How Entrepreneurs are Saving Big Money on Legal Bills
Many startups spend more than R50,000.00 on legal bills over the course of their first year. For a bootstrapped startup, that can amount to more than 25 percent of the company’s startup capital.
Starting up your company should not put such a dent in your early capital. Here are a few tips that can help entrepreneurs save thousands of Rands while still getting high quality legal services.
Use smaller firms, solo practitioners, and virtual services
Most of the time, finding the right lawyer is not easy. You might have to look up and call ten different lawyers and get quotes. Many times, this means just getting hourly quotes as opposed to a firm idea of how much something will cost. Often, entrepreneurs get fed up searching and make a selection out of frustration or go with a referral from a friend, which can still lead to overpaying. This is especially true when you need a la carte legal services, such as drafting an agreement or reviewing a document.
Finding the right attorney comes down to two basic understandings:
- Independent and boutique lawyers can be just as effective as big law firms for 90 percent of your legal needs; and
- Having a lawyer within 2kms from your office is not as important as you think (i.e. virtual lawyering is where legal services are heading).
Get it done right the first time
Some of the most expensive legal work is correcting work that was not done correctly the first time. More often than not, this occurs when using a document automation and filing service. Talk to any startup lawyer, and they will tell you they spend 15 percent of their time (or more) correcting the mistakes made by such services, most notably in company formation.
It is not because these services are bad services. They are actually good at doing a few things very well, but their services are limited and leave out requisite steps in critical processes that usually require a lawyer to complete. If you choose to use one of these services, make sure you do all your homework and know every single step that must be taken or the most important part of the documents you are automating. Otherwise, you will be paying 10x what you saved initially by using one of these services.
Take care of legal stuff sooner rather than later
There are most certainly legal tasks that you can delay. We typically do not recommend forming a company until one has a product or a real team working on a product close to being released. Most of the time, however, the right time to take legal action is now.
One of the most common things we see is when entrepreneurs start operating their business without doing a trademark search and filing a trademark application subsequent to that. Only after operating their business for months do they realise there is another company with a similar name in a similar industry, or worse yet, they get a cease and desist letter. The costs to rebrand can be extreme.
Another common example is having contractors join a company. In the haste of getting people started, so many entrepreneurs do not put an agreement between the company and contractor in place. This formality gets put off and then before you know it, you have a dispute with a contractor and they take off with code or do not complete the work you paid them for — both costly results.
When faced with saving money, entrepreneurs have blazed the trails in finding ways to get high quality and cost effective services. Legal services are no exception. By finding the right lawyer and avoiding some common mistakes, you can help save your valuable capital for the most important thing, growing your company.