Maximizing Your Legal Dollars
When times are tight, you might do your transactions without a lawyer, to save on legal fees. Although understandable, this is bad practice.
But times are tight. What should you do if you don’t have the budget for a comprehensive legal review? Listen to Abraham Lincoln. When asked how long his legs were, Abe Lincoln replied, “Just long enough to reach the ground.” Sometimes you don’t need perfection. Sometimes you want “just good enough.”
All competent legal work should try to hit the ideal “just good enough” point. That is, the legal work should strive to hit the ideal cost / benefit point. This point is a moving target that depends on a lot of factors. For legal transactions, the two most important factors are tolerance for risk and ability to pay. Assuming your lawyers are honest and competent, the more you spend on th em, the more they protect you. Conversely, the less you spend, the less protection you get.
Of course you want to reduce risk the same as any other business. But when times are tough, you don’t have the cash flow to get maximum protection. You need “just good enough” protection on the cheap. This is where a lawyer’s real skill comes in. A good small business lawyer can triage your risks, then cover them in order of priority within your legal budget. Here you cover your big risks as best as you can afford and you let the little things go. It’s a calculated risk.
To see all this theory in action, let’s look at a typical commercial lease. A commercial lease can run up to 40 pages of small print on 8 X 14 paper. Every single sentence benefits the landlord. As a tenant, you don’t have the time or money to argue the entire lease. You can’t fight the hundreds of battles in the lease – instead you must choose a handful of make-or-break issues and really go to war on them. You need to prioritize, to focus your lawyer’s time on the really important issues. For example, you might start with base rent, move to pass-through (triple net) costs, then to tenant improvements, then to assignments and sublets. And you might let go on the split of condemnation proceeds.
How do you get this kind of review? First and foremost, you need a good and trusting relationship with a business lawyer. A lawyer must know you and trust you to give you this kind of service. Understand that a lawyer incurs his or her own risk in doing your cost / benefit analysis. If your lawyer tells you to focus on issues A, B and C and let go on issues X, Y and Z, the lawyer has malpractice liability if issue Y becomes a problem a few years down the road. With this in mind, you can’t expect a lawyer to stick his or her neck out for you without a good relationship in place. And do your lawyer a favor. Tell your lawyer in writing that you agree to the limited review in return for reduced fees. Give your lawyer all the CYA language he or she needs.
Let me wrap this up now. I am not telling you to do all your deals on the cheap. That’s just playing Russian roulette – you’ll suffer tomorrow for being cheap today. What I’m saying is this – if you don’t have the money for a full legal review, then get a limited review. Get the best review you can within your budget. Get a good small business lawyer to help you figure out just what protection you can get for your money.
ABOUT THE AUTHOR: Matt Dickstein
Matt Dickstein, Business Attorney, provides business legal services in the San Francisco Bay Area and the Silicon Valley, California, including San Jose, Palo Alto, San Francisco, Oakland, Hayward, Fremont, Walnut Creek, Pleasanton and Sacramento.
Since 1994, I have been practicing business law, corporations & LLC law, securities law (including private offerings / placements), franchise law, real estate investor law, mergers and acquisitions, and exit and succession planning. I work with small to mid-size companies in all industries and at all stages of a company’s development, from start-up to IPO or sale.
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer. For specific technical or legal advice on the information provided and related topics, please contact the author.