By: Jordan Gerheim CEO | Outside Chief Legal Officer | Litigator | Strategic Business Advisor
As fractional Chief Legal Officers and outside general counsel serving businesses across multiple industries, we see a similar pattern repeated over and over: smart, successful business owners making costly decisions simply because “that’s what everyone else does.” By following the latest industry trend, too many businesses fall into the trap of “herd mentality” without questioning whether these practices actually serve their unique needs.
The business world is full of conventional wisdom that sounds logical on the surface but often fails to deliver when examined through the lens of your specific circumstances. This is why the most valuable legal advice we often find we give is not about which forms to file or clauses to include, it is about developing the habit of asking “Why?”.
The hidden costs of blindly following business practices extend far beyond direct financial expenses. Herd mentality can lead to:
Resource misallocation when you invest in solutions that do not address your actual problems
Strategic confusion when your business practices do not align with your actual business model
Competitive disadvantage when you follow the same playbook as everyone else in your market
Cultural misalignment when policies and practices do not reflect your actual values and operations
Legal vulnerabilities when generic solutions do not account for your specific risk factors
A couple common examples…
When “Business-Friendly” Becomes Business-Expensive
Start with perhaps the most pervasive myth in business formation: that incorporating in Delaware is automatically the best choice. The statistics are compelling, more than 1.9 million businesses have registered in Delaware, including two-thirds of Fortune 500 companies. This creates a powerful narrative that Delaware incorporation equals success and sophistication.
But ask why Delaware incorporation makes sense for your business specifically. For most small to medium-sized businesses operating primarily in their home state, Delaware incorporation can create unnecessary complexity and cost without delivering meaningful benefits. You could pay higher initial filing fees than most other states, increased registered agent fees and potentially annual franchise taxes based on your authorized shares. If you are conducting business in your home state (not named Delaware), you will also need to register as a “foreign corporation”” and pay additional fees there as well.
The Delaware Court of Chancery and extensive corporate case law that have made Delaware attractive to large public companies rarely benefit smaller businesses. Most small business disputes do not involve complex corporate governance issues requiring Delaware’s specialized expertise. More importantly, if you are seeking outside funding or “going public,” investors will often require Delaware incorporation anyway, making early incorporation there premature until you actually need it.
The Double-Edged Sword of Alternative Dispute Resolution
Arbitration clauses have become ubiquitous in business contracts, often included automatically because they are perceived to be a “faster, cheaper, and more flexible” alternative to traditional litigation. The logic seems sound: avoid crowded court calendars, reduce discovery costs, and maintain privacy. However, this one-size-fits-all approach ignores the significant downsides of arbitration that may not align with your business’s dispute resolution needs.
The reality is more nuanced. While arbitration can reduce overall costs in some cases, arbitration filing fees can reach into the many thousands and arbitrators themselves can often charge $800 per hour or more. These costs are borne by the parties rather than taxpayers. In many cases, you cannot choose your arbitrator, and there may be no guarantee they are experts in your particular matter, much less the law. More critically, arbitration severely limits your legal options. There is generally no right to appeal arbitration decisions, even in some cases of gross error or misconduct. You lose the right to a jury trial, potentially limiting damage awards, particularly in cases where emotional harm or punitive damages might be appropriate.
For businesses that rely on public accountability or need the deterrent effect of public litigation, mandatory arbitration clauses can actually be counterproductive. They may also limit your ability to join class actions or pursue certain types of statutory claims that require court intervention.
The Strategic Value of Contrarian Thinking
The most successful businesses are not those that faithfully follow conventional wisdom, they are those that question conventional wisdom most effectively. Business leaders who take a contrarian stance can use the herd’s thinking to pressure-test their own information before making critical business decisions.
This does not mean being contrarian for its own sake, but rather developing the discipline to evaluate each business practice based on your specific circumstances rather than industry norms. Sometimes the conventional approach will be right for your business; sometimes it will not. The key is making that determination consciously rather than by default.
Five “Why” Questions Every Business Decision Should Answer
- Why does this practice exist? Understanding the original problem a practice was designed to solve helps you evaluate whether that problem applies to your situation.
- Why is this practice common in my industry? Industry practices often persist because they solved problems that no longer exist or addressed the needs of businesses very different from yours.
- Why would this practice benefit my specific business model? Generic benefits rarely align perfectly with specific business needs.
- Why now? Timing matters. Practices that make sense at one stage of business growth may be premature or outdated at another.
- Why not alternatives? Every business practice involves opportunity costs. What else could you do with the time, money, and attention required by conventional approaches?
What Is Best for You, Not What Everyone Else Is Doing
Our focus and commitment as your fractional CLO and outside general counsel is not to implement what everyone else is doing, but to understand what is best for you and your specific business. Every recommendation we make is grounded in analysis of your actual needs, risks, and opportunities rather than industry conventions or legal template libraries.
When you work with a legal team that prioritizes strategic thinking over conventional wisdom, you get legal guidance that serves your business objectives rather than legal objectives that happen to involve your business. We question every assumption, challenge every “industry standard,” and evaluate every practice through the lens of your unique circumstances.
The most expensive legal advice is not the hourly rate you pay, it is the cost of implementing practices that do not serve your business. The most valuable legal advice helps you build a business structure and legal framework that advances your specific goals rather than following others’ playbooks.
Before you follow any business practice simply because it is common, ask why. The answer might surprise you, and it will almost certainly save you money while better protecting your business.
Jordan leads Outside Chief Legal LLC (OCL), a modern, forward-thinking law firm that redefines how businesses and their owners access legal support. OCL works to remove the common barriers preventing many from seeking the legal counsel they need — such as fear of unknown or high costs, lack of legal experience, and overly complex legal jargon. OCL serves as fractional chief legal officers and outside general counsel for businesses of all sizes drawing on over 100 years of combined litigation, in-house, and general counsel experience. It delivers approachable, comprehensive counsel that blends legal expertise with practical business insight to help clients navigate ownership complexities with confidence. As a seasoned litigator, general counsel, and entrepreneur himself, Jordan personally understands the legal and business challenges businesses and their owners face. Jordan and OCL are committed to providing the modern legal support today’s companies need.
