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November 1st: Torsten Jacobi, CEO of Creative Weblogging, joins host Anita Campbell. Sponsored by Six Disciplines. Show details.
Friday, March 05, 2004
Small Law Firms for Small Businesses
An oh-so-true article has been making the rounds on the law blogs, or "blawgs." It suggests that small businesses should hire small law firms for their legal work.
    "Via this post from solo Matt Homann comes this New York Times article on the lawyer's role in counseling small business. A number of the small business owners quoted in the article criticized attorneys, claiming that they "fascinate themselves with trivial things" and "consume as much time as possible" in a transaction.

    Matt's post summarizes the advice for small businesses on dealing with lawyers, including negotiating flat fees, approving staffing and questioning bills that seem high.

    Another piece of advice not commonly found is for small companies to hire solo and small law firms to keep a lid on costs. The article's worth a read for those who market to small business - and the advice could easily be converted into an effective sales pitch for lawyers seeking to advise and represent small companies."

    Quoted from MyShingle via the Stark Law Library Blawg.
Having been a corporation attorney for a number of years, I can say that the advice to small businesses to hire small law firms is good advice.

As a corporation attorney, a large part of my job was to hire and supervise outside counsel. Over the course of more than a dozen years I hired and supervised hundreds of law firms across the United States, Canada, Germany and the United Kingdom.

Even though the companies I worked for were large corporations, I often sought out small and midsize law firms.

Smaller law firms tend to be practical and results-oriented. They are conscious of costs -- yours -- and do the job efficiently.

Smaller law firms also tend to be easier to work with than large firms. I could get the kind of results I wanted. For instance, I found small firms were more amenable to the following kinds of approaches I used with my attorneys:
  • I could (and did) demand that my attorneys write contracts in plain English, instead of legalese. I routinely nixed excessive numbers of "defined terms," i.e., capitalized definitions in contracts. Many attorneys feel defined terms are more precise. But if carried to excess they make contracts impossible for business people to decipher. And if the contract is unintelligible to the business people who have to carry it out, it's of little value to the business.

  • I regularly suggested optimum contract lengths (e.g., "about 6 to 8 pages"). Normally I got back something longer. But just by suggesting a short length it set a certain expectation. The lawyers tried to keep documents concise because they knew I valued brevity.

  • Over the years I got good at keeping minor issues and theoretical concerns from taking on a life of their own during contract neogotiations. I would simply declare "that's a business decision." No contract, no matter how detailed, is going to stamp out all risks in a business transaction. At some point the business owner has to exercise common sense, take the situation out of the lawyer's hands, and be responsible for making the decision.

  • In litigation, I frequently pushed for early settlements. Litigation is expensive in this day and age. In my experience, one of the most underestimated costs in litigation is management time and distraction. And small businesses may be least able to afford that management distraction. For example, in a small business the company president may need to be heavily involved in defending a lawsuit -- the same company president who may also be the company's best sales person. Hmmm. Let me see. If I am a small business owner, which will I choose? Fight the battle royal over a lawsuit that won't mean anything in three years' time, while sales go in the tank? Or settle the lawsuit and focus my attention on sales?

Of course, there are times when even a small business may be best served by a large law firm. For instance, a small business faced with a large complex transaction requiring specialized legal expertise needs a law firm that has been down the road before. Often that means hiring a large law firm. But most of the time, small businesses will be far better served by small law firms.
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