Hiring A Lawyer For Your Growing Business

Posted on August 1, 2012

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As your company grows, the role of the lawyer usually increases. As one astute attorney put it, you now have something to lose. Of course, sometimes the frustration with lawyers increases as well. As with a lot of professions, finding the right lawyer and meeting expectations on both sides is a real challenge. So how do you find and engage a lawyer that is right for you?

First, go back to the three questions asked in the last article — What do you need a lawyer for? How much should a lawyer cost? What should be your expectations with respect to services rendered? Again, these questions should focus you better on what lawyer you should hire even in the later stages.

As your company develops, the role of the lawyer divides into two distinct categories — technical legal and quasi-business/legal. By “technical legal,” I mean the stuff that only lawyers can or should do. For example, you need a patent attorney to file a patent. You need a litigator to represent your company in a lawsuit. You need a tax attorney to represent you in tax court. You need a securities lawyer to take your company public.

While lawyers like to preach that there is much more to lawyering than simply turning screws, the fact of the matter with respect to some legal services is that they are a commodity. You hire a person to mow your lawn, he mows the lawn, and you pay him. He may be a teenage kid from the neighborhood or a professional landscaping company or any number of shades in between. Each of the various vendors has their particular benefits, but ultimately, you figure out what you want, and you go and pay for it; you should use the same strategy when selecting your lawyer. Contracting and legal documentation present a unique challenge to this arrangement. Many, if not most, contractual agreements do not require a lawyer. When you sell your products or services, unless you have inordinately large contracts, a lawyer is typically not involved.

However, business lawyers routinely provide the following assistance for their clients in non-routine matters (large customers, equity owner financing, non-standard debt financing, etc.):
Providing the form.
– Assisting with the negotiation of the agreement. As the parties work through an agreement, counsel can provide a leading or a behind-the-scenes role in negotiation.
– Negotiating the contract. Often, “the lawyers get involved.” Sometimes that is a good thing. Two qualified lawyers can help the parties be sure that their respective clients are right for each other.

For business lawyers who routinely handle these transactions, you start to have a sense of how other businesses are doing things. This is where lawyers can be helpful in a quasi-legal and quasi-business sense. This role is tricky, but you can get a lot of value from your attorney if his or her services are used properly. I have seen lawyers help secure financing, connect potential
acquisition parties and serve as board members. Usually, the company gets a tremendous benefit for very little money. However, in order to do this well, I believe you have to be mindful of the fee relationship (lawyers are capitalists; if they are doing something for free, it usually means they need to make it up somewhere else). If you can build a relationship with your lawyer, you
can often get tremendous insight from his or her business perspective.

When it comes to fees, the key element is trust. If you believe that your attorney is over billing you, then how are you going to put faith in their advice? However, by “trust,” I do not mean blind faith. Ask other business people and other lawyers how much you should expect to pay. If something seams unreasonable (too expensive or too cheap), then ask your attorney about it.
Additionally, do the math. By this, I mean, realize what amount a lawyer wants in take home pay. Lawyers are no greedier than the next guy, but unless they are doing something for the public good, they want to bring home six figures, and good ones usually do. If your attorney is billing you $200 or $300 or $400 an hour, realize how many hours he has got to bill to make the amount of money he or she wants, factor in overhead (sometimes two or three times billings) and then see what percentage your project or matter amounts to.

If you do some simple math, I believe you can ascertain a more realistic perspective on why the fees are what they are. This information will allow you to have a more rational conversation with your attorney, and this kind of communication is the best foundation for any professional relationship.

Mike Goodrich
Goodrich Law Firm, LLC

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