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When Does Your Startup Need a Legal Department?



When Does Your Startup Need a Legal Dept

After years of working with different law firms on a variety of business matters, it was time to stop and ask myself: Just how many lawyers does it take before hiring one in-house?

I didn’t keep an exact count, but I knew when I’d arrived at my breaking point. The costs and headaches associated with working with firms, which were both disconnected from one another and from the daily operations of my company, were rising. We needed help with matters such as establishing trademarks and drafting and editing partnership contracts (at least four to five per day). Understandably, our legal matters were just one of many to-dos on an outside counsel’s list, which meant that our priority levels and timelines had to be balanced against their other clients’. It seemed clear that an investment in hiring a lawyer in-house would be the most economical and efficient decision.

But before I created an entirely new department, I wanted to check my thinking. My team and I evaluated our legal expectations and gaps and came up with five specific indicators that made the final decision to hire seem like a no-brainer.

If these problems sound familiar to you, then establishing a legal department may be a valuable next step for your business too.

Your turnaround time on legal matters is too slow.

We were dealing with a significant number of contracts, and the amount of time it took to work and return markups from outside counsel was becoming excessive. Efficiency is critical when it comes to finalizing legal agreements with business partners, and any delay put valuable relationships at risk. A general counsel could exponentially speed up our turnarounds—moving from a phone tag process that could take a few hours to a one-minute casual conversation—and keep our promise of great support and service to our partners.

Legal micromanagement is overshadowing other responsibilities.

Our employees were putting too much effort into managing legal considerations. It was beginning to detract from their primary responsibilities. We needed someone new to help manage legal operations so that non-legal staff could fully commit to their designated obligations again.

Legal consultation is becoming inconvenient.

Because we were so busy getting involved in the fine print of our company’s legal matters, it was becoming easier and easier to write off certain precautions as being unnecessary. Spending valuable time and energy planning for speculated risks didn’t seem to be as important as dealing with the palpable concerns of the present. We needed a more integrated method to streamline our risk analysis and avoid careless mistakes.

You’re lacking a cohesive and company-specific legal plan.

We did not have a definitive legal strategy that was in line with our overarching goals as a company. This was mainly because we were working with third-party sources, who, despite their expertise, weren’t familiar enough with our business to provide the goal-oriented support we needed. Someone integrated with the day-to-day operations and even the company’s in-office personality would be better equipped to give us the counsel we needed.

The financial expenses of working with external firms are building up.

We were faced with an incrementally rising cost of legal assistance from a variety of outside counsels. For the amount of money we were spending on legal advice, we could afford a better return on investment and more specialized support by hiring for an internal role. Bottom line: we did the math. Beyond actual monetary costs, the extras we would get from someone in house — tailored advice, speed and operational improvements—added even more to a general counsel’s worth.

Adding a legal department can be a daunting decision when you’ve been getting by with without one for so long, but if you’re experiencing the perfect storm of challenges like we were, an outside counsel may be the perfect way to clear the air.

Several months after our hiring decision, we’ve seen a noted improvement in the challenges we faced. We’ve become more agile, resourceful and efficient due to the hard work and tenacity of our general counsel. Our turnaround times are faster than ever, our plans are proactively vetted for risks, and we have the opportunity to run our ideas (and our lawyer jokes) by an expert who is just a few steps away.

Author: Zach Robbins is an entrepreneur and expert in performance marketing, website optimization, lead generation, and marketing technology. He is co-founder and CEO of Leadnomics, a digital marketing and technology company, and Margo, a digital insurance agency.  

Published: February 9, 2017

Source: Business Collective

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The Young Entrepreneur Council (YEC) is an invite-only organization comprised of the world’s most promising young entrepreneurs. In partnership with Citi, YEC recently launched StartupCollective, a free virtual mentorship program that helps millions of entrepreneurs start and grow businesses. Follow the YEC on Twitter @YEC.

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