The Benefits to Attorneys of Voluntering with Emerging Businesses

SUMMARY


A creative approach to pro bono work that can reap a multitude of benefits for an attorney or firm is participation in "an emerging business" program, cosponsored by others interested in economic development, such as a bank, utility, or government agency.

This article discusses an example of a successful “emerging business” program and benefits to attorneys of this kind of program.

Another marketing opportunity for attorneys is a program where an individual attorney or several attorneys from a law firm, often in conjunction with other consultants, "adopts" an emerging business. The firm provides pro bono services to the business for a specified period (usually one year).

The advantage to the attorney or firm of this program is that it concentrates pro bono efforts in one area, allowing for major impact and significant control over events. It can also result in high visibility and significant good will among program recipients and other supporters.

"Adoption" programs of emerging businesses are most effective when cosponsored by a government agency. Many cities, counties, or community groups will engage in activities to encourage the growth of emerging businesses. The U.S. government's Small Business Development Centers can put attorneys in contact with emerging businesses and will be a strong cosponsor of the activities. By participating in one of these programs, the attorney or firm will benefit from the goodwill created not only with the company being helped but also the goodwill within the sponsoring agencies.

Adopting a knitting company

Here is a case history of a 50-person law firm which participated in a statewide adopt-an-emerging-business program, sponsored by the governor's office of a western state.

A regional office of a national accounting firm, a bank, and law firm chose to participate in their state's emerging business project. They "adopted" a company that would receive a year of free, coordinated services in the hope of aiding the state's overall economic development.

Five years prior to "adoption," the company was started in a garage. Its products were knitted apparel, mostly made by local women in a small town of 4,000. The company manufactured "fleece wear," which it called a stylish cousin of the sweatshirt. The products came in pullover or cardigan styles and featured knitted decorative panels. They were commonly sold in resorts and boutiques at an average retail price of $42 to $60.

The owners always believed their business had great growth potential. So when the governor's office announced the adoption program, the firm immediately applied along with 200 others.

In the beginning, the owner had designed the first products as a way that women in an economically depressed section of the state could earn enough money to offset partially the cost of a knitting machine. She took the first garments to a local crafts fair, where they sold quickly.

Rapid Growth

The owner formed a partnership with another woman and set up a business. Orders grew rapidly. Two years prior to adoption, they were selling 1,500 shirts per month. But at the time they applied to the governor's program, the firm was selling between 8,000 and 10,000 pieces in a month.

The rapid growth left the partners uncomfortable with their business skills. One owner received business advice from her husband who ran three pizza parlors. The other owner had kept books for a family farm but neither felt equipped to run a business with annual sales approaching $1 million.

The bank, accounting firm, and law firm helped the partners build their business skills and solve business problems. The legal firm put together a lease for their plant and, together with the bank, helped refinance the business at a substantially better rate. The accounting firm helped the partners computerize the bookkeeping.

But most of all, the owners reported, it was "simply good to have counselors" to help with everyday problems such as how to set up an employee bonus system or how to deal with personnel problems.

Before being adopted, the partners discussed postponing any growth for a year while they learned more about running a
large company The owners feared getting overextended, so the consultants helped write a long-range business plan for safe, steady growth.

Specifically, the law firm assisted the company in several areas where small, growing businesses need legal help: form of entity, financing practices, and lease and other contractual agreements.

Attorney Participation

When the law firm became involved, they discovered the principals of the emerging company were in a partnership. The attorneys recommended the owners incorporate under subchapter S status, pointing out the issues to small-business owners of liability, responsibility for corporate debt, and tax consequences.

The attorneys helped negotiate the termination of an existing inventory purchase financing agreement. This financing arrangement was costly and was using up the capital needed to maintain operations and grow. Once free of the old arrangement, the company was able to pursue less expensive financing.

Because new businesses often are forced into accepting relatively expensive credit terms as a result of their lack of positive credit history, the attorneys moved the company out of its old financing agreement into a more conventional and less costly line of credit. The attorneys noted that although emerging small businesses can operate successfully on cash flow and a certain amount of high-cost credit, significant expansion usually requires a source of reasonable, conventional credit to avoid excessive cash flow drain.

The company held a month-to-month tenancy which either party could terminate on 30 days' notice. After determining the current facility would be adequate for several more years, the attorneys drafted a long-term lease which created greater stability for landlord and tenant and encouraged construction of tenant improvements.

The attorneys also reviewed insurance policies with their broker, consulted on employment law issues, and scrutinized their contracts with suppliers and personnel. The result of this activity was continual coverage in local and statewide newspapers on the innovative program. A major article in a statewide business magazine described the role of the attorneys in detail, along with that of the bank and the accountants. Since the program was initiated and cosponsored by the state governor's office, the state economic development agency continually praised the program in various forums, including department newsletters, public speaking events, and interagency memos. More direct benefits for the law firm included strengthening of relationships with individuals at the accounting firm and at the bank, which led to referrals for other business. In addition, the public information aspect of the program emphasized the role of attorneys to provide assistance in areas of financing and leasing. Other companies, realizing the value of this service, called the firm for assistance in this area.

This case history points out that, from a marketing perspective, the "adoption" approach to pro bono work can work well to supplement other business development activities. The key to a good program lies in ensuring that:

• The program is well organized and sponsored by a credible organization or government agency
• The company being adopted fits the market in which the attorneys wish to practice
• The attorney regards the adopted company as a genuine client, performing high-quality professional work
• Attorney staff understands the purpose of the legal work for the adopted company
• Appropriate publicity and recognition is undertaken either by the firm or other sponsors
• Good relationships and referrals from other consultants involved with the project are established