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The Importance of Having the “Right” Attorney on a Contractor’s Expansion Team

For most contractors, business growth and expansion is a key goal. The general belief is “bigger is better” and that a contracting company will bring in more revenue the larger the company gets.

Unfortunately, growth does not always produce increases in revenue. In fact, when a company grows too quickly the opposite result can occur and the business can suffer serious financial setbacks.

When selecting an attorney, here are some areas to focus on.

Choosing the “Right” Attorney

The problem is not finding an attorney, as the country is inundated with them; rather it is finding the “right” attorney. Contractors looking to expand should seek out an experienced attorney whose practice is focused primarily around business and who has experience with expansion and growth.

Often, contractors make the mistake of hiring an attorney who is a family friend and who may handle a myriad of legal matters, including business. An attorney who practices in too many different areas may not be equipped to provide adequate counsel and advice to a contractor interested in expansion. While the “jack-of-all-trades” attorney may mean well, he or she simply may not have the time or experience to properly assist the contractor.

Two key questions to ask a prospective attorney are:

  • what percentage of the attorney’s practice is focused on business and transactional matters; and
  • has the attorney had significant experience with purchasing, selling, growing and expanding businesses?

Contractors should be looking for an attorney who spends 80-100 percent of his or her time on business matters and who has handled similar expansion matters.

Does Size Matter?

Yoda will be the first one to point out that “size matters not” and in most cases, it holds true when selecting an attorney for business expansion. Sure, the mega firms have more resources, more secretaries and more paralegals, but this does not mean that they have better attorneys. Contractors can find extremely high-caliber attorneys who are either solo practitioners or at small firms. Two major complaints by contractors employing large firms are high hourly rates and being assigned to associate attorneys, paralegals or secretaries.

Contractors looking for growth need to be able to pick up the phone and get their attorney on the line. They should not have to deal primarily with paralegals or secretaries. As long as the attorney is qualified and experienced in business transactions, the size of the firm that he works with should not matter.

What Should the Attorney be Doing?

An attorney assisting with expansion opportunities of a construction company should be focused on a variety of legal and quasi-legal matters that provide the contractor with the ability to make good decisions about an expansion opportunity as well as preparing and reviewing contracts and other legal documents.

One often overlooked area of attorney involvement is the due diligence period. Whether a contractor is looking to buy a new business, assimilate an existing company or franchise his or her business, an attorney should be involved with due diligence.

Business owners may not think that it is necessary to involve their attorney with due diligence. Rather, they try to cut legal expenses by reviewing financial documents, existing liabilities and related areas of concern alone. This is never a good idea. An attorney can provide contractors with insight into risks and benefits of assimilating a company or other avenues of expansion. Attorneys can obtain asset profiles, pending litigation information, background information and much more. While ultimately it is the contractor’s decision to move forward with an expansion plan, a qualified attorney can provide valuable insight and limit exposure, risk and liability.

Construction businesses thinking about expansion should waste no time building their expansion team. One of the first members of the team should be a qualified and experienced business attorney. If expansion is approached carefully and thoughtfully it can produce unparalleled revenue increases for contractors. However, failing to provide adequate respect for the process can result in devastation.

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