,

The Business Plan: A Vital Tool for Maryland Startups and Established Companies

Business owners in Maryland often ask, “Why do I need a business plan?” Stated another way, the question may be posed: “Who needs a Business Plan and Why?”  The fact is that most people have a limited view of the purposes of a plan. Raising capital for a young business is not the sole purpose of having a plan although it is a good initial reason. In reality, every business needs a plan, whether it is a startup, a going concern seeking growth, or a solidly successful company whose owners seek an exit strategy. An experienced business law attorney is adept at keying business owners into the purposes and tools needed to draw up a business plan.

A Roadmap – Describing and Understanding the Business

In addition to financing, let’s look at some of the other important reasons for having an up-to-date business plan. One purpose is to provide a business roadmap to success. It lays out a long-term set of goals, values, and procedures that will guide the business forward. The owner also benefits from having it in writing, which includes the convenience of referencing the company’s game plan   whenever the need arises. The current version of the plan will always be there to re-energize staff, management, and ownership to the fundamental purposes of the business and its stated values.

The plan describes the business and how it works. It explains the need for its services and/or products. It also describes the industry, the nature of the competition and the strategies for gaining profitable market share. Preparing the plan requires research and the developing of an in-depth understanding of the industry and its trends. It also lets the leaders of the company visualize how the working parts fit together and how expenses impact profitability. By having a more three-dimensional view of the financial dynamics, ownership can devise more effective and targeted funding efforts. The providing of sufficient capital to make the company’s growth strategy work is a benefit of the plan. Most businesses fail early due to insufficient capital, and a good plan brings capital needs into clear focus.

Charting the Company’s Future in the Plan

The business plan lets the owners and managers do away with the need for crystal balls and fortune tellers. In preparing a plan, the leaders will likely learn where alliances with other companies can be critical to growth. They may also develop cost-saving strategies for acquiring raw materials or outside products or services and other critical needs. The plan tells both new investors and the company’s founders about the company’s strengths and weaknesses and gives sound proposals for maximum progress. It is a roadmap into the future, identifying all the paths, detours and straightaways to follow or to avoid for maximum financial health and profitability. The plan’s rigorous foundation, in fact, keeps the owners reality-based and minimizes any tendencies toward fantasy or distorted thinking.

A business plan can set specific goals for managers and employees. It can attract new talent by planting sparks of enthusiasm for specified goals, compensation plans, and groundbreaking programs. In addition, specific planning issues can be raised and resolved, including expansion needs, new employee hirings, asset acquisitions, new technology and innovative equipment.

The Plan Sets the Financial Value of the Business

No matter what stage of forward progress the business has achieved, there may always be a need for ongoing financing from investors in Maryland and nationwide. The total business picture is highlighted for potential investors through the plan. There may come a day when the owners decide to sell a successful enterprise and retire on their hard-earned laurels. An exit strategy can be incorporated into the business plan. A business plan expresses the market value of the business and describes such important features as goodwill. In all cases, remember that the plan is a living organism that must be actively consulted, monitored and modified as the company’s future goals change due to new discoveries, technology, and changing needs in society.

Information in this article is provided for educational purposes only and not intended to constitute legal advice. Please consult with a licensed attorney in your jurisdiction for help with your specific situation.

_______________________

Schedule a consultation with Maryland attorney Elsa W. Smith from the

Law Offices of Elsa W. Smith, LLC in Annapolis at 410-995-7719 or Laurel 301-358-4340.

,

5 Common Mistakes with Do It Yourself Contracts

A contract memorializes each side’s understanding of the terms of an agreement. Pay special attention to these five common pitfalls when entering into a contract in order to save time and money should the relationship deteriorate.

Mistake #1: Not Having a Meeting of the Minds

Take the time to have an in-depth conversation about what each side expects before the contract is drawn up. Know what it is that you are seeking out of the relationship and aim to have a solid understanding of the other party’s wants so that you can anticipate those elements of the contract that may require later negotiation. This step will result in a well-written contract that addresses the minute details of your specific situation rather than a standard form contract.

Mistake #2: Not Reading the Fine Print

Remember that you will be forced to uphold all parts of the contract, not just those that you read. Neglecting to point out and re-work any confusing provisions may result in that language being used against you at a later date. Pay special attention to any bolded, capped or larger-print block sections. This is generally done because those sections contain language alerting you that you are waiving some sort of right. For example, when signing a lease, you may see block print that discusses the right for the landlord to enter a confession of judgement against you for failure to pay. You’ve potentially allowed the landlord to enter a judgment against you without your having the ability to defend against it, even if you have a valid excuse for not paying.

Mistake #3: Neglecting to Consider Choice of Venue, Choice of Law

Be mindful of language related to the location of any potential dispute resolution. This generally refers to where a trial would be held in the event of a breach. If you are entering into a contract with a supplier to produce a good, you want to be sure that any litigation takes place in your city and state, not that of the supplier. If you live in Maryland and your supplier is located in California, it is not advantageous for you to spend thousands of dollars merely in travel to litigate your claim. Similarly, choice of law provisions dictate which jurisdiction’s laws will apply as to the construction, interpretation and litigation of the contract. If you want to file a suit due to a breach of contract, you have three years in Maryland, but the statute of limitations may be shorter (or longer) in the other party’s state, and that statute of limitations may apply if their state’s laws were chosen in the contract.

Mistake #4: Eliminating Boilerplate Language

Boilerplate provisions are standard in most contracts. They serve several purposes such as: defining the parties’ rights and responsibilities, how the parties may make changes to the contract, how the parties may provide notice and control the remedy in case of a breach. It is important to understand the meaning of each type of boilerplate clause and only choose those that are beneficial for your particular contract. Eliminating them altogether may cost you money and peace of mind down the road.

Mistake #5: Not Hiring An Experienced Attorney

Contracts are written in a language that can be extremely difficult for an average untrained person to understand. Hire a lawyer experienced in reviewing and drafting contracts, particularly one who has practical experience in the area that underlies the basis of the contract. For example, if you are a landlord and need a contract for a new tenant, seek out an experienced real estate attorney. This is especially important if the other side has an attorney who has drafted the contract.

Contracts can be the start of a prosperous relationship, but they can also result in a chain of negative consequences. Avoid the above mistakes in order to benefit from business relationships and to protect your interests.

Information in this article is provided for educational purposes only and not intended to constitute legal advice. Please consult with a licensed attorney in your jurisdiction for help with your specific situation.