7 Ways to Save Your Company Money by Controlling Legal Expenses

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Originally a Special to THE GLOBE AND MAIL

In large corporations, lawyers tend to be salaried employees, and at some point the legal expenses theoretically stabilise. If the legal budget is too high, at least it is fairly consistent. To small and medium size companies, however, a lawyer is a subcontractor with the capability to bill up to a million dollars a year –and the ability to expand minor tasks into programs in the effort to protect your business against every hazard in the universe. Yet where smaller company is at more risk, it can also cut legal expenses far more aggressively.

Don't negotiate prices until you specify the job.
There are now 800,000 lawyers in the U.S., and 60,000 in Canada. Oversupply has put the customer in the catbird seat. With those facts in hand, the logical reaction is to hammer the lawyers' prices down.

The logical reaction is wrong.

Specifications are the place to start. How much legal work do you need? What are the risks, the consequences? Can your own employees do some of the work? As the job is laid out, and the fat trimmed away, costs can plummet sixty or seventy percent, where price negotiation –no matter how ruthless –is unlikely to cut the bill more than fifty percent.

Get monthly billing.
It makes sense to accept all the interest-free credit you can get; if your suppliers don't bill you for three months, so be it.

But legal work is a hazy brew, and it is hard to see the bottom. You need a measuring stick, and itemized monthly billing is the simplest way to judge if the job is on schedule and the costs are within budget.

Don't get monthly billing too often.
Most business lawyers would like to know you well enough to send a bill each month. If you are in litigation, it's inevitable.
If you are not in litigation, don't let it happen. Monthly billing means a relationship, which means the lawyer will be calling you with idle notions, and you will be calling the lawyer with "quick" questions. There will be little bills for research. Problems will be found. . . Every now and then, don't call your lawyer.

Don't spend money on useless contracts.
Buying a building will lead most business people to question a lawyer, and certainly arouse a lawyer's contract-writing instinct. If this is the one-in-a-million location for your newest convenience store, then it is worth spending some money to guarantee possession.

With the property in hand, your lawyer will be happy to draw up a contract guaranteeing your store a daily supply of milk. But cows don't read, and the day Farmer Brown's cows take sick, you will be wondering where to get 400 gallons of milk –and what "recourse against supplier" can possibly have to do with the needs of a convenience store.

A better contract might have been oral –and free: "Farmer Brown, please send me 400 gallons every day until I call you and say I don't want your milk (and then I'll call Farmer Jones)."

Say, "There's one thing you need to know about us: we're cheap."
In that moment of shock, continue ". . . we won't question your hourly rate, but we always reserve the right to limit the scope of the job." In accepting the hourly rate, you leave them their self-esteem. At the same time you move yourself towards the category of "pretty nice for a tough client."

Some lawyers are not amused by this; usually the same ones who think they should set the agenda. You are better off without them.

Buy more information and less advice.
Information is relatively cheap. Advice is even cheaper, but can bleed you later on, because where information enlightens, advice presumes. It presumes that your lawyer knows where you stand and where you are bound.

In ten years you may be wondering why you formed a corporation instead of a partnership, and why you have spent thousands of dollars on corporate accounting software.

Did your lawyer presume that your 8 employee software company would be expanding to 800 employees?

Don't buy information by the truckload.
A loosely worded request for information can produce page upon page of mind-numbing legislation, accompanied by a $5,000 bill (particularly after a lawyer has come to know you a bit too well).

Instead, ask your lawyer to find a current legal article that tells "Which way the wind is blowing," or "the shape of the ballfield." Almost any legal question has been addressed by someone who understands it better than your own lawyer.

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