Saving money on legal fees – it’s all about the budget….

I used to work as the head of legal (until they hired a much more experienced one!) for OTRO, a new global football media startup, where the CEO, Jeremy, who was originally trained as an accountant, drilled into the company pre-launch and year 1 budgets with military grade precision. Every work stream (marketing, online advertising, product development, commercial partnerships, finance and accounting, etc) had its own deep dive budget, with line items covering every eventuality, milestone and target…but for whatever reason “legal” was just supposed to be a vague line item listed occasionally in other elements of the budget, and with no real  concept of anticipated costs.

Each manager, responsible for each element of the budget would usually stamp a fairly random, large figure in the “legal” line and when I asked them to justify the figures, their answers were generally vague and often just an educated guess. Despite having a fantastic knowledge of their field of expertise, they had very little concept of (a) what legal costs were definitely going to be incurred for specific items, and (b) how much they would expect to pay for each of those items.

The end result was that the total ‘legal’ budget was unfocused, unfounded, and did not portray an accurate picture of what the business was going to need in its crucial early stages. It seemed that there was a general acceptance that legal costs are just ‘one of those things’, or a ‘necessary evil’.  Of course, they had in-house legal support, so costs were going to be significantly lower than if they didn’t, but this was a potentially global and complex operation and costs definitely needed to be accounted for.

So my job as the in-house legal, was to plan and project what legal work was going to be needed and when (pre-launch and in year 1) clearly projecting what work could be done in-house and what should be outsourced, and then establishing estimated costs that we would be willing to pay for each outsource item, and adding on a percentage for items where partly unforeseeable costs might arise (e.g. trademark application disputes).

From there, all of a sudden, the budget had both a clear ‘legal’ section to it, aligned with each ‘legal’ line item in other parts of the budget, and of course…the amount we now had was significantly lower than before because we had actually applied some focus, data and industry knowledge to it. This then put the business in a much stronger position to (a) negotiate fees with law firms, (b) allocate more funding to key growth verticals like marketing and online advertising, and (c) ultimately grow and hit targets based on the cost savings and having greater financial certainty.

This is one of the key messages and value-adds Accelerate Law is looking to convey and offer to startups and growing businesses.

This article was written by Simon Davies, founder of Accelerate Law. Accelerate Law is a consultancy business providing in-house legal support to startups.

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