Is your school protected legally?
Or have you taken a DIY attitude and used “template” legal documents or borrowed them from friends and colleagues?
In this episode, we look at 4 areas where you do NOT want to cut corners… places that you need to get an attorney involved.
We also discuss how to budget for an attorney in your school or studio… as well as bust some other myths that run rampant in our industry.
Click below to listen!
Or, check out the video version of the podcast:
Here’s what we cover in the episode:
During the episode, we referenced a video that Grow released last year that discussed how to legally enforce your studio’s policies and 30-day notice… you can find that here:
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Furthermore, if you’d like to learn more about Stephanie or have questions, she can be reached here.
Disclaimer: Nothing in this podcast should be construed as giving anyone specific legal advice and are intended for informational purposes only. This informational material is not intended, and must not be taken, as legal advice on any particular set of facts or circumstances. You need to contact a lawyer licensed in your jurisdiction for advice on specific legal issues.
Daniel P 00:10
Hey, welcome back to another episode of 7-Figure Music School.
A couple episodes back, we met with Stephanie and she gave us some amazing answers around an oft-debated, oft-misunderstood topic in terms of non-compete agreements/non-solicit agreements.
So, we decided to record another episode with Stephanie. And I think we have a lot of questions. We loved the first episode so much that we might put your name and face on the cover of 7FMS and just start having you back.
That first episode was so good that we just had to do another.
Today’s question… (and this one came from Nate) I think we’re just gonna jump into it. But the question is, at what point does an owner of a school or studio need an attorney rather than a boilerplate legal document? Or in other words, when does it really make sense for a school owner to invest in legal counsel? And how often?
Nate, I might actually have you describe for me what you meant by “how often”?
Nate S 01:13
Yeah, I think about it in terms of my accountant I talk to twice a year – my bookkeeper. I talk to them about twice a month on average. I’m just wondering if there’s any sort of seasonal rhythm with my attorney that I should actually commit to? So that’s all I really mean by that. And we get this question all the time – ‘can I just LegalZoom this to get started?’… So I’d love your interpretation of that.
Stephanie M 01:45
You should plan for legal expenses and paying an attorney the same way that you plan for anything else.
Your marketing budget, your hiring budget, your rent, or any other expenses – you should plan for those, because, like it or not, if you’re going to be in business for any amount of time, you are going to need an attorney at some point, whether it is to:
You should be able to have pre-planned for that, or pre-planned funds will help with any sticker shock, so to speak. And if you don’t use it at the end of the year, you can just roll it over to the next year or use it for something that you need to as long as you continue to plan for that year after year.
Nate S 02:56
You said something that I just love… financial fluency and the benefits of that.
Daniel and I talk about it often, but you said to budget for your attorney line, right? We have that in the Brooklyn Music Factory budget, you’ll be happy to hear. We have outside services and there’s a little subline in QuickBooks where it says ‘attorney.’
I’m wondering if there’s any way for those of us that look at our historical information on rent, and look for trends and percentages over the different locations we’ve had. Then I can able to create a forecast.
But for those of our listeners that really don’t have any version yet of historical data, is there either a percentage of your gross income that you think is the average that people spend on, you know, legal counsel? Or is there just a general dollar figure? Like be sure you have at least a couple $1,000 in there every year? Can you give us any kind of guidance in that way?
Stephanie M 03:58
Yeah, I think having a few $1,000 – $2,500, budgeted for legal expenses is probably a good place to start. That doesn’t mean that you’re only going to spend $2,500, or whatever you’ve budgeted for. But it should at least cover enough for you to find an attorney that fits your needs. And then you can discuss these with them and you will have a better idea moving forward for the future.
Nate S 04:34
Nice. So that obviously fluctuates based on whether you’re in a New York City Market like me, or maybe in Indianapolis – it probably changes based on the geographical location, right?
Stephanie M 04:46
Yes, there are several factors that go into legal fees because attorneys charge in different ways. Some people use flat fees, although that’s not very common these days. And most of the time, legal services are provided at hourly rates, which will vary, both based on geographic location, as well as the number of years that the attorney has been practicing.
So it is important that in doing your search for an attorney, you find somebody that fits not only your legal means, but your budget as well. And although a few thousand may not get you very far in a densely populated area, or whatnot, it at least gives you a cushion so that if you needed to meet with somebody, or if you needed to put a retainer down for some reason or another, you would at least have that handy.
Nate S 05:41
I’m going to ask you a follow up question with a little Brooklyn Music Factory story tagged with it.
We’ve had three locations. We just signed another lease for 12 years in a beautiful new space that’s going to open up this fall.
Now, when I was going into the negotiation for that lease, I reached out through a referral to an attorney. And this guy was very generous with his time. And… he sort of deflected me. He said, “Nate, actually, I want you to call this other guy, he’s gonna serve you better in this instance.”
Why is that? Is that because he’s too busy? Is it that he’s actually saying, “You know what, you’re going to get more bang for your buck over here”? Or is it that it’s not his expertise? Can you tell us a little bit about why an attorney might suggest somebody else?
Stephanie M 06:43
Well, all of the reasons that you mentioned could be why an attorney would recommend somebody else.
Attorneys typically do focus on certain practice areas. As I mentioned in the last episode, I focus on business transactions, franchise licensing, and trademarks. If somebody were to come to me for commercial real estate, for example, to review and negotiate a lease, I would be happy to speak with them initially, but then I probably would refer them to one of my colleagues at the firm who does commercial real estate, you know.
Or it could very well be that somebody’s workload is such that they wouldn’t be able to get to the matter in enough time for whatever the deadline is- they want to make sure that it’s addressed timely for the customer’s benefit. And there may be somebody else who is able to do that.
Daniel P 07:38
And this reminds me of something that had happened with another client of mine, where she was dealing with the non-compete/non-solicit situation.
The attorney she had the most affinity with had a social relationship with her as well, and was a friend of the family – a wills and trusts lawyer.
That person said, “I don’t know if I’m the person for this job. I think you need to talk to someone else.”
I just thought I’d add that in there. Nate, did you have other things that you were gonna say and ask? I’d love for you to kind of take the lead on this.
Nate S 08:10
Yeah, I had a follow up to my follow up, so I’ll now fast forward with the story.
Now I’ve brought on this attorney that was recommended to me, and brought him on a retainer. The idea was to complete the negotiation of the lease.
He, right out of the gate, said, “Listen, Nate, in order to get the most value from me, you’re going to spend most of your time with my legal assistant (maybe I’m using the wrong term). She bills at a much lower hourly rate, and she’s going to be able to do a lot of the work necessary. And then we’re just going to talk as needed, so that you can get the most benefit from my expertise.”
Is that a normal type of working relationship?
Stephanie M 08:56
Most law firms that employ more than just a few people have attorneys of all levels in terms of years of experience.
If there is a younger attorney that somebody works with who is more than capable of handling the project that can do the work at a lower hourly rate, then it’s not uncommon for the senior attorney to allow them to do that: to inform the client that that’s going to be happening, which will save the client money, and allow the project to get done in a competent manner.
So yeah, that’s a very, very common arrangement.
Nate S 09:39
Well, I just love that.
Also, what you’re pointing out here is when we’re creating the budget, you’re saying budget for your legal counsel. You can have that open conversation.
When you’re reaching out to an attorney, say, “Hey, listen, I only have $3,000 in the budget. How can we best use this given that I’d like to draft contracts?”
And, you know, maybe, “I’m working on some commercial real estate here and need a lease, how do I stretch those dollars?”
It sounds to me like that’s a really smart question.
Stephanie M 10:12
Yeah, definitely. And the attorney can say, “Yes, I have an associate who can help you with this, and they will let you know, X amount of per hour. And to the extent she has questions, or he has questions, then I will advise and supervise.”
But, you know, the work can be divided up that way.
Or alternatively, you know, there’s always a chance that the answer is going to be, “I would love to help you. I’m really sorry. But there’s just nobody here that could, you know, do that for that budget.”
That might be a reason that they might refer it out to a colleague that they know bills on an hourly rate, because the attorneys are in the business of providing services as well.
Nate S 10:58
I had a situation where (I’m wondering if this is common) I expressed, “Here’s where Brooklyn Music Factory is in terms of our budget.”
And this attorney who ended up getting us to the finish line on the lease said, “Okay, now, we didn’t end up coming within budget, but he discounted many of the hours to try to help. So when he showed us his invoice, the invoice said, I don’t know, maybe $7,500 or something.
And he said, “But I’m going to discount that down to five, so that we can get close to where we agreed originally.”
Is that actually a practice that happens in billing? I mean, it happens, honestly, it happens in the music school and stuff. But is that actually common to have attorneys say, “Hey, listen, I’m going to show this as the billable service, but I’m able to discount here and there. Is that? Is that a common practice? I don’t know.
Stephanie M 11:57
I don’t know if I would say it was common. I mean, it depends on the attorney and the relationship they have with the clients and what’s transpired throughout the representation. But the attorneys are well within their right and discretion to do that, if they feel like they should provide a discount or want to provide a discount to continue to foster that business relationship.
Nate S 12:25
Nice. I was going to pivot to another comment you made around common disputes, if that’s okay.
I feel like one of the real values for our listeners is your wisdom –
What are the five most common disputes that a small business owner can expect?
…Or not even common disputes? If you were to help our listeners say, “Okay, here’s your checklist, you should for sure get legal counsel in these three areas.”
Can you give us a simple list that we could begin to aspirationally try to get through over the first year of being in business if we’re a new business owner?
Stephanie M 10:21
Yes. So first and foremost, you want to make sure that your business entity is set up correctly. And while it’s extremely easy to go online these days and set it up yourself, it is common to not do it correctly, if you’re not being properly guided by somebody who understands the impacts of the business structure.
And so while it may be intimidating to reach out to an attorney (maybe when you’re first starting out and think maybe you don’t have enough money for it in your budget), it is a lot more cost effective to spend the money at the outset and get it set up correctly than to come to an attorney three or five years later to pay them to undo what you did at the beginning. Because that’s going to cost you a lot more money.
So that would be the first first thing.
The second thing I would say is the contracts, which we talked about in the last episode – that could be contracts with your employees or potentially with your students (depending on how you have them sign up and pay), that kind of thing.
You’re obviously going to have a lease for your space unless you’re operating out of your home. And so you definitely want to get an attorney involved with those negotiations.
And then the third one isn’t necessarily when you want to get your attorney involved, but it can help offset potential costs when there are certain types of disputes or incidents and that would be getting certain types of insurance. adds, such as Employment Practices Liability Insurance, which may have some coverage for instances of sexual harassment, or other types of employment practice related claims. Obviously, your general liability insurance will help with, you know, certain damage claims, that kind of thing. So I would recommend that.
And then last but not least, I would highly recommend getting an attorney involved when it comes to your intellectual property, making sure that that is protected, especially in the industry in which you guys work, where content is being created. And whether that’s, you know, musical arrangements, blog posts, whatever the case may be, or your name, your logo, it’s going to be important that you make sure that those items are protected.
Nate S 15:15
Those are so good. I hear:
When do you actually need to go to an attorney? was the actual question vs. Can I just go on Google and use a contract template for a music school?
Which, by the way, I’m sure something would come up? You know, can I ask a couple of detailed questions around the comments you made? And then I think maybe we bring this sucker to a close, but you said possibly getting your students to sign a contract? I have never actually heard that before in all my years doing this. I’m curious if you could elaborate a little bit on the why behind that – what would be an instance that I would actually want a student or a parent to sign a contract with?
Stephanie M 17:38
Yeah, so to clarify, it would be their parents if they’re not legally assigned the contract.
That is more in the sense of, you know, signing up for the lessons, and you would likely want something in writing that outlines, you know, the fees that they’re agreeing to pay X amount for the lessons as the studio, you’re agreeing to provide X amount of lessons per weeks.
The parent may need to provide some consents and authorizations to share certain types of information related to the student. For example, if you want to take pictures during your classes, and you want to use those pictures within your website, or for marketing purposes, you’re very likely going to need the consent of the parents to use the photos of their children. And it would contain other sorts of information related to that.
So those are the types of contracts that I’m referring to when I say, “contracts with your customers or your students.”
Daniel P 18:55
And I will even just briefly say before the next question is that last fall, Alyssa, another one of the coaches here at GROW, did an entire episode on how her studio in Boston has a legally enforceable policy and defined length of stay for a student in their studio. And she talked at length about how they worked with their attorney to basically ensure that once a student committed to joining their program, they had to stay in the commitment.
Very fascinating episode – I’m going to put that in the show notes… or maybe also just a PS on the email that goes out to all the folks who are listening to this.
But Nate, please continue. I know you had a lot of detailed questions there.
Nate S 19:40
Yeah. I love that, Daniel, that that links directly to this.
You know, to your comment, we at Brooklyn Music Factory you’ll learn the hard way around having an AV release form. Like most small business owners, they learn through mistakes.
And I’m literally looking at our Slack channel for our recent Day Camp, and there’s a teacher channel in there, and it tells all the teachers the AV release status – who you’re allowed to take photos and videos of and who you’re not.
We post that every day of camp.
That’s just a beautiful, very real example for everyone listening, because a lot of listeners probably don’t realize that they just need to ask!
Daniel P 20:28
And again, it’s one of those things where you can download the template, or you can actually talk to someone who knows what they’re talking about, and figure out the nuances of that and have something that’s drawn up.
There shoule be a good line of communication between you and someone, in this case, attorney who’s personally advising your studio, on all the ins and outs of what that means. Because, again, this is one of those areas where there’s a lot of misinformation and myths that run rampant through our industry, from folks who’ve gotten their law degree from the University of Facebook.
Nate S 21:01
I think in closure I want to highlight one of your last comments that you sort of glossed over – but it’s so valuable, which is this:
You said you’ll spend far more money three years from now undoing the mistakes you made in the early stages.
At Brooklyn Music Factory, I’m going to go on the record here and be totally transparent that I made many mistakes in the early years. And it costs me time and money to undo them. And I wanted to draw an analogy here for us. Because we hear this often where small business owners will start and they will do all their bookkeeping themselves, they’ll be like, I’m just going to set up Xero or QuickBooks, I got this or it’s going to be all in a spreadsheet.
And Daniel and I pound on this idea that one of the most important first hires is actually finding a bookkeeper that you can trust, that will just get your or your dollars and cents organized. Especially when you’re small.
I feel like the same lesson learned here is with an attorney. It’s like you have you maybe a business partner, you’re working on your partnership, and like two teachers. Invest now, while your team is tiny, so that you can have really easy conversations amongst a small number of people, and try to get it right at the outset. Because, you know, in our program, correct me if I’m wrong, but once you create a good contract, once you start creating those release forms, once you get that insurance setup, etc. Like that’s a repeatable system.
Am I wrong about that? I mean, I feel like you can really get a lot of things right in the early stages.
Stephanie M 22:46
Well, that’s exactly right. And that’s one reason why you do want to consult a good group of advisors at the beginning, always having a good banker to help with financial issues, a good accountant to help you with the tax aspects and anything else that they can help you with, and a good attorney to help you with the business setup and getting your initial draft of contracts.
Now those contracts (once you’ve got them in place) can be a good system for you that you can continue to use over and over. But as you grow, your needs may change. And you may go back to that attorney and say, “Hey, you know, when we started, I needed X, Y, and Z. But here’s what I’ve got going on now, is there something we need to do to update this?”
Or, you know, maybe there’s been a change in the law related to no- competes, or whatever the case may be, and the documents need to be updated, or you grow your business large enough that maybe you’re considering growing through franchising, or growing through licensing, and you need an attorney to help you with that. And if you want to know the difference between a license and a franchise and what that entails, I’m always happy to talk about that.
Nate S 24:04
In full transparency, we didn’t really put together a non-compete or non-solicit until the first class of teachers that were part of the early stages of our business were leaving.
We just didn’t even know you needed it.
I can’t believe that.
Daniel P 24:30
First of all, when you’re just starting you can’t even imagine that anyone who joins you would ever even leave.
Nate S 24:34
I’m fessing up right now.
Stephanie, thank you so much.
I just love how succinct you are in terms of areas to focus on and how valuable it is to maintain to actually develop a lasting and mutually beneficial relationship with your attorney. I think that’s really my main takeaway from this – you’re looking for a relationship that’s going to last through every stage of growth.
Stephanie M 25:02
Yeah, definitely, definitely. And, you know, there may be a time when you grow big enough that you may need a different type of attorney. But finding somebody who can get you started and who can grow with you and with your business can be vital and can end up saving you a lot of time and money in the long run.