Earlier this year, the team at LegalVision gave us some helpful tips on the legal basics of starting a new business.
Over the coming weeks, we’ll look at legal matters that can arise for a new business once it’s up and running.
Here, Lachlan McKnight, chief executive of LegalVision, offers some ideas about how to keep legal expenses down.
Running a start-up (at least if you’re not funded) is all about trying to keep your costs down. You want to spend as little as possible on goods or services which are not directly related to growing users or revenue.
Obviously there will be some expenses which can’t be avoided – accounting fees and legal fees being two of the main examples. There are, however, lots of ways in which you can reduce your legal costs. We’ve set out a few of these in this article.
1. Get a lawyer to help you for free
Lots of people are friends with lawyers (really!). Get your lawyer mate to help out with reviewing your key documents. Most lawyers I know have helped out their friends on a huge range of legal issues. Start-ups are fun and exciting ventures. It’s fair to say that many lawyers crave a bit of fun and excitement, so give it to them by letting them help you!
2. Give away some equity
If you need a more involved legal presence, and can’t pay for it, you could consider giving away a sliver of equity in return for the legal advice you need. When Facebook was strapped for cash in the early days they gave away equity to lots of service providers. The guy who painted their walls is now worth $200 million!
Obviously you will want to avoid giving away equity if you can avoid it. Paying your lawyer is a much better approach, but if you just don’t have the cash there are entrepreneurial lawyers out there who might be interested in taking equity in your business.
3. Get down and dirty – DIY
There are lots of websites out there offering “DIY” legal documents. Some just offer basic templates, and a few use interactive question and answer software that creates a more customised legal document. If you’re strapped for cash this can be a great way to get low cost legal documents. For simpler documents such as confidentiality agreements and board minutes you may not even need to get a lawyer involved.
For more complex agreements, such as your Shareholders Agreement or a Sale of Business Agreement, you probably will want to work with a lawyer, but bringing along a first draft (if it’s of good quality) will help you reduce the fees you will have to pay the lawyer. Technology is changing the way we do business on a number of levels, and legal services are no exception to this rule.
4. Ask for a package deal
If you’re working with a good start-up lawyer, he or she will be able to assist with all of the above. Try and negotiate a package deal. Lawyers are businesspeople. If you’re bringing a nice chunk of business to them, they’ll be incentivised to sign you up as a customer and willing to offer you a discount in order to do so.
Although founders don’t want to spend precious runway cash on non-revenue generating services, it’s fair to say that getting the legal issues sorted for your start-up is pretty important. Burying your head in the sand isn’t a good strategy. You need to get legal assistance, so try and get it done well but for a reduced price.