Bootstrap yes, but don’t skimp on a good lawyer or accountant

Google don't like lawyers

Google “I like lawyers” and the top results are articles such as “Why do people hate lawyers so much?” and “People like lawyers less than you think”.

Even Google can’t find a positive result.

It might be easy to knock them, but finding a good lawyer or accountant is critical to the success of any business. I wonder why they get such a bad rap? Perhaps its the legalese and financialese that some find perplexing, or the $100’s per hour fees charged in 6-minute blocks that wrangle.

While it’s important to conserve cash when starting (and running) a business, as my wise business professor used to say: “Never skimp on a good lawyer or accountant; doing so will be a false economy. Find a good one, and these people will save you tens of thousands of dollars in the end.”

I can certainly attest to that…

When our fledgling online business was still in ‘bare survival mode’ in the early 2000s, I became aware of a relatively new government scheme called the ‘R&D Tax Rebate*’ (or ‘R&D Tax Incentive‘ as it’s now known). I remember asking our existing accountant (twice) whether we qualified, and being told unequivocably that we did not. At the networking function around this time, I got talking to a city accountant who had been at the same uni as me, and he mentioned that we would definitely qualify. I followed up with him, and not only did he manage to get us over $50,000 cash back that year, he backdated the process (as we’d missed out in its first year of operation, the year before) so we duly won two years worth of rebate, over $100,000 in cash. At the time, this was the difference between sink or swim.

We changed our accountant.

[* The scheme allows businesses investing heavily in R&D to convert a portion of their losses into cash back from the ATO. Once profitable, you can use it to minimise tax. I would estimate this scheme returned us half a million dollar benefit over the course of the subsequent 7 years.] 

Also around this time, we were made aware that a rival website was taking data from our site, and displaying it as if it was theirs. I became perplexed as to how this could be legal, but various lawyers I spoke to did not seem to know if we even had a case. Until I met a brilliant IP lawyer, who had used our site before (so he was a fan, which was nice), and seemed confident that we were in the right, and they were in the wrong. The upshot of his work was that other site shut themselves down.  You can read the ensuing media coverage of this case here.

I have used this same IP lawyer ever since.

I can tell you that both the accountant and lawyer mentioned above were extremely reasonable with their charges, and sensitive to the fact that we were but a small startup with limited funds. It felt good to have some experts on your side, and to get good outcomes as a result. I could not have done any of this alone.

So, do not skimp on a good accountant or lawyer. But bootstrap your startup. It sounds paradoxical, but it’s probably the best advice I can give you.

Advertisements

2 thoughts on “Bootstrap yes, but don’t skimp on a good lawyer or accountant

  1. The R&D question is where interpretation is so important and strictly speaking your first accountant may have been closer to being right. Cutting code to a known specification to solve a known problem is not R&D per se but obviously it’s not hard to spin in a story about how you are researching to build a totally new technology or whatever.

    Accountants who get too creative however should be avoided as well as the trail of failed tax driven incentive schemes over the years will attest …… all of which makes me wonder why the tax office seems to have so much trouble in vetting these schemes are there is so much money being lost through claims that won’t stand scrutiny.

    • Absolutely – I’m not saying all R&D is deductible; we had to do a lot of work every year to show the valid R&D and innovation we were doing. We were breaking completely new ground in map based property search 7 years before Google Maps. We had Ausindustry interview us, and there’s a lot of paperwork to do, and that’s fine. But imagine if we’d accepted we were not eligible.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s