As an entrepreneur, your journey is fraught with challenges, some known, some lurking in the shadows.
Pitfalls can ensnare even the most astute business owners. In the Legally Bulletproof framework, every entrepreneur faces the same 5 enemies and is exposed to the same 101 deadly business mistakes that cause entrepreneurs to lose.
So who are these 5 enemies that every entrepreneur faces? They can be categorized into five groups, known as the "Five C’s" - Customers, Cops, Challengers, Competitors, and your Crown (ego).
Customers: Often the lifeblood of your business, customers can also become adversaries. From disputes over service quality to legal claims, customer relations can quickly turn into legal battles. Once they purchase from you or you make claims to them, they have standing to sue you. Now, any business owner selling products or services online are subject to so many claims, class actions and individuals, by customers all over the world and predicated upon various laws and regulations. The mistakes and potential liability here is tremendous.
Cops (Regulators): Navigating the complexities of regulatory compliance is a daunting task. Missteps here can lead to severe legal repercussions, fines, reputational damage as well as bankruptcy. The cops can be any government agency like the FTC, IRS, SEC, or any agency having authority over your business like permits and licenses. As a business owner, you better know your cops and have compliance manuals, and checks and balances as well as a compliance system set in place for your peace of mind and to impress your enemies when they come knocking.
Challengers: These are the hidden critics. They might be former employees, ex-business partners, or any individual who, for one reason or another, has a vendetta against your business. They are the haters that you never see coming. Only the right business defense system combining strong practical legal strategies with contracts can prevent the challengers.
Competitors: Healthy competition is good for business, but sometimes, competitors can play dirty. From intellectual property theft to slander, the tactics used can be underhanded and damaging. The best way to protect against competitors is by creating a business defense system focused on protecting your IP offensively and defensively. You need to monitor your IP and understand how to deter others from attacking it.
Crown (Ego): Perhaps the most insidious of all, your ego can lead to overconfidence, underestimating risks, and ignoring valuable advice. Every entrepreneur has a big ego, it’s a necessity and how you get here. But it’s also one of your worst enemies if you don’t hold it in check. To keep your ego in check, a trusted mentor can be very helpful as well as learning problem solving skills and how to build the right team.
The only way to deter these 5 enemies is first - to identify them. Second, to build a defensive system involving legal strategies, contracts, manuals and business and legal SOP’s that will monitor and deter your enemies. You want them to know you have a defensive system because most don’t and that’s deterrence in general. Let them know you aren’t an amateur entrepreneur and are protected. Third, you need an in-house lawyer / mentor that can coach you and train you how to use your defense system, legal strategies as well as train you with problem solving skills and techniques.
That’s a business defense system and your best option to identify and deter your 5 enemies as well as prevent you from making the 101 deadly mistakes that cause entrepreneurs to lose.
The framework applies inversion, an approach associated with Charlie Munger and Warren Buffett: identify the objective losing recipe of entrepreneurship, then invert it to get the winning recipe.
The business defense system is a method to deter your business threats.
Karam Nahas is a retired litigator, licensed in New Jersey and not practicing. Legally Bulletproof provides education and templates to help entrepreneurs understand and manage legal risk. Preventing liabilities is the key to success.