Good Morning!

"I've learned that mistakes can often be as good a teacher as success."

—Jack Welch
Straight From The Gut

Sometimes a quote can be good common sense and, when it is, I like to save it…you never know when it will come in handy. And when it comes to making mistakes, all of us have made some whoppers (even Jack Welch!). But, if we learn from our mistakes, then indeed, they have served a purpose.

This month I hope to save you from a common mistake made by small business owners all the time: failing to protect your private company's very private financial information.

Cordially,

Marijo

Just last week I got a call from a client who began the conversation by saying, "I have a stupid question." After assuring him (sincerely) that there are no stupid questions, he explained the situation. A new vendor of his had asked for his company financial statement, and my client wanted to know if he should turn it over. He thought he should call me before doing so (good for him!).

My short answer was: no way … do not … repeat, do not … hand over your private company financials to anyone. Why? For the very reason that they are private and you do not want them circulated in an unsupervised, unprotected manner.

A financial statement of a private company, unlike a public company, is protected from general view and unauthorized use only as well as you, yourself, protect it. Think about it for a minute: would you really want anyone (other than those with a need or right to know) to have confidential information about your company? Would you really want anyone to know your top line, much less your bottom line? Would you really want that information carelessly left on someone's desk, available for anyone to pick up and peruse?

Assuming that the answer to all of these questions is a resounding "no," what should you say when asked for financial statements?…

…by a vendor. "No." Even if the vendor says he won't do business with you unless you do. Presuming first, yours is a company which has been around for a number of years (not a brand new start up), and second, yours is a company with excellent credit, which pays its bills on time, and handles it business affairs credibly, you have a track record which precludes the need for a vendor to see financial details. Instead, offer the vendor a few credit references … parties with whom you have dealt over a number of years and have built up a credible payment history.

…by your banker, attorney, accountant or insurance professional. "Yes." These professionals are well versed in the requirements for and procedures related to confidentiality, and do often need your financial details in order to perform the jobs for which you have hired them. Confidentiality is part of the agreement you entered into with these folks when hiring them and you can confidently share your financial information. (Hint: send a hard copy instead of e-mailing this information, to reduce the chance of accidental sharing. And get into the habit of stamping documents such as this "CONFIDENTIAL".)

…by your landlord. "Maybe." If you're a current tenant and your lease does not require it, don't do it. However, if you are considering moving into a large office building, and depending upon the age and size of your company, you may very well find yourself being asked to provide a financial statement. Again, this is a request from a party who needs to rely on your creditworthiness before extending to you a multi-year contract, and this is a situation where you may not be able to deny access to your financials. Just as you may want to do a bit of due diligence on a potential landlord…they may want to do the same with regard to you (or their lender may require that they do it for tenants of a certain size).

That said, asking the landlord to protect the confidentiality of your financials, and building that commitment into the lease, is a reasonable compromise. If you get a "no" on this request, consider another landlord…trust works both ways and no one wants to enter into a contract with an untrustworthy landlord.

Remember, your private financial records are just that…. private, and it's up to you to decide with whom they should be shared. As always, when in doubt, call your attorney or other business advisor for a second opinion!

Now that the weather has convinced us that summer has truly arrived, our thoughts turn to being outdoors … and where better to be outdoors for fine dining than a sleek, stylish urban oasis in the South End known as B&G Oysters.

Our client B&G is often called Barbara Lynch's "pint-sized second act" (and, of course, No. 9 Park is a hard act to follow!). I can't help but agree with a food critic who wrote "each bite is a pearl."

A seat in the stone-walled courtyard is a sure-fire way to play hooky on a fine summer afternoon. But, please, if you go and I'm sitting next to you… keep that cell phone in your pocket… this place is for pure enjoyment!

Widett and McCarthy helps small business owners start, grow, acquire and sell their businesses.

We serve as "in-house counsel" . . . on-call when needed, but not part of the company overhead. Our best clients understand that the relationship between lawyer and client is a two-way street, built on information sharing and problem solving.

For more information regarding
how we can help you, click here.

• IssueSource.org
• MCAD
• SBANE
• US SBA Office of Advocacy
• WSJ Center for Entrepreneurs
• The Kaufman Foundation