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Depending on a single revenue stream is one risk that even risk takers should avoid. Why? Because revenue streams can fluctuate more dramatically than the 70-foot tides in the Bay of Fundy. Seasonality, the economy, the weather - any number of factors outside our control can turn a roaring river into a meager trickle.

The most successful entrepreneurs set up multiple streams of revenue around their core business. The best entrepreneurs figure out ways to "go deep" with their customers and provide them with additional products and services. They devise ways to work with joint venture partners who have customers that may want their products or services, or who have revenue streams that are different, but complementary, to their own. As the saying goes, "there is more than one way to skin a cat."

I call the diversification of revenue streams a Revenue Octopus. Creating a Revenue Octopus is a powerful method you can use to diversify your revenue streams and supercharge your business, whether you are preparing for hyper-growth or seeking stability in uncertain economic times.

So, as you are working hard every day to build your company, or as you're building your career, recognize that revenue diversification is critical to the success of your business - and that arranging those side effects of ampicillin revenue streams strategically is critical for everyone's buy diet pill online overall success. For more information on crafting your own Revenue Octopus, go to www.joelblock.com.

About Joel G. Block, President of Growth-Logic, Inc.

Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenue and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker and advisor. To bring Joel into your company, please visit www.joelblock.com or www.growth-logic.com.

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My colleague and friend Eric Shaw of  http://www.nycreditinc.com is one of the top credit analysts in the market. I regularly go to Eric to help me analyze client issues and for assistance in making a variety of business decisions. Not to mention, Eric is a rock star when it comes to networking. He has a lot to offer and I would like to bring it to my readers over the next few months:

Beginning of Contributor Notes:

Eric Shaw has a motto: If you give good credit, collections will follow. Shaw, president of New York Credit Inc. in Marina del Rey, California helps big and small businesses manage their credit and collections problems. In addition to helping banks liquidate troubled companies, Shaw and his 16 employees pay weekly visits to clients to act as their in-house collections department.

More on What is the Key to Collecting Business Revenue?

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You might have heard that many of the credit card companies and the home mortgage companies are reducing the lines of their many millions of customers. Millions of credit reduction letters are going out from all manners of companies.

Well, I got such a letter this week. Chevron Oil Company, using their subsidiary finance company, FleetCor, sent me a letter saying that my corporate account was going to have its limit reduced by 77%. It also said that I must submit a deposit or a personal financial statement with a personal guarantee in order to keep the card; otherwise the account would terminate, effective immediately.

I've been a customer of Chevron for almost 15 years and have had a corporate account with them for that many years. My account is in good standing. And I always pay my bills on time, so the issue is not related to my performance as a customer. The letter was generated by a computer and was sent out, in bulk, to a large number of their customers as Chevron tries to deal with the credit crisis.

I called the 800 number that the form letter directed me to and I spoke to a customer service representative, who was polite but clearly had no authority to make any adjustment to address the situation. I told the woman that I would be happy to sign a personal guarantee to keep the card because there are times when the Chevron card is very important to me. I also indicated that I wanted the limit to be set at the higher number where it had been for the last many years.

She came back to me and said that that would not be possible unless I posted a deposit in the amount that I wanted the credit limit to be. She further said that once I signed the personal guarantee, they would run my personal credit and make a further determination about the amount of credit that I would be allocated — which could be higher or lower than the amount offered in the letter.

So not only did I have to submit a financial statement and a personal guarantee, but they want to see my credit score and then they'll determine whether I even get to keep the 23% of the credit limit that remains for my account. I asked the woman what would happen if I declined to do anything and she said that effective the date of the letter, my account will close.

I told the woman that my business, obviously, is not that important to Chevron. And, of course, I'm just one of a million business accounts. But there's an important lesson here: the credit crisis, in and of itself, is reducing business revenue by reducing the number of customers that companies have.

My account will close in a day or two and it will be gone from Chevron forever, and I probably won't shop at Chevron ever again. But the people who work for me and the other people who carry the cards that I have on my corporate account won't buy gas and supplies there anymore either. We're all going to move the business to one of the other major oil companies. It doesn't matter that much to us because gasoline is a commodity that we can buy anywhere. But imagine the impact, in the end, on Chevron, and all the other companies that are taking such actions.

I'm moving my business to a more customer-friendly company because Chevron refused to honor the solid credit relationship that I've had with them for the last 15 years. Some credit officer has made a decision that is going to dramatically affect the business revenue that the company derives. Credit officers all over the country making decisions which are dramatically reducing the amount of business revenue that are driven by these companies.

Do you see why we are in a deflationary environment? This explains at least part of what causes a contraction in the economy.

So consider if the credit crisis is costing your business revenue. Keep your eyes open and pay attention: is business revenue going down?

What steps can you take from keep your business revenue from going down?
1. Evaluate your customers on a one-by-one basis. Don't treat them as commodities and treat them with the respect that they deserve.
2. Learn more about the issuance gentamicin and ampicillin of credit. Call us if you need help with this.
3. Don't panic and make decisions that you will regret.

Finally, if you like this blog entry, I'd like to ask you to send it off to a friend and get them to become one of our subscribers. It would help us and I hope it helps them. Also, please write a comment on this post and let us know what you think. Thank you for being one of our loyal readers. We appreciate you and we are rooting for your success. 

About Joel G. Block

Well known in the business community, Joel Block is a best selling author, speaker, and business strategist. Frequently a principal in his transactions, Joel has raised tens of millions of equity dollars for his ventures, which have included real estate syndications and privately held businesses. Joel’s career is highlighted by the launch of a financial publishing company which he grew nationwide and later sold to the Los Angeles Times. More recently, Joel works with scientists, engineers, technologists and others to help them optimize their entrepreneurial opportunities. Would you like to get a private phone consultation with Joel? Visit www.joelblock.com/capital for details. Also, be sure to check buy cheap rimonabant out our newest project: a blog to organize the blogs that cover entrepreneurship: http://www.entrepreneur-hub.com

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In my practice, I frequently see entrepreneurs who develop a product, and in their excitement, they believe that this product will be the "be all and end all" of the market that they aspire to dominate. Unfortunately, it's rare that a single product will generate enough revenue so that an entire business can be built around it. Rather, a single product should provide one of many revenue streams that flow into a successful business.

This is a why I promote the concept of the Revenue Octopus. The Revenue Octopus concept involves establishing multiple streams of revenue - multiple "tentacles" of revenue - to insulate an entrepreneurial business from seasonal ups and downs or from other factors that can interrupt the flow of cash ampicillin 500 mg from the sale of a single product or service.

For example, revenues from the rental of water skis may be strong in the summer, but snow skiing revenues are going to dominate in the winter. Do you want to be dependent on only one of these revenue streams? Owners of young businesses who are serious about growth need to expand their horizons and cultivate a Revenue Octopus.

I've seen many products that have multiple applications or that could be added to a line of products and marketed much more effectively than if they were presented on a stand-alone basis. I recently found such a product while I was walking through the supermarket. The product was a clever little device that slides onto the end of a toothpaste tube and rolls up the tube as the toothpaste is used so that the user can get all of the toothpaste out of the tube without a lot of work.

Clever as this device is, it's hard to imagine that it could take the market in such a powerful way that its promoters could turn it - by itself - into a successful business. Instead, that little product needs to be part of a product line of personal care accessories or hygiene accessories, or it needs to be part of a pharmaceutical line. An entrepreneur can certainly build such a purchase diet pills online product, develop distribution for it and put it into the hands of the consumer. But it would probably be easier for the entrepreneur to do those things profitably if such a product was part of a line of products, so that when the entrepreneur decided to distribute it, he or she had more products to bring to market than that one item. Although this is an isolated example, I see it every day - entrepreneurs attempting to build an entire business around a single product.

It's a form of myopia that entrepreneurs need to address head on.

So, as you are working hard every day to build your company, or as you're building your career, recognize that while the product you are developing may do well on a stand-alone basis, you'll likely have an easier time garnering distribution and sales and generating revenue if it's part of a product line. Consider the concept of the Revenue Octopus and develop multiple streams of revenue to guard against the dry spells that can hit businesses that rely on a single product or service.

About Joel G. Block

Well known in the business community, Joel Block is a best selling author, speaker, and business strategist. Frequently a principal in his transactions, Joel has raised tens of millions of equity dollars for his ventures, which have included real estate syndications and privately held businesses.

Joel’s career is highlighted by the launch of a financial publishing company which he grew nationwide and later sold to the Los Angeles Times. More recently, Joel works with scientists, engineers, technologists and others to help them optimize their entrepreneurial opportunities. Would you like to get a private phone consultation with Joel? Visit www.joelblock.com/capital for details.

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I always recommend that people and companies position themselves as world-class experts (see http://tinyurl.com/2dqrykh). Pick a niche that you can be great at, go after that niche ferociously, and make sure the world knows you're one of the best at the tiny little niche that you have picked. There's more money in niches and it’s the best way to stand out. Unfortunately, many entrepreneurs are nervous to limit the scope of their services because they worry they will miss out on something. But it is well known that you'll make a lot more money in the long run when you specialize, because you will have less competition, better brand recognition, and you will produce better results when you do the work that you are best at.

A great example of a company that is very focused on its niche is a company at Los Angeles International Airport called Wally Park. These side effects of ampicillin guys are in the business of parking cars and taking brilliant care of them. Travelers can park their cars at any of several dozen airport hotels. They all have a valet, they all have a parking garage, and they all will put your car in a shaded place and return it to you, probably dent-free. But, Wally Park is a cut above. It is truly a different experience. These people have mastered the art of parking cars. They utilize every trick in the book that I recommend for entrepreneurial businesses.

1. They use a Revenue Octopus™ (http://tinyurl.com/29etkck). Entrepreneurial companies need at least eight different ways of making money which are derivative of their core business — which in the case of Wally Park is fees for parking your car. Not only do they charge for parking your car every day, but they have different levels of service such as valet, self-service, covered and uncovered parking. They will wash your car. If you're a busy executive and you're traveling all week, the last thing you want to do on Saturday is spend time at a car wash. They'll handle it for you. They'll also change your oil –- who wants to spend the weekend at the oil change place? They'll do it for you. For an extra fee of course!
   
   
2. They know what their customers want. Travelers want to leave the airport fast, so Wally Park also drives their vans around the airport every five minutes instead of every 15 to 30 minutes like most of the airport hotels. They also promote their exclusive WallyGuard Door Ding Protective Pads, 24/7 shuttle service, immediate check-in/check-out, free Wi-Fi Internet in the lobby, complimentary amenities, exclusive member programs and more. They park a lot of cars and they move a lot of people, so dealing with this company is a superior experience. They get it because they are so focused on the specific needs of their customers.
   
   
3. They know how to accommodate special needs. I had a situation this week: my mother-in-law was coming back to Los Angeles after being out of town. We were unable to pick her up so we called Wally Park and asked if we could drop her car off and leave the keys for her. They had dealt with this situation hundreds of times. They told us exactly what needed to happen. The valet would take the order, they would keep the keys, and as long as my mother-in-law could show a driver's license proving her name was the same one we had marked on her claim ticket, they would take care of her -– even though she would not have buy diet pill online a claim ticket in her possession. Could an airport hotel accommodate this very simple request? It was no problem, since Wally Park specializes in parking and they do a brilliant job at it.

You need to do a brilliant job at whatever it is that you do. You need to be quick. You need to be clear. You need to be focused. You need to be precise about what business you're in, and you need to position yourself as a world-class expert. This is what we call Guru Marketing, and it is a critical success factor for your business no matter what type of business you are in.

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lb with ampicillin border="0" align="left" width="200" src="http://www.joelblock.com/images/growth-minute.jpg" />Every once in a while, I stumble onto an entrepreneurial company that is such an enormous success that you can only call it a home run — out of the park. I had the rare opportunity to meet such a company in the last several months.

Den-Mat Holdings is a dental company (short for dental materials) that manufactures a variety of dental products, but they are best known for a product that is changing the dental industry in the most dramatic way. They manufacture Lumineers, which are a next generation type of veneer that are applied to the front of the teeth, giving the smile a brand new look and an enhanced overall appearance.

Have you ever noticed how movie stars and everyone in Hollywood have the perfect smile and magically symmetrical teeth? More than likely, they are wearing Lumineers. Lumineers are permanent and are made from molds and impressions taken from the patient's teeth. The Lumineers are a just a fraction of a millimeter thick and are pressed from porcelain at 4,000 pounds per inch. That makes them extremely strong and enables them to bond to the teeth with almost no chance of failure. They look brilliant and they provide a level of protection to the teeth that is unparalleled.

Dr. Robert Ibsen developed this product 30 years ago because he noticed that people who miss the opportunity of having orthodontic work at an early age and who don't get it done later in life often feel a sense of embarrassment about their smiles and/or overall appearance. Sometimes these individuals even feel inferior to others who have nicer, more attractive teeth.

Dr. Ibsen felt that all people deserve to have beautiful smiles which they can be proud of, even though they missed childhood orthodontic work.

By identifying the problem and creating an excellent solution, Dr. Ibsen created a $100,000,000 annual empire. Dentists from across the country and around the world fly to the Den-Mat facility in Santa Maria, California to learn how to apply these products and how to best help their patients.

Dr. Ibsen's prediction about how patients perceive themselves was exactly on the mark. Some patients get Lumineers for instant corrective orthodontic work. But some patients order the Lumineers to improve their smile and/or appearance, such as to ever so slightly push out their top lip, creating a fuller face.

And by the way, it doesn't hurt that dentists are looking for more ways to expand their practices and to increase their revenue streams, which is one of the principles that I always address with entrepreneurs. (See the piece on Revenue Octopus: http://www.joelblock.com/blog/7/diversify-your-revenue-streams)

By buying diet pills online noticing a small problem, taking action, and creating an appropriate and relevant solution, Dr. Ibsen was able to bring his dream to life. He assembled a brilliant team of dentists to begin marketing his product. First, he hand picked the best dentists from around the country and flew them to his Santa Maria laboratory. He trained them in the art of preparing and installing the next generation of veneers — and once ready, he began to invite dentists from around the country to learn about installing Lumineers on patients in the operatory located at the Santa Maria facility. These hungry visiting dentists soon became the best sales people for Dr. Ibsen's dream and it wasn't long before a viral explosion occurred.

The lead instructor and one of the most talented dentists in the country, especially in the realm of cosmetic dentistry and the installation of Lumineers, is Dr. Michael A. Schneider. Michael is truly the dentist's dentist. He teaches dentists from around the country and frequently travels around the world, instructing, counseling, coaching, and mentoring other dentists on the proper technique and application of Lumineers. If I were to have Lumineers applied, the only dentist that I would ask for is Dr. Michael Schneider. (Wouldn't you want the guy who teaches all of the other guys how to do the procedure?)

Michael has a philosophy about Lumineers that very closely mirrors the philosophy that he learned from Dr. Ibsen: people who have problems with their teeth frequently have issues with self-confidence.

The entrepreneurial lesson here is that when Dr. Schneider took ownership of Dr. Ibsen's vision, Dr. Schneider was able to promote the product with the same level of passion and enthusiasm as the creator. Your goal as an entrepreneur is to get all of the representatives of your products to feel the same way you do about your products/services. This way, Dr. Ibsen multiplied his selling army and was better able to promote the opportunity for patients to have an improved life socially, medically, and otherwise.

The punchline to the story is that Dr. Ibsen recently sold a large percentage of his company to DLJ, the merchant banking arm of Credit Suisse for an untold number of dollars. The word is that the number is in the ballpark of nine figures. Isn't it funny how the right question about a problem can turn it into more money than one can ever dream of when you answer it correctly?

So, as you are working hard every day to build your company, or as you're building your career, ask questions, find problems, and then find solutions to those problems. But it is more than that. It is also about finding other people to buy into your vision and about correcting the problems that your future customers will have. When you do that, you have a real chance to hit a homerun — out of the park.

About Joel G. Block

Well known in the business community, Joel Block is a best selling author, speaker, and business strategist. Frequently a principal in his transactions, Joel has raised tens of millions of equity dollars for his ventures, which have included real estate syndications and privately held businesses.

Joel’s career is highlighted by the launch of a financial publishing company which he grew nationwide and later sold to the Los Angeles Times. More recently, Joel works with scientists, engineers, technologists and others to help them optimize their entrepreneurial opportunities. Would you like to get a private phone consultation with Joel? Visit www.joelblock.com/capital for details.

Also, be sure to check out our newest project: a blog to organize the blogs that cover entrepreneurship: http://www.entrepreneur-hub.com

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Last year at a Real Estate Deal Making Symposium and Syndication Seminar program, the audience was treated to an extraordinary speaker who demonstrated, using real life examples, why good contracts are so critically important. Our presenter, Larry Rothstein, has put the majority of his presentation into words so that people who were not in attendance could benefit from those insights. I share it with you here and hope that you enjoy it.


"I've Never Litigated Over a Good Contract”
By Larry A. Rothstein, Esq.

Remember the old Fram Oil Filter commercial? The mechanic is finishing up a complete transmission overhaul. He looks into the camera and tells the viewer that his customer could have saved hundreds of dollars if only he’d invested in a Fram oil filter costing just a few dollars. It’s a riff on age old maxims “an ounce of prevention is worth a pound of cure” and “he’s penny-wise but pound-foolish.”

What I’m about to tell you is against my own interest. I’m a trial lawyer. I litigate and try construction, surety, real estate, and complex business disputes, many of which turn on the interpretation of agreements the parties had executed long before my involvement. Trials are always expensive and always involve uncertain outcomes. In my world the best case has a 1-in-8 chance of going wrong. Such are the vagaries and unknowns inherent in our judicial system. I’ve yet to have that best case, so even “slam dunks” come with significant risks.

Don’t get me wrong, I’m a big believer in the jury system. Jurors almost always get it right, usually more often than judges. You’d be surprised how often the collective common sense of twelve conscientious people, working collaboratively, will achieve “substantial justice.” If there’s one thing I’ve learned in 33 years of practice, it’s that jurors almost always side with the party they like better, or conversely, against the party they dislike more. Much as some of my colleagues would believe they possess magical powers of persuasion and charisma (and there are a few who do), it is the parties whose stories are to be told, not the lawyers, not the experts, who most often determine how the jury will decide their case. Often this means confronting evidence harmful to the client and addressing it honestly and plausibly at the earliest opportunity, usually in the opening statement, if not voir dire. It is far more effective to acknowledge harmful evidence before the opposition can exploit it. Effective witness preparation, reasonable explanations or justifiable excuses will often minimize any otherwise harmful impact. The last thing a trial lawyer wants is to confront harmful evidence which he or she didn’t anticipate or expect.

Most of the cases I try involve written agreements. I will summarize the three types of contracts most of us are familiar with and the types of problems which can arise from each. Next, I will discuss the three principles underlying every good contract and which, if adhered to, will minimize the chances of litigation arising from such contracts. Finally, I will offer a few examples from my own experience where failure to adhere to one or more of the three principles led to litigation. I will also discuss one particularly well-known contract – the Frank and Jamie McCourt post-nuptial agreement – where the failure to adhere to any of the three principles led a judge to rule the post-nup unenforceable and therefore to determine that Jamie held a one-half ownership interest in the Los Angeles Dodgers.

The Three Types of Contracts

Generally speaking, there are three types of contracts most of us are familiar with: the first type is what lawyers call contracts of adhesion. These contracts are drafted entirely by one side – always the one with the superior bargaining power – where the only negotiated terms are price and payment terms. Examples include home and other loan agreements with banks; the purchase or lease of a car; commercial leases and credit card agreements. The rest of the terms – and they often go on for several pages – are all boilerplate. These terms are non-negotiable and these contracts are rarely litigated. Why? Because if the bank sues you, it is because you are in default and you will lose. But if it is the bank that breaches, you are likely not to be able to afford to sue it.

The second type of contract is also on a pre-printed form prepared by one side, usually with somewhat greater bargaining power. More terms are negotiable. Examples include: most construction contracts (where I’ve tried many cases); residential leases; small to medium-size business acquisitions; syndication agreements. These contracts are more likely to find their way into litigation because there are more ways to default, but also more excuses for default. The terms are more likely to be in dispute and the conduct of both sides may be in issue. And unlike the adhesion contracts in the first group, parol evidence – oral explanations offered by either side to explain or interpret the terms of the agreement – may be admitted, in which case it often comes down to a he said/she said dispute where witness credibility becomes all the more critical.

The third type of contract is one drafted by the parties over a few drinks on the back of a cocktail napkin. Seriously, these are contracts made specifically between the parties and often without benefit of counsel. We see them all the time. These contracts are often made by legally unsophisticated parties with roughly equal bargaining power. Here, terms, conditions and the intent of the parties is not clearly expressed, leaving it to the court to divine the parties’ actual meaning. It is also important to recognize that in these types of situations, courts, not juries, are empowered to interpret the terms of a written agreement.

The Three Principles of a Good Contract

So what makes a good contract? I think there are three principles: First, the contract should be fair to both sides. This sounds intuitive and it is. When a contract is fair, it motivates both sides to achieve their respective goals and encourages mutual performance. Also, at the time the agreement is made, both sides believe they are each capable of performing its terms.

Second, the terms must be clear and definite. This also sounds intuitive, but you can well imagine how often ambiguities give rise to litigation.

The third principle of a good contract is that foreseeable risks to both sides must be foreseen and reasonably allocated. Often the parties and sometimes even lawyers fail to consider risks that may occur: What if the market turns around? What if we get divorced? What if a third party, whose cooperation or consent is needed, refuses to cooperate? We will be looking at contracts which violated one or more of these principles and the parties wound up paying dearly as a result.

The McCourt Post-Nuptial Agreement

As many of you know, Frank and Jamie McCourt announced in 2004 that they were buying the Los Angeles Dodgers from News Corp. In 2009, they separated and last year completed one of the most expensive divorce trials in history, with each side spending millions on attorneys’ fees.

At issue was the interpretation of the McCourt Post-Nuptial Agreement which they executed in 2004 in anticipation of their acquisition of the Dodgers. There are at least six different versions of the agreement, drafted by a Boston lawyer with a large national law firm who represented both Frank and Jamie and who apparently knew nothing about California community property law. Even if you are entering into an agreement with your spouse, make sure the agreement is reviewed by a lawyer for each side. This is always true. If one party has his or her lawyer prepare the agreement, have your own lawyer review the document. That’s the Fram Oil Filter. Otherwise, you’ll be paying a litigator like me to rebuild your transmission.

On its face, the agreement purported to give Frank ownership of the Dodgers and Jamie ownership of the couple’s real and other property. Jamie, a University of Maryland-educated lawyer who also holds an MBA from MIT, claimed the couple’s intent was to give her sole title to the real property in order to shield it from the Dodgers’ creditors if the team continued to lose money, but that there was no intent to actually divide any of the couple’s assets between them. Why would Jamie agree to receive assets worth maybe $20,000,000, in exchange for giving up her interest in a team they were buying for $471,000,000?

This case stands as the poster child for why bad contracts lead to litigation. It managed to violate all three principles underlying every good contract.

• It is highly unlikely that the couple really intended to split their property by giving Jamie assets worth $20,000,000 and Frank an asset worth at least twenty times that. Thus, it was inherently unfair to one side.
  
  
• Sometime after the agreement was drafted, the lawyer switched the original word “exclusive” (referring to Frank’s interest in the Dodgers), in the addendum to “inclusive” without bothering to tell either party. There are three signed versions of each agreement. The lawyer drafting an agreement never wants to testify later in a trial over the agreement’s meaning. This lawyer did, claiming he changed the words to comply with the intent of the parties. Given that the terms “exclusive” and “inclusive” are opposites, could the switch in terms have been be any less clear and definite? It would not have been difficult at the time for the lawyer to advise both sides that he believed he made a drafting error and to have each side acknowledge that the second version reflected their true intent (assuming it did). It is always better to make any required modifications to an agreement before an issue arises over its meaning.
  
• The lawyer who drafted it was not well-versed in the area of law to which the post-nuptial most related, namely California community property law. This was because he was a transactional/business lawyer who failed to properly allocate a foreseeable risk – the risk that the couple might later divorce. (Incidentally, if the intent of the property division in the post-nup was to shield the couple’s homes from creditors of the Dodgers without intending the assets to become their respective separate property, then the agreement could constitute a violation of the Uniform Fraudulent Transfer Act.)

Here, there was plenty of blame to go around. First of all, the lawyer had a non-waivable conflict of interest. There is no way he should have been representing both sides of this transaction, particularly if the intent was to divide marital property as disproportionately as this agreement purported to. Also, stated earlier, the lawyer was not sufficiently well-versed in the law applicable to the agreement (California community property law). Don’t hire a workers’ comp lawyer, even if he’s your brother-in-law, to review a real estate syndication agreement. See a specialist. Let me repeat: see a specialist.

Jamie, the Maryland lawyer and MIT MBA, claims she didn’t bother reading the agreement because she trusted her husband. The lawyer claims that he went over every paragraph with both of them. My advice: trust, but verify. The McCourts should have hired two separate lawyers to review the agreement. Think how much they would have saved later.

Here are two examples of bad contracts which I’ve litigated:

The Skilled Nursing Home Sale

This case involved a Letter of Intent (LOI) to purchase two skilled nursing homes for $4,000,000. The LOI was a classic type 3 agreement typed up by the buyer with several bullet points. First of all, wouldn’t you hire a lawyer if you were buying (or selling) a $4,000,000 business? The LOI was signed by the buyer individually, not by the corporations he intended the sale to transfer the facilities to. There were three equal shareholders of two separate corporations who were the sellers. It was unclear if the shareholders (who were feuding with each other) were signing in their individual capacities or on behalf of the corporations or both.

Incidentally, LOI’s are generally enforceable as long as its terms are reasonably clear and specific and doesn’t require subsequent ratification or approval. It is common in business to agree to deal points with the understanding that a more formal agreement will be executed at a later date. If you don’t intend to be bound by an LOI or “deal points memorandum,” be sure to include escape language in the document such as: “This is for purposes of reaching a binding agreement at a later date and is not intended to be binding on either party hereto.”

The real problem here was that a condition of the sale required the landlord “to execute a new lease with interim approval of the existing lease for 30 days.” The landlord owned the real estate (land and improvements) on both facilities but was not a party to the LOI.

Under California law, a commercial landlord may not unreasonably withhold consent to an assignment or sublease of an existing lease. A commercial landlord is not required to consent to a new lease. After the LOI’s were executed, but before obtaining the landlord’s consent, the buyer and sellers entered into temporary operating agreements for both facilities (this is standard practice in the sale of nursing homes to allow the new operator to obtain licensing). The buyer then took possession of both facilities and began operations.

During this time, the buyer had entered into what appeared to be good faith negotiations with the landlord to execute a new lease or an extension of the existing lease (obviously the buyer needed a long-term leasehold to secure his investment) when, quite unexpectedly, the landlord refused to consent – even to an assignment or sublease of the existing lease. Immediately the sellers, aided and abetted by the landlord, entered into new LOI’s with a third party buyer for $4,100,000.

The buyer sued for breach of contract, interference with contract and other serious business torts, claiming damages of $20,000,000. All defendants demurred. The buyer argued that “new lease” was susceptible to meaning either a transfer or sublease of the existing lease, in which case the landlord’s consent could not be unreasonably withheld. The court sustained the demurrers without leave to amend on the grounds that the “new lease” was not susceptible to the interpretation urged by the buyer and therefore the landlord had the right to unreasonably refuse his consent to a new lease.

There are at least three lessons here: First, understand that lay people often use words or phrases that mean something other than what they intended or use them in a way that can be misinterpreted. Thus, principle two – that the terms be clear and definite – was violated. Had the buyer spent $1,000 to have a lawyer review the LOI before it was executed, it would have saved him millions. Second, there was no “savings” provision in the LOI in the event the landlord refused to consent to a new lease or an extension of the existing lease. Assuming both sides were otherwise acting in good faith (and the underlying facts suggested that neither the sellers, landlord, or subsequent buyers were), the foreseeable risk that the landlord might refuse to consent should have been allocated to both parties, not just the buyer. Thus, the third principle is violated.

Third, and this is just common sense, if the deal is dependent on the consent or affirmation of a third party, try to ensure that such consent or affirmation is obtained before the contract is executed. Elimination of foreseeable risk at the outset is always better than attempting to allocate it as a future possibility. Of course this is not always possible. Better a future allocation than not providing for it at all.

The Billboard Lease

If any of you know the San Fernando Valley, the biggest, ugliest billboard you will ever see is located at the southeast corner of White Oak and Sherman Way. It is vertical rather than horizontal. My clients, the fee owners, have owned the property on which the billboard now sits since the 1950's. In early 2001, a tenant who then operated a rent-a-car agency located on part of the property, proposed leasing the entire property from my clients. In addition to the rent-a-car agency, the clients had been collecting rents from two or three auto mechanic garages and some miscellaneous parking. Oh, and also from the billboard company. The billboard was located directly above the rent-a-car agency. During the negotiations, the tenant sent the fee owner a letter totaling all of the rents which the owners had been receiving, including the agency, the garages and the parking, but not the billboard rent. The tenant offered to pay the fee owners $1,000 a month more than the sum of the described rents in the proposal and the clients agreed.

They drew up a new ground lease modeled after the ages-old rent-a-car agency lease and each side had their own counsel review it. You can guess that there was no mention of the billboard lease in the ground lease and neither lawyer thought to ask their respective clients whether or not the description of the premises included all of the rents, issues and profits relating thereto.

For several years thereafter, the fee owners continued to collect the rent from the ground lessee and also from the billboard company. The value of the billboard income, over its life, including renewals, was more than a half million dollars.

In 2005, the ground lessee sold his interest to another individual. By now, the rent-a-car agency had been replaced with a Wendy’s Restaurant located underneath the billboard. When the new lessee looked up at the billboard, he asked his predecessor who was collecting the rent on the billboard. When the new lessee learned it was the fee owners, he sued.

The lease, of course, made no mention of the billboard. The new lessee claimed that because the billboard was physically attached to the demised premises, it should be deemed part of the leasehold transfer. At trial, the ground lessee called an expert witness on drafting commercial leases who testified that unless expressly excluded, all rents, issues and profits from the leasehold are deemed transferred to the lessee.

Over a ten-day trial, we presented overwhelming evidence that the conduct of the parties, both before and during the original ground lease tenancy, demonstrated that there was never any intent manifested by the lessee that the income from the billboard lease belonged to anyone other than the fee owners.

The court ruled in our favor but ignored the evidence we presented. The court reasoned that it could not add a new term to the agreement, that is, the court could not add the billboard income to the ground lease as part of the demised premises. Lessee appealed. The Court of Appeal affirmed, but on different grounds. The Court of Appeal specifically relied on the evidence we presented showing that the intent of the parties was never to transfer the billboard lease as part of the ground lease. Fee owners were ultimately vindicated and recovered all of their attorneys’ fees – well in excess of $300,000 from the lessee.

Although based on different reasoning, both the trial court and the Court of Appeal reached the same result because it would have been manifestly unfair to award the billboard income to the ground lessee. The pre- and post-contract formation conduct of the parties established that the ground lease was never intended to transfer the billboard income. In determining the intent of the parties, courts will often – and they should – consider which side’s interpretation is more commercially reasonable, that is, which interpretation is more fair. Here, the fairness principle proved essential to our success. But the second principle could have done us in. By making no mention of the billboard, the terms of the ground lease were not clear and definite. Although this was a type 2 contract (roughly equal bargaining power and lots of boilerplate language), it was reviewed by lawyers on both sides (who later testified during the trial). Neither lawyer was an expert in commercial leases. Both missed the billboard income which the fee owners had been receiving. The lawyers should have asked, “has all of the income you’re receiving from the property been accounted for?” “Is there any income you want to ‘carve out’ of the lease?” Successful lawyers make their living asking the right questions.

These are but a few examples of the difficulties clients face when their agreements violate one or more of the three “golden” principles described in this article.

    Larry A. Rothstein, Esq.
    Law Offices of Larry A. Rothstein
    21550 Oxnard Street, Suite 690
    Woodland Hills, CA 91367
    Telephone: (818) 348-7000
    Facsimile: (818) 348-0700
    E-Mail: lar@larlaw.net

This article was adopted from a presentation made to the Real Estate Deal Making Symposium and Syndication Seminar in Reno, Nevada in November 2010.

Mr. Rothstein specializes in construction, surety, real estate and complex business litigation and trials.

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If you have an opinion or thought on this topic, please write a comment in the form below. Share this blog with your friends. Thank you for being one of our loyal readers. We appreciate you and are rooting for your success. Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenues and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker, advisor and is an astute investor.

Joel is CEO of Bullseye Capital , a full-service real estate company supporting owners and buyers of real estate assets with brokerage, leasing, property management, and mortgage services. Joel is also the founder of the Bullseye Capital Real Property Opportunity Fund, LLC which is an investment company that acquires distressed real estate by working with accredited investors.

A leader in real estate syndication, we offer seminars to assist others in acquiring the skills needed to raise syndicate capital to acquire properties. Imagine knowing how to pool funds to purchase any real estate investment, whether single family, multi-family, commercial, or anything else. For more information and complete details, please go to http://www.syndicatefast.com/.

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If you look at the individual investors that participate on Wall Street, only a tiny handful can take down a whole company all by themselves. There are a few billionaires who can but they generally don't want to, and typically prefer to share the risk with other people. For this reason, corporations have been organized with shares of stock that are sliced up so that dozens, hundreds, thousands or tens of thousands of investors can participate in the profit-seeking activities of our capitalistic country.

Similarly, if you can't pay for a car all the day you buy it, the finance companies have made it easy to slice it into dozens of payments, each one planned out to be manageable for your monthly operating budget. Homes are the same. Few can pay for a home in cash on day one. The idea of 30 year mortgages helped make it possible for nearly anyone to afford a house.  The goal was, upon retirement, to own you home free and clear. The concept of slicing up the elephant so that it can be eaten in little bite-sized chunks is well understood in the United States. It's part of our capitalistic culture.
 
All risk is managed this way (it is syndicated) but what about bigger pieces of real estate? Is it possible to take down big opportunities by yourself? In most cases, no. And in most cases, real estate is not organized in a stock company format like corporations that can be sliced into small pieces of stock that trade on a daily basis.

Part of the reason for this is that the tax code favors real estate and makes it undesirable to put into a corporation. There are other tax structures that have been developed, such as REITs but the opportunity for retail investors is nominal by the time they get into one of these corporately-managed investments.

That's part of the reason for the emergence of the private placement industry. Private placements make it possible for individual investors, self-directed IRAs, pension funds, and others to participate in much larger real estate investments than anyone could handle by themselves. A well-structured private placement syndication can produce dramatic results for the participants.

Because these entities, which typically are organized in LLCs, can be exempt from regulation by the Securities Exchange Commission and they're not registered the way that public corporations are, there are special some rules that govern who can participate. You have to be somewhat financially successful to be able to participate in these activities, but if you are at that place in your life and you are fortunate enough to be able to invest in private placements, it's a wonderful opportunity that you should explore.

Part of the reason that private placements are outstanding is because the cost of operating a private placement is relatively low, compared to the enormous amount of overhead cash to running a public company with the annual and recurring legal fees, accounting fees, and other regulatory requirements. Private placements are typically light on these expenses, and consequently, the returns that are developed in private placements are much higher than they would be in a comparable public environment. But again, because they're not registered and regulated by the government, only a select few may participate.

Unfortunately, private placements are private, and in order to get in the “club”, one has to meet certain minimum financial criteria. If you live in a big city, it's not terribly difficult to meet these criteria, but not everyone qualifies. For those that do, investing with a group of people, which is the basis of our capitalistic society, is the best way to take down bigger pieces of real estate and it's the best way to profit from the dysfunction of the real estate market that we're experiencing now.

As I watch broadcasts of what's happening in the stock market and the commentators talk about what investors should do, there's a certain assumption that investors will only invest in the stock market, but readers should know there are many alternatives beyond what's offered to you by the companies that control retail investments. And most of those will provide yields that far exceed the returns provided in the equity markets.

Don’t be bashful about taking charge of your investment strategy. Place your cash, your IRA accounts, your 401(k) and other assets into the investments that you believe will return the most to you. Do not be limited by the retail stock brokerage firms. Ski shops sell products for skiers. If you play another sport, you need to go to another store. Treat your assets the same way. Don’t let the store owner tell you what to do with your investments. And if you can’t eat the whole elephant by yourself, don’t be bashful about joining with others to make it happen.

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If you have an opinion or thought on this topic, please write a comment in the form below. Share this blog with your friends. Thank you for being one of our loyal readers. We appreciate you and are rooting for your success. Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenues and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker, advisor and is an astute investor.

Joel is CEO of Bullseye Capital , a full-service real estate company supporting owners and buyers of real estate assets with brokerage, leasing, property management, and mortgage services. Joel is also the founder of the Bullseye Capital Real Property Opportunity Fund, LLC which is an investment company that acquires distressed real estate by working with accredited investors.

A leader in real estate syndication, we offer seminars to assist others in acquiring the skills needed to raise syndicate capital to acquire properties. Imagine knowing how to pool funds to purchase any real estate investment, whether single family, multi-family, commercial, or anything else. For more information and complete details, please go to http://www.syndicatefast.com/.

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Does the little guy stand any chance anymore? Is anyone looking out for us?

Probably not. The world has become pretty unfriendly to entrepreneurs and self employed people so we have to take care of ourselves. Just keep your eyes wide open when it comes to the management of your financial resources. Understand how the game really plays.

Most financial representatives, whether stock brokers, money managers, financial consultants or otherwise, work for organizations known as broker/dealers. Broker/dealers, as the name implies, sometimes act as brokers and sometimes, they act as direct dealers (owning a position) in securities. These organizations are licensed by the Federal Government (the Securities and Exchange Commission, or SEC) to sell securities, collect money from customers, and execute transactions. Because they receive commissions, they can have a conflict of interest with their customers, but when they act as dealers, the problem is even worse.

Very frequently, broker/dealers, especially the big Wall Street wire houses will acquire positions in securities. You've seen movies where the sales managers get on the "horn" and tell the brokers which stocks to move that day. There would be extra commissions if they move those stocks. Brokerage firm sometimes take positions in securities for many legitimate reasons, and when those positions need to be moved, the natural buyers are the clients of the firm. Those buys are not necessarily the best buys for the clients and those buys are certainly not being made for the clients’ benefit. Unfortunately, they're frequently made to benefit the broker and his broker/dealer.

Rather than allowing the fox to mind your chicken coup, some investors prefer to engage a Registered Investment Advisor (RIA). An RIA, works for you for a fee and makes suggestions to you, but does not necessarily take commissions on the transactions that they recommend. They can be much more pure in their selection and recommendation process. A lot of investors don't like to pay the 1% to 3% advisory fee they charge, but it's a lot cheaper than the invisible “fees” that are paid to your broker/dealer when you get a bad deal.

Transparency in the securities business is very high – if you are an Albert Einstein type with the ability to carefully read the prospectus of every mutual fund and other investments to know how much load, fees and commissions are being charged against your investments. If you're not reading these materials carefully, you will be surprised to learn how fast the charges add up. The big firms load their investments with tons of fees that make it nearly impossible for investors to generate good returns on their investments. If they share the profits with you, the investor, how will they pay their own commissions and salaries? The system is set up to provide a good but not great return to retail investors.

RIAs frequently make suggestions of both traditional stock and money market types of investments, but they also reach out to limited amounts of alternative opportunities such as real estate, commodities, oil & gas, or start ups to enhance the returns of their clients. Since they don’t profit directly from their suggestions, they can be objective and creative. Keep an open mind when working with an RIA, because sometimes that might be the best way to go.

RIAs are not on the same side of the table as you because they don’t make money when you do, but they are rather independent and are not on the other side of the table – working against you.

Isn’t a better business model one where both you and the investment sponsor make money at the same time? If the deal is successful, everybody wins. If not, everybody is disappointed. The big boys tend to rig the game, but smaller companies can set it up so that everybody wins. Look for this business model in your next investments.

The world of investing is complicated, and it's further compounded by the self-interest of the people who represent the investments. Trying to mitigate the self-interest component will make a big difference in your investment strategy. And remember, if you want some clarification to help you make better decisions, feel free to contact me.

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If you have an opinion or thought on this topic, please write a comment in the form below. Share this blog with your friends. Thank you for being one of our loyal readers. We appreciate you and are rooting for your success. Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenues and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker, advisor and is an astute investor.

Joel is CEO of Bullseye Capital , a full-service real estate company supporting owners and buyers of real estate assets with brokerage, leasing, property management, and mortgage services. Joel is also the founder of the Bullseye Capital Real Property Opportunity Fund, LLC which is an investment company that acquires distressed real estate by working with accredited investors.

A leader in real estate syndication, we offer seminars to assist others in acquiring the skills needed to raise syndicate capital to acquire properties. Imagine knowing how to pool funds to purchase any real estate investment, whether single family, multi-family, commercial, or anything else. For more information and complete details, please go to http://www.syndicatefast.com/.

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Let's face it: we live in a wired world, or more recently, a wireless one. In the old days, vacations meant that you could leave the office and never look back. A couple of weeks later, when you come back, you step back into your shoes, and keep going like nothing ever happened. But how many of us have a world like that nowadays? Now, people fall into one of a couple of categories. If you physically need to be present at your job, like a factory worker, a receptionist, or something else, then you can certainly leave without a care in the world and come back a few weeks later. As long as your job is still there, and the company is still solvent, you can walk back into your shoes like nothing ever happened.

But that doesn't describe most of us, at least not the people who read my column. For most of us, we're attached at the hip to our customers, to our clients, to our vendors, to our businesses, and to the sources of our revenue. People expect, like never before, that we'll be there for them, that we'll answer their questions, and that we'll attend to their every need at every hour of the day.

I just came from breakfast with a CPA friend of mine, who just returned from the south of France on a two and a half week vacation. He said it was the best vacation of his life. It was long, it was luxurious, and it was perfect in every way. But he also said that his cell phone was working the entire trip because he paid for some conversion to a European standard. He used his cell phone to communicate with clients during the entire trip, but still came back feeling like he had a real vacation.

It's just a fact of life, there's no way around it. We have to be tethered to our businesses, and there's no going back. I don't think that any of us can imagine a world where we disappear and people don't notice that we're gone.

For me, one of the only vacations where I can really go down deep and disappear is a cruise. Somehow on the open seas, even though ships have satellite Internet reception, I'm able to put the phone in the safe in the room and enjoy the family and the special time that we have together.

Next time you go on vacation, try telling your clients that you'll be gone just for a short while. Try putting off meetings, conferences, and other activities, so you can really enjoy the special time that you don't get very often with your family. People are willing to be more respectful of your private time than you might think. If you have a business partner, trade some of your responsibilities temporarily to them; and be ready to accept those responsibilities when the shoe's on the other foot.

I always say that everything in business is a team sport. The current business climate does not favor the lone wolf. And part of the reason, beside the complexity of governmental regulation and litigation is the expectation from our clients that we'll be there for them 24/7/365. But don't forget that your family also deserves a slice of your energy and time. So cut the proverbial cord (or wire) and be sure to make some time for them at least a few times a year, before your kids are grown and off on their own.

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If you have an opinion or thought on this topic, please write a comment in the form below. Share this blog with your friends. Thank you for being one of our loyal readers. We appreciate you and are rooting for your success. Often dubbed a "Growth Architect" by his clients, Joel Block advises companies on explosive growth strategies by driving revenues and sales. Well known in the capital markets, Joel is a successful entrepreneur, speaker, advisor and is an astute investor.

Joel is CEO of Bullseye Capital , a full-service real estate company supporting owners and buyers of real estate assets with brokerage, leasing, property management, and mortgage services. Joel is also the founder of the Bullseye Capital Real Property Opportunity Fund, LLC which is an investment company that acquires distressed real estate by working with accredited investors.

A leader in real estate syndication, we offer seminars to assist others in acquiring the skills needed to raise syndicate capital to acquire properties. Imagine knowing how to pool funds to purchase any real estate investment, whether single family, multi-family, commercial, or anything else. For more information and complete details, please go to http://www.syndicatefast.com/.

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