Three ways to lower your start-up’s legal fees


There is no question that legal bills for startups, as a percentage of expenses, are out of control.  In some cases I have seen more than a third of the capital raised by start-ups go to paying various legal bills.  Closing fees are, in most cases, the largest portion of the cost.  However if you are starting a B2B company, or forging a lot of partnerships, negotiating contracts can quickly drain the coffers.  The answer is not a cheap lawyer or your uncle.

Put it out to bid

Early on it is very difficult to gauge how much legal work should cost.  A few months ago I met a great company called Legal River.  They effectively turn the legal process on its head allowing small businesses to create RFPs for any work they need done.  Lawyers with free time, and generally expertise in the area, bid on the work.  Even if you don’t use one of the lawyers who responded, you now have a market price for the work you want done.  They certainly aren’t the first to embrace this model but they are catering to start-ups and small businesses.

Ask for a quote up front

As standard practice now I advise startups to ask for quotes, or at minimum estimates of the amount of time each project will take.  Whether this lowers the actual bill or not (which in some cases it does) it helps tremendously to scope out the work ahead of time and make sure you aren’t paying more than the document is worth to you.  Of course there is a limit here.  If you ask for continuing revisions it will raise the cost.

Negotiate

I consider the necessity of negotiation unfortunate, but the fact remains that most legal bills are negotiable; particularly if the hours put in to the work appear more than necessary (or considerably more than you were quoted).  If you are not negotiating or actively managing your counsel you are probably paying more than you need to be.

1 comment so far

  1. Ben Hatten on

    Bronson –

    Thanks for the nice mention – and we definitely agree with your points. To add though, if someone decides not use Legal River – I would also strongly encourage them to ask for fixed fee from whatever lawyer they speak with. More and more law firms (especially those who service startups), are offering alternate payment methods. However, you need to ask.


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