The cost of new carpet

Remodeling my new office has reminded me of a lesson in business. Most notably the cost of new carpet. I tried to cost out all my tenant improvements, and for the most part my budget came out on target. But my carpet estimate was terrible. Why?

It wasn’t because of the price of my new carpet. My estimate was off because I forgot about the cost of the carpet already there. It turns out that the most expensive part of new carpet is actually the removal and disposal of the old carpet.

I should have seen that coming. Not because I remodel commercial spaces on a regular basis. I don’t. But I do help clients again and again who are refreshing their business by expanding distribution channels, adding new partners, new equipment, or new products. The most difficult part of these projects is rarely the exciting new enterprise. It’s rewriting the existing terms and conditions or partnership agreement. Changing filing statuses. Dissolving the old company. Settling matters with the partner who wishes to cash out. In short, the demolition of the old corporate structure often costs more than the replacement.

It can be frustrating to spend money on something that’s no longer needed. But sometimes that’s simply where most of the hard work is hidden. You have to remove the old carpet before you can reap the benefits of the new one. 

Inigo Montoya on Terms of Art

“You keep using that word. I do not think it means what you think it means.”

Perhaps you do. But do others?

Terms of art and professional jargon play a valuable role in many fields. They help professionals speak to one another with efficiency and precision. But arcane language can often be confusing to those people who are outside of the circle. That can include many people who have a stake in a transaction.

When drafting business documents, terms of art should always be used sparingly. When included, they must be defined clearly. That might make the documents longer and wordier, but the meaning of the documents will be much more apparent to others who might read them in the future. Would an agreement full of technical jargon make sense to less technical investors or business partners? In the event of litigation, would the intent of the parties be clear to a judge or arbitrator? How about a jury? Could a lack of clarity be used against you?

Take the time to spell it out. You never know who will need to understand it 5, 10, or 20 years from now.