate every risk. That's impossible. The goal is to identify the risks that could seriously damage your business and take reasonable steps to manage them.

7. Don't Forget the Business Behind the Business

Finally, remember that your business is more than the service or product you sell. Your business also has an ownership structure, contracts, employees, customers, assets, liabilities, intellectual property, insurance, and financial obligations. Those pieces need attention, too. That may mean periodically reviewing your business entity and ownership structure, making sure personal and business finances remain properly separated, updating important agreements, reviewing insurance coverage, or developing a plan for what happens if you eventually want to sell the business or step away from it.

You don't have to tackle all of these issues at once. But you should have a habit of periodically stepping away from the daily work and asking: "If something went wrong tomorrow, how prepared would my business be?"

Work On the Business

Being a good business owner means doing the work. But being a great business owner also means building a business that doesn't depend entirely on you doing everything yourself, every day, forever. That means establishing good contracts. Creating repeatable processes. Protecting against unnecessary risks. Collecting what you're owed. Hiring and delegating appropriately. And periodically stepping back to make sure the legal and operational foundation of the business is keeping pace with its growth. The best time to build good business systems is before you need them!

At Hoffman Law Offices, we work with small business owners on the legal side of building and protecting their businesses—from business formation and contracts to employment matters, risk management, and general business counseling. If you're spending all of your time working in your business, it may be time to set aside some time to work on it.

Disclaimer: This article is provided for general informational purposes only and is not intended to constitute legal advice or create an attorney-client relationship. Every business is different, and the legal issues affecting your business will depend on its particular circumstances. You should consult with a qualified attorney regarding your specific situation before taking action based on anything discussed in this article.