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In this episode
The number one thing that most business owners today are going to ignore are their vendor agreements, observes James Sanders of MPL Law Firm LLP.
One topical area that most people ignore to their detriment are Force Majeure clauses in their agreements which specify the rights and obligations of the parties when an "act of God" happens. War, hurricanes, tornadoes, floods, and pandemics can all be covered or not. Whether you have to deliver and pay or have an out in a contract can be determined by how that part of your contract is drafted.
James points out that contracts are legal agreements and how they are drafted and the words that are used matter greatly, particularly when one of the parties decides things are unfair after it is signed. While many think they have insurance to cover unforeseen incidents, many times the insurance won't cover or has an exclusion. James advocates that business owners should consider a yearly attorney review of all of their business agreements as a cheap extension of your business insurance.
A glimpse of what you'll hear
02:27 Why business interruption insurance won't cover damages from pandemics
04:25 Force Majeure - what is it and why you should care
06:19 How a business owner should think about vendor management
08:00 Benefits to a business from properly managing their vendor agreements
10:37 3 steps to implementing an effective vendor management system
11:35 Learn about James and MPL Law. Email James at JSanders@MPL-Law.com
Centricity Introduction 0:04
Welcome to the Best Kept Secret videocast and podcast from Centricity. If you're a B2B service professional, use our five step process to go from the grind of chasing every sale. to keeping your pipeline full with prospects knocking on your door to buy from you. We give you the freedom of time and a life outside of your business. Each episode features an executive from a B2B services company sharing their provocative perspective on an opportunity that many of their clients are missing out on. It's how we teach our clients to get executive decision makers to buy without being salesy or spammy. Here's our host, the Co-Founder and CEO of Centricity, Jay Kingley.
Jay Kingley 0:43
Today, I am very fortunate to have as a guest on our podcast, James Sanders. James is based in York, Pennsylvania. He is a partner in the MPL Law Firm, he focuses on business and commercial law. And he does this for primarily the Lower Mid-market and small businesses, which we define as under 250 employees, and under $50 million dollars in revenue. Welcome, James, to our podcast. And I want to get started right off here. I know you work a lot with business owners of companies of this size and there's been an awful lot of change, particularly as the pandemic and as we come out of the pandemic, from your perspective, as an attorney James, what is the thing that you think that business owners in this target market need to focus on and pay more attention to?
James Sanders 1:44
Well, first of all, thanks for having me, on the podcast, I do appreciate getting engaged in these types of activities. I would say that the number one thing that most business owners today are going to ignore are their vendor agreements. These are things that typically renew on an annual basis. And there are things that typically get updated from time to time and typically come out of some type of major life changing or industry changing events. So think in terms of like a 911. Think in terms of a wartime event, think in terms of a pandemic. Most business owners didn't realize that their business interruption insurance didn't apply coming out of this last pandemic. And the reason why is that this actually happened back in the mid 2000s, with swine flu, and a lot of insurance companies updated their language to include pandemic exclusions. That's why you're seeing a lot of business owners, restaurant owners in particular, that are having issues getting coverage for business interruption because they were shut down by the government. Well, what I can tell you is, if you're looking at that, take a look at the other provisions within your agreement. You're doing a lot more online today, I just came in I just came across a case where a business owner was being sued, because of their website, I said your website was not ADA compliant. So you may say to yourself, well, how does that happen? I mean, I usually think of ADA compliance with, you know, my business structure, a bathroom door set of steps. Well, unfortunately, websites fall under Title Three, which applies to all businesses, not just businesses of 50 employees or more. And what happened to this owner was they were selling in the state of New York, there was a gentleman that was blind, his software could plug into the back end of their retail storefront, and he wasn't able to access the items on the site. So all of a sudden a complaint appeared out of nowhere. And I can tell you that outside of the compliance with the ADA, the state laws had some pretty hefty civil penalties that would have applied, thankfully, they settled it, but all I can tell you is that falls under the guise of vendor agreement, reviews, management and check-ins with your professional service providers. Of course, business attorneys would be a great place to start.
Jay Kingley 4:16
Now James, one of the things that are in a lot of contracts that just about everybody ignores, you know, it's under the guise of its just boilerplate is something called force majeure. So when we talked about the pandemics and war, is that what they mean in a contract by force majeure? And is that a clause that is standard? It's only written one way? Or do you have the ability to actually specify what counts as force majeure and what the remedies are?
James Sanders 4:48
So force majeure clauses, unfortunately, get very boilerplate it and that's not a legal term, but when you read it, it basically says that it's any acts of God Anything that though is weather related, you know, think of a, an oil rig out in the middle of the Gulf of Mexico that gets shut down by a hurricane, they can declare force majeure, and basically say I can't fulfill on my agreement. Well, unfortunately, as those things have happened, it's been litigated. It's run through the court system. And what people have found, and the smart companies are getting ahead of it is you need to be as specific as possible, you can not be generic with how you're referring to what your force majeure options are. So again, if you have any type of supply chain that moves outside of your local geographic region, or you're using services that are outside of your local geographic region, you know, think any container ships coming in from, from Asia, you really need to watch what that force majeure language says, both with your vendors and what it says for you with your clients.
Jay Kingley 6:00
Now, I think, James that most business owners, when they think of vendor management, are really thinking about am I happy with whom I'm using? Do I want to replace someone, they're not thinking about contracts for existing vendors that they're happy with, that is just sort of ticking over and they're not paying any attention. So given the issue that you have laid out, how should business owners be thinking about vendor management?
James Sanders 6:28
At the size level that I'm dealing with a lot of times, it's the business owner that's doing that review? Well, that business owner is often wearing about 10 different hats within the company and is doing flybys of these agreements. As they come through, they're just typically going to see the renewal on their credit card and say, Good, I'm covered. Unfortunately, that's where things can go sideways. What I would suggest is you have an annual meeting with your account to get your taxes done, because you certainly don't want to get any types of late charges. You don't want to get any penalties interest, and you certainly want to protect yourself against an audit. Well, I can tell you right now, think about contractors think about building supplies and materials. All those businesses right now are suffering because they didn't review their vendor agreements, their supply chain is, is all been strangled. Now. And if they had the right language in place, or the right insurance coverages in place, they would be more than protected right now. That's why I'm saying not only should you be meeting with your accountant, but your business attorney should be once a year or once every six months, your commercial insurance provider, same thing, your financial advisor to see how your investments are doing all those should at least have a review.
Jay Kingley 7:49
So you're talking about a team approach, and ensuring that we don't take anything for granted. Now, if a business owner makes this shift from ignoring and blissful or perhaps non blissful ignorance, and puts this in as a regular part of their business processes. What kind of benefits? Do you see whether it's in reduction of risk or issues around the cost side? What could you expect as a business owner to gain from adopting what you're suggesting?
James Sanders 8:22
Think of it as the foundation of your house. Your house is only as strong as the bottom part. If you're going to build it on dirt, that first rainstorm, you're going to notice that the house that you built looks so beautiful, it's gonna have issues. Put it on concrete, you know what you're standing on, and you know that you're protected over time. I view the services, we provide us the concrete in that in that situation. I often tell people, I'm the next alternative to your insurance coverage. They're in the business to protect what you own is what they advertise. But go try and get coverage from an insurance provider. And you'll see how quickly how many reservations and how many exceptions that they're going to look to not cover you. Well, that's where a good business attorney comes into play. We solidify that foundation underneath your business, your job is to go out and grow operate, find the right talent, put them in place, my job's to sit there and make sure that your foundation is as solid as so we're
Jay Kingley 9:25
Talking a major reduction in the risk that you may not even be aware of around your business could save you significant sums of money in the event of one of these triggering events, which could be all the difference between you keeping your business and you putting the plywood on the windows and locking the door and saying the game is over. Is that accurate?
James Sanders 9:49
Absolutely. You know, a couple of hours with me once a year. Okay, but you know you're talking about something that's under $1,000 per year. have spent, go get hit with an insurance claim. Go watch one of your employees, take one of your company vehicles out and hit somebody, and see what that costs you. And you don't have the right coverage, the right place to have your supply chain dry up, and you've got no rights to go get insurance coverage or go get your supplies in the hands of what you need to do to fulfill your client orders. See what happens when it's going to cost.
Jay Kingley 10:25
So cheap insurance clearly. So you made, I think, a pretty compelling case for how we should rethink our vendor management. So let's say I'm a business owner, I'm like, okay, James, you've convinced me, what are the steps that I would need to take, in order to make or to put in place an effective vendor management system?
James Sanders 10:47
Make sure that you have all of your vendor agreements sitting in one place. Not only that have your vendor agreement sitting virtually in second place. Make sure that you have a system or a check in to know when the renewals come up on those agreements, because they're not on the date that you sign them, they're typically 30 60 90 days before that you need to notify whether you're going to change or update or terminate the agreement, I would recommend that you go 30 days ahead of that, and start having that conversation with whomever provided you with that contract. And then also bouncing it off of your, your professional service advisors, your board of directors, whomever you view as the objective mentors that are going to tell you what you need to grow to want to hear. That's the people I would be bound to our agreements.
Jay Kingley 11:37
We're talking with James Sanders, business and commercial attorney with MPL Law in York, PA. James, in addition to the vendor management that you've talked about, what other issues do you typically help your clients with?
James Sanders 11:52
So another area is with transitions, Exit Planning, mergers and acquisitions, any type of what I call transactional types of situations. And what I can tell you is, business owners or ownership groups in the the area that I serve, are often poor planners, when it comes to the transition of that business. More times than not, it's a very closely held or family run business. And what you have is an owner that has built it from the ground up, they have issues with giving up control, but they think that once they're ready to walk out the door that whomever that senior leader is or son or daughter or niece, nephew or other family member, they're just going to fill right in and be ready to take over the business. Well, the problem is those conversations don't necessarily happen at the most appropriate times, or when they do happen, it gets mixed in with a good degree of emotion and feelings. And then when you start mixing emotion and feelings with business decisions, things go really sideways really quickly. And one of two things will happen either that next generation or next layer of leadership, they're going to either lose interest in doing what they're doing, or they're going to just up and leave. And then the business owner is kind of stuck, because now they got to go find a third party, or some other way to monetize what is typically their most valuable retirement asset, which is the value of
Jay Kingley 13:34
Well done. Now I know, as a good business attorney, your objective is to keep your clients out of litigation. But just in case there is confusion. Do you also handle litigation? Or is that another specialist? Who takes care of that? Should it get to there?
James Sanders 13:50
Yeah. So I will take you right to the point of walking into the courthouse and doing the filing. It has to be a really unique situation for me to get in there and help out with the quarterback, the actual process of litigation. But I have folks in my firm, I have colleagues that that only focus on commercial litigation. And those are the ones that I will bring it. That's the nice thing about being a smaller firm is I can plug in with others when needed. And you're not necessarily paying for all the extra legal services,
Jay Kingley 14:26
I will just say as someone who's been on the other side, we work with a good business commercial attorney so that litigation is not in your future. It is not fun on even if you win, it is a horrible experience. Take it from me on that
James Sanders 14:44
If it has better up six or seven zeros at the end of it if that's what you're going after. And I mean well into the 6 figures because if not if not you're letting your emotions take over what what might be good
Jay Kingley 15:00
Now, James, there, obviously are lots of business attorneys out there. But tell me, what is it about you, that makes you great at what it is that you do.
James Sanders 15:12
So I am probably the most non traditional lawyer that you will ever meet. I spent my entire career outside of the legal profession, I spent it in the business world, I was an analyst, I was a corporate strategist. And I was a business owner who bought my family's business and bought a second business in the same area. And I turned around and sold both of them. So what I will offer and I tell you is, when I look, it's an issue that you bring to my attention. I'm looking at it from a business owners standpoint, and I'm trying to understand the why of what we're doing. And I'm gonna be pretty direct with you, and pretty quick to answer what my thoughts on the matter, we'll figure out what the legal boundaries are. They're always there. But let's figure out why you're doing something so that we put the most appropriate legal boundaries in place now I've been licensed my entire career. And as I tell people, you only knew if I was upset with you, or if you're a family member, and and you asked me really nicely, but you know, I, all I can tell you is, is I'm a different kind of attorney because I'm not going to I look at things truly from a business owners.
Jay Kingley 16:24
And one of the things from my perspective, James is talking about is so many attorneys, I used to call them, doctor no, they would you would sit there and say is what I'm trying to do. And they will tell you every reason why you can't do it. And you sometimes just wanted to strangle them. Because the last thing you want to do as a business owner is deliberately go against your advice of an attorney like that's never going to end well for you having an attorney James like yourself, who is there to and understands the business and says, How do we do this acceptable, if not minimal, legal risk, is a true asset to have as part of your executive team.
James Sanders 17:05
I totally agree. And and I'll tell you, that's a skill set I pulled from my investment days as an analyst, the biggest thing we had to understand was the downside risk and how to exit from an investment. Well, the same thing applies. And when you're when you're looking at a business decision, understand your downside risk, see how comfortable you can get with it, see if you can live with it sleep at night. And if you can do all those things, then you know what your decision is? If you can't sleep with it, you can't live with it. Earth probably not a good decision.
Jay Kingley 17:34
James, you've alluded to some interesting career progressions that you've had, I'm interested in, what was sort of those major milestone events that took you from the investment and business world? How did you end up doing what you're doing now?
James Sanders 17:50
You know, it's it's, as I look back on my career, and I think I've had five careers, and people have approached my wife and I said, Wow, your husband, five careers, what an entrepreneur and she just rolls her eyes in the back of her head. And, and absolutely, you know, gets frustrated by it. Because we've, we've gone to three different cities, and I've had a number of different travel opportunities. And anyway, long story short, I would say the biggest seminal event in my career was losing my job, losing my job coming out of 2009, I was working for an investment fund, and 2009 If people can remember that that was a pretty serious financial downturn. Well, that forced me to really make a decision as to whether I wanted to stay on Wall Street, and continue to go after the proverbial big dollars that people read in the paper, or actually go pursue owning a business. Well, I was raised by my parents who were too small business owners, and they built a business from nothing, and I got the opportunity to come home, take it over, buy it from them, go through all the family, family fun and have the emotions and feelings and, and force them to sell it to me because I got tired of building their equity at my expense. But anyway, long story short, that was the big one. The second big thing that that was a seminal event was when I bought my second business, of course, I brought my Wall Street attitude. I thought I could analyze my way through it and my numbers weren't wrong. I had an accountant and accountant brought in a score mentor for me. And they both saying the same thing. And I bought the business I overpaid for count myself upside down. And about 75% of what my accountant and the score mentor told me came true. Thankfully, they helped me through it. I got the business going the right way. And I actually started mentoring for score and really enjoyed the work. That's what triggered me to say how do I make a business out of helping other business owners? Well, my mentor said, Hey, James, you're an attorney. They have these things called Business attorneys. If you can do the work well that's That's how I launched it. So when I, when I ended up selling my first business, I said, Alright, I'm gonna see if I can do business and transaction work on the side see work as well, the same owners or purchasers came back and bought my second business about a year later I had launched my legal services in between and now on set and I'm a full time attorney. So between losing my job and almost taking my business upside down, those were the two big things, the two big, you know, arguably failures that that I learned from that pushed me in areas.
Jay Kingley 20:33
I now need to James, you really educated, I think our audience on the importance of vendor management. And in that context, the role that a really good business attorney can play in helping a business navigate the world and all the things that sometimes we don't anticipate, and we don't think about. So I'm sure many of our listeners are going to want to reach out to you what's the best way for them to contact you.
James Sanders 21:03
So you can of course, go and email me Jay Sanders@MPL-law.com You can get in touch me through our website, www.mpl-law.com. Or you can reach us via telephone 717-845-1524. So any of those methods, I will get back to you and and this is what makes me a little different than other attorneys as well as I'll actually return your call.
Jay Kingley 21:34
And that is different there. I have some guys put that in the show notes to make it easy for you to reach out to James now, James, I don't mean to ambush you. But I'm going to do it anyway by our guests to give a little something a little present little gift to our listeners. So I'm gonna put you on the spot. And I'm gonna say, James, what can you offer our listeners in return for them hearing you out?
James Sanders 22:01
So typically, when you engage with me, I will take an hour of my time to understand what's going on why we're talking. And I don't charge for that. But this situation I'm going to get I'm going to double that. Awesome. I'm going to double that and get two hours of my time. Okay, almost $1,000 value.
Jay Kingley 22:25
I appreciate that. What an incredible offer. Please mention that you heard James on the Best Kept Secret podcast. So James, I want to thank you. You are awesome. You really gave us some tremendous insight. guys reach out to James, he is an uncommonly fantastic business attorney. Thanks guys be back with you soon.
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