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Whether you are just starting a business and need to form an entity, have an existing business and are negotiating contracts with third parties or are in the process of selling your business, an attorney will undoubtedly play a critical role. It’s important to keep in mind, however, as vital as an attorney’s advice is in these situations, it doesn’t mean you have to pay an arm and a leg for it. Set forth below are three strategies to minimize attorney fees and stay within your budget:
1. Know What You Need
The ﬁrst step to ensuring you receive quality legal services for an affordable fee is to know exactly what you need from your lawyer. Prior to seeking out a lawyer, write down any questions you would like to ask and take notes of your situation. Will you need help with speciﬁc documentation or just need more general legal advice? The more organized you are before you speak with a lawyer, the better off you’ll be.
2. Negotiate Fixed Fees
Small business owners are particularly sensitive to costs associated with hiring counsel when they have a legal need. For this reason, business owners should negotiate fixed fees for their transactional needs rather than paying an attorney on an hourly basis. This is because with fixed fees both the client and attorney are very clear on what the intended objectives of the engagement are. An experienced attorney will know what needs to be done and how much time they will likely spend on the matter and will be able to (more or less) accurately price it upfront.
Sometimes attorneys are resistant to provide fixed fees on the theory that a matter is too complicated to price it up front, say for instance, when purchasing a business. If you do receive pushback, break down the matter into discrete tasks. You could agree to pay (i) a fixed-fee for initial legal due diligence, (ii) a second fixed-fee for the initial drafting of the purchase and sale agreement, and (iii) another fixed-fee for revisions, negotiations and finalization of the agreement. Structuring attorney fees this way ensures that you have control over your costs and clearly defines the scope and involvement of the attorney throughout the process.
With hourly rates, on the other hand, even the most well intentioned attorneys could be inaccurate with their time-keeping, which may ultimately result in unexpected costs for the client. Take for example an attorney that charges $300 per hour and bills for 10 hours of work, for a total of $3,000 at the end of the engagement. If the attorney billed in increments of 6 minutes (which is customary) and is off by 6 minutes in tracking for each hour spent, that would mean an additional hour’s worth of work (or $300.00 in this example) is charged without any actual value in return. Simply put, inaccurate timekeeping can add up if you are on a budget. That said, if you are unable to negotiate a fixed-fee arrangement, you should request that the fee based on the hourly rate is capped at a set amount so that you at least have a sense of the outside cost.
3. Using Legal Forms
One method small businesses often utilize to save on costs is downloading a legal form and filling in the blanks. This certainly will reduce your legal costs since the business owner is deciding to forgo counsel. While it is true that most forms contain “standard” or “boilerplate” provisions, it is the non-standard provisions that really require an attorney’s attention. Instead of just using a stock document form without any modification, a better approach would be to use the legal form as a starting point and have an attorney tailor the form to your particular needs. This should save you significant fees as the attorney can concentrate on the customization and reworking of deficient provisions in the “standard” form rather than starting from scratch.
Tej Prakash is the co-founder of ShouldiSign.com, an online legal marketplace that helps individuals and businesses find and engage pre-vetted attorneys in a transparent environment. Prior to co-founding Should I Sign, Tej was a corporate attorney at Willkie Farr & Gallagher LLP and then Kleinberg, Kaplan Wolff & Cohen, P.C., specializing in public and private mergers and acquisitions, private equity and venture capital transactions and general corporate and securities law matters. He also has experience serving as an advisor to start-up companies.