You And Your Attorney

Tweet

3. When you call, make it count. If your company is like most small businesses, you rely on your law firm primarily to draw up contracts and agreements, wrestle with the personal needs of top management, and represent you in litigation. Other common needs for legal counsel involve real estate and insurance problems, estate planning, and matters as mundane as dunning delinquent accounts. Beyond these typical requirements, small business's demands for legal advice range from matters involving taxes and patents to labor relations and public offerings.

Maintaining regular communication with your lawyer is important. But how often should you be in touch and how do you make every call count?

The majority (58%) of the companies responding to INC.'s survey talk with their attorneys at least once every 30 days, although the frequency of communication varies widely, depending on company size and circumstances. Among the smallest firms, contact with legal counsel ranges from once a week (10% of respondents) to once every six or seven months (36%). Among larger companies, with sales of $5 million to $25 million, the percentages are almost reversed -- 33% are in touch with their attorneys at least once a week, while only 11% go beyond the six-month mark without communication.

Good communication with your legal adviser helps create the kind of rapport that prompts him to call you, for example, when he spots a change in legislation that might affect your business. Assuming that you don't have immediate need for counsel, contact once a month should suffice. A personal visit is preferable, but a phone call will do. Plan to cover at least three or four items or questions that you have jotted down and accumulated during the month. The continuity of relationship will be valuable in resolving routine matters but will count most when your need for legal advice is immediate and unexpected.

4. Forget the dollars, worry about the sense. Regardless of how smooth the relationship may be, legal fees are a perpetual burr for most small businesses. The problem is a practical one, with two sides and a single solution.

Clients often don't understand exactly what services their attorneys are performing and why they cost so much. They are mindful, however, that the matter is always running. In turn, attorneys are deficient in making clear to their clients just when they'll be billed, what the charges will be, and why. As a result, their bills always seem too late, too large, and too vague in terms of time spent and work done.

The solution is to establish a clear understanding about cost and then put it in writing. The written agreement should specify what services will be performed, what the fees and reimbursable expenses will be, and how you will be billed, including frequency, itemization, and -- if applicable -- progress summaries. As a matter of practice, several dos and don'ts apply. Don't ever hesitate to call your attorney. But when you ask him to do something -- whether it's a request to attend a management meeting or send a dunning letter to a customer -- don't expect him to do it for nothing. Do ask for an estimate on specific jobs, but don't continually try to negotiate fees.

How do most small businesses pay their attorneys, and what's the typical tab? Almost 7 out of 10 respondents to the INC. survey compensate their lawyers on an hourly basis; the rest rely on negotiated fees, flat rates, and retainers. Not surprisingly, the use of nonhourly payment methods directly relates to company size. Flat fees, for example, are generally found among the smallest companies, while retainer agreements are more common among the largest firms.

While annual legal costs among the survey respondents range from $150 to $75,000, the majority (63%) of companies manage to keep their legal fees under $5,000. Depending on company size, average annual legal expenses range from about $4,300 to nearly $43,000. Figures from the attorneys surveyed corroborate the data. Some 93% of the lawyers reported that small companies pay for their services on an hourly basis. While the average annual legal fee paid by their small business clients is $6,948, 55% of these clients pay less than $5,000.

Do small businesses enjoy any special break in rates? Not among most law firms. However, 17% of the attorneys surveyed offer what amounts to special concessions for small companies. Such breaks take the form of lower hourly rates, running as much as 30% less than larger clients pay, discounts of up to 25% for start-ups or repeat business, and deferred payment terms.

5. To find a lawyer, look beyond the local bar. Knowing how to select a lawyer -- whether to replace or to reinforce your existing counsel -- is part of being a better client. There are various reasons, negative and positive, for switching attorneys. The negative ones range from consistent disagreement and general neglect, to incompetence and exorbitant fees. On the positive side, a change may be in order because your business simply has outgrown your legal counsel's capabilities or your needs have become more complex and require an experienced specialist. In the latter case, your present attorney may even instigate the change for you.

Regardless of the motive, how should the search for another law firm be launched and what criteria should you use for selection? Most larger libraries have a copy of the Martindale-Hubbell Law Directory -- a national listing of the legal profession. Your local and state bar associations may be a better place to start. And your best source will be the references and recommendations provided by your business peers, accountant, banker, broker, and other advisers.

Based on the responses from small business executives and attorneys who participated in the INC. survey, the chief criteria for choosing a law firm include personal chemistry and accessibility, reputation, expertise in your specific area of need, overall competence, and fees commensurate with services performed.

 PREV  1 | 2