Have you ever received a legal bill totaling twice the amount of the initial estimate? Unfortunately, legal bill sticker shock can happen easily for business owners and entrepreneurs who are busy starting and running companies rather than monitoring legal price tags. One way to avoid the shock of an unexpectedly high legal bill is to just expect to pay much more than you are quoted; but, there are better ways that ensure that you know approximately what your bill is going to be before you even receive it.
1. Avoid paying for a learning curve.
Talk to several lawyers before you hire someone. You want to be certain the lawyer you hire has the experience you need. Ask specific questions to determine if the lawyer has handled similar cases to or matters as yours—and what those outcomes were. Lawyers interested in your case are likely to give you some free advice. Take advantage of it. They may offer free insight on things to consider when forming a company or the best approach to a piece of litigation. Ultimately, you should go with your gut: Hire someone who is interested in helping you and someone with whom you are comfortable.
2. Ask for a flat-fee arrangement (at least for a portion of the work).
Not all lawyers are open to flat-fee arrangements, but it never hurts to ask. Assuming the fee is reasonable, knowing up front what your legal work will cost is an ideal situation.
However, this puts the onus on you to determine how much you’re willing to pay to resolve a legal issue. So you need to do some leg work to determine a fair price (hint: talk to several lawyers). A flat-fee agreement needs to be very clear about what will—and won’t—be handled by your lawyer.
3. Establish a budget up front, and stick to it.
This means communicating your budget clearly to your lawyer before the project even starts. Be sure you and your lawyer have clearly communicated what his or her work involves and then put it in writing. Having something in writing will have more impact than a simple verbal estimate. Most importantly, monitor the budget! Get regular reports on time and costs, especially when being billed by the hour. If she or he must go over budget, discuss why.
4. Do as much as prep work as possible.
Imagine someone sending you a box of documents and asking you to sort through it. That takes time; and if it’s your lawyer, it takes money, too. Provide your lawyer with organized information in addition to timely answers. Go through your to-do items with your lawyer and ask which ones you could do yourself to help cut costs.
5. Communicate efficiently (especially when being billed by the hour).
It’s natural to want to discuss things with your lawyers because they are smart, you like them (after all, you chose them), and they have good experience. But without regular budget updates (see point 3), it may seem as though they are a “free good.” When you understand that the seemingly short conversation you had last week cost you $400, it will modify the way you talk to your lawyer. Think twice before you pick up the phone to call your lawyer or tap out a lengthy email to him or her. Your calls and emails take time. How important is the question? Some things sort themselves out. When you do reach out, be specific, concise, and coherent.
Good project management is the key to avoiding sticker shock with your legal bills. Manage the entire process—from finding a lawyer that is the best fit for your needs to establishing a budget and keeping an eye on the lawyer’s activities through close and consistent communications.
Tim Greene is cofounder of FizzLaw, which helps small business owners and entrepreneurs find budget-conscious lawyers with experience serving these markets.