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Investing in a Little Law

A big worry for stockbrokers about 15 years ago was the rise of the day trader, people who would trade stocks on their own account, paying a minimal charge for each trade. Stockbrokers feared this would be a disaster, but it proved to be a boon. Day traders, focused only on the next trade, were consistently behind the curve. Day traders were the ones buying when brokers were selling, and selling when brokers were buying. Investors who had access through their stockbrokers to better analysis and information gathering profited from the ignorance of those without such access.

The same is true in the legal world. Business owners worry about cost, and lawyers are at the top of the list. However, while legal advice may be expensive, it is usually a wise investment. Not getting legal advice in a timely manner can be much more expensive.

Good legal advice cannot always prevent dishonest people from stealing assets like customer lists or formulas. However, a dollop of good legal advice in advance can save far larger costs later on. Having a lawyer review a lease before signing it can point out potential problems to avoid, like responsibility for utility costs, common area maintenance costs, and the like. It may seem cheaper to avoid a lawyer when buying assets from a competitor, but the savings can disappear when there is a dispute over what was bought or sold.

Investors are not traders. Investors see the big picture over time, as good business owners do. Investing in legal advice before a problem arises is far cheaper than dealing with the catastrophe that can come afterward.

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