Are your legal costs starting to keep you awake at night?
On average, companies spend about 0.36 percent of their annual revenues to settle their legal expenses. This might look like a negligible figure, but when you’re running a small business on a tight budget, even a small expense can have a big impact on your finances. Plus, there might be a sudden spike in legal expenses if your business is engaged in corporate litigation.
The good news is there are ways to cut what you’re spending on legal fees without increasing your company’s exposure to various liabilities.
Read on to find out how.
1. Avoid Having In-House Attorneys
Many large companies have well-staffed legal departments, usually led by the chief legal officer – and with good reason. An in-house legal team is in a strong position to identify and address legal threats in good time.
If you’re a small business, you might also want to follow this path and start building an in-house legal term. Unfortunately, having a legal team on the payroll comes at a steep cost. In fact, most small businesses cannot afford to hire more than one attorney as employees.
An effective way to save on your legal costs is to do away with an internal legal department if you already have one, or downscale it significantly. After that, you can hire an attorney on retainer for all your ongoing legal support needs.
Still, you can do without an attorney, and only hire one when needed. There are several on-demand legal services for businesses, and you can use them to reduce your legal bill.
2. Comply with Relevant Regulations
In the normal course of running a small business, you’ll only need the services of an attorney occasionally, which is ideal for keeping legal costs low.
For example, during startup, you might need a business attorney to help you with business formation or incorporation and partnership agreements. The next time you’ll need an attorney is probably when you’re hiring employees, to help you draw up employment contracts.
However, there are instances when you need to get legal help out of your own wrongdoings, intentional or not. As a business, you have a responsibility to comply with the various laws and regulations in your industry.
For instance, if you’re required to get a business permit and you decide to start operating without out, you’re inviting legal trouble – and unnecessary legal expenses. The same applies if your business flouts out regulations it’s supposed to comply with.
As such, being in compliance with the law at all times will help you keep your legal costs law. You won’t need to spend money hiring lawyers to defend your business in court.
3. Prioritize Out-of-Court Settlements
Thumbs up for being a law-abiding business, but that doesn’t mean you won’t have legal disputes to deal with. Even when you’re doing everything by the book, there are issues you may not have control over. For instance, workplace accidents can still happen or employees can sue the company for one reason or the other.
Whenever there’s a legal dispute, don’t be so quick to rush to court. Being a litigation-happy company will only drive up your legal fees.
Strive to resolve disputes out of court. If your business is in the wrong, pursue settlements to prevent the aggrieved party from filing a lawsuit.
4. Negotiate Legal Fees When Hiring a Lawyer for Your Business
As a business owner, how often do you negotiate with service providers? Perhaps you do occasionally, but what if you have an employee who’s in charge of procurement? Chances are they’ll pick a provider who fits the allocated budget instead of negotiating.
Yet, everywhere in life, negotiating is a proven way of getting a better deal. To keep your legal expenses as low as possible, make it a policy to negotiate with attorneys before engaging them on a matter. Getting a lawyer to reduce their hourly rate from $100 to $80 might not seem like much, but the savings will add up as the hours pile on.
In addition to negotiating, try to find law firms or lawyers who aren’t the priciest in your location. Hiring a top-rated law firm for a simple legal matter that even a freelance solo lawyer can handle won’t help your cause to lower the legal bill. Top law firms will slap you with hefty legal fees and probably won’t give you room to negotiate.
5. Recognize That Not All Legal Work Needs an Attorney
Are you turning to a lawyer for every bit of legal work your company needs?
While it’s good practice to leave legal work to the pros, you’ll incur higher legal expenses. When you’re looking to cut down on those bills, embrace the fact that not all legal work needs the input of an attorney.
In today’s digital age, there are free online solutions you can turn to. For instance, if you need to create a sales agreement, there are thousands of free templates you can download and customize to meet the needs of your business.
Just be careful not to tackle tasks that require an attorney in the name of saving money. You can make errors that can turn out to be very costly.
Don’t Let Legal Fees Eat Into Your Bottom Line
It’s impossible to run a company without incurring any legal fees. However, these fees shouldn’t be so high as to threaten the financial health of your business. If they are, you can use the strategies fleshed out above to bring them down.
Read our business section to learn more about running a small business.
