I’ve spent too much money on lawyer fees. Let's call it a million dollars. It hurts my heart to share this. But I'm writing this to help you avoid unnecessary costs.
Keep reading, it's a bit long, but there's something for everyone on this list. Even if you don't work with lawyers a lot now, you will encounter them one day so skim the headers (in bold).
First and foremost lawyers are important.
They will help save you one day.
However, they bill you hourly. Which means they are incentivized to create situations that cost you money.
They're not evil.
To explain this, Charlie Munger likes to say: "incentives work".
An experience I had recently:
We sent a $75,000 retainer to a lawyer recently. A bit high but OK for this situation.
Magically, her invoice after 10 days of work came back exactly $76,000. Painful, but no surprises there. I didn't follow my own advice below.
Don't make mistakes like me. Follow the advice below and you'll save a lot of money:
Ask for a Quote Before Signing.
When you ask for a quote for the project, many lawyers will try to push back. They want to bill hourly, not fixed fee. But keep pressing them until they give you an approximate project quote or at least a range. It will ensure your expenses don't run away from you.
Schedule Short Meetings.
You send calendar invites. Don't let the lawyers do it. Your calendar settings likely default to 30 or 60 minute meetings. If you set the time, you will always fill it.
Instead use a 15 minute calendar invite. You'll be surprised how much value you can fit in 15 minutes.
Avoid Meetings.
Send your lawyer questions over email instead of calling them. A meeting that takes 30 minutes, can be 5 minute written response.
If something isn't clear in the email, then you can jump on a "short" call.
Good Lawyers Save You Money.
Carefully vet every new lawyer relationship. You won't know how good they are until you've worked together for a few hours.
Here's what good looks like: they will bring up good ideas to protect you, and you'll feel delighted by their specific knowledge and speed.
Unfortunately, there is little correlation between expensive lawyers and good lawyers.
Industry Experience
You need a lawyer that has worked on and seen dozens of situations like yours. Meaning they've worked on the paperwork, and years later had to defend their client if they got sued. That's how you really learn as a lawyer (knowledge of case law also helps).
If you're acquiring a business, do NOT hire your family friend who has done a couple deals in the past. Look for a lawyer that has done 40+ deals. Also don't hire a lawyer to buy a $5M business who has mostly done $100M+ acquisitions. It's a different lift, and set of expectations.
The problem with someone who doesn't have experience in the market is they still want to protect you, but they don't understand which parts of the document they should be arguing or not. So they argue everything. And sometimes they scare you, and it ends up killing your deal. Or they haven't seen enough lawsuits in this space, so they don't know what langauge is required to protect you.
Forget Sunk Cost.
Sometimes we hire a lawyer, find-out they are slow or not great after 4 hours working together and we keep working with them. Don't do this. Find another lawyer. Forget the money you've lost. It will serve you to have a great lawyer for your situation.
Ignore "market"
Sometimes you'll ask a question about the legal wording in a document and the lawyer will say "it's market". What they're trying to say is "most other lawyers agree this to be the right way to approach this situation". I've fallen for this trap in the past. That's bullshit. There is no such a thing as "market". You get to design whatever world you want to live in.
So keep poking and proding. Ultimately they work for you, and you can tell them "here is how I want it done".
Maintain Agency
You're in control. You and only you will suffer the downside if things go wrong or you get sued. The lawyer will not. Which means you have misaligned incentives (I've talked about these before in this newsletter).
You cannot surrender the details of your legal documents to a lawyer. It can feel very confusing because you think you hired them for this purpose.
But you hired them to advise you on the legal process.
Carefully consider every sentence in a document before you sign it and ponder how it will affect you if things go wrong in the future.
Ask the lawyer "what are some example downsides and corner cases of this sentence?".
Look stupid to avoid being stupid.
I used to be afraid of looking stupid when I didn't understand something. So I just blindly trusted the lawyer. Bad idea. I was so afraid of looking stupid that I ended up being stupid and signing something I didn't complete understand. It cost me dearly.
Don't be afraid to say: "I don't understand this sentence". If you don't say that line 15 times when reviewing a legal document you're not doing your job.
I use Chat GPT and copy/paste a sentence and tell it to "explain this sentence to me in simple terms".
Prenups are Imporant.
Not just in marriage, but also business.
If you enter into a contract with another party, you must define the terms of what happens if the partnership does not work out. These Unwind terms are what will save you the most money one day.
Any partnership or contract you enter to will feel rosy when it's happening.
Otherwise you would not be entering into the contract, right? But life is full of twists and turns. So it's better for you to be prepared.
Agree to clear terms on what happens if things don't work out.
Consider every corner case or downside scenario and outline it. It's a weird feeling to do when things are good and you "don't want to discuss the bad". But that will get you in trouble. And getting in trouble costs you a lot in legal expenses.
Don't let more than 1 lawyer on a call
Sometimes I schedule a meeting with our lawyer, and they bring their partner or associate. It's easy and convenient for them, but it costs me double for every minute.
When I start a call with multiple lawyers on it, I ask one to leave. It feels weird, but it feels better than paying $1300/hr to them.
I nicely tell them: "to keep costs down, I prefer to keep only 1 lawyer on calls. And if needed, we can update the other over email later".
Hire Lawyers in the Midwest.
That's it. You get charged double hiring lawyers on the coasts (cost of living) but you don't get double the value.
Ask for Draft Template First.
Before your lawyer starts work on a new document for you, ask for a baseline template or a copy of a previous agreement. You can take a first pass editing it and save thousands of dollars.
Arbitration Clause, Always.
The US legal system is broken. If you go to court, everyone spends money on lawyers. Somebody may get a judgement but nobody wins any money. All the money goes to the lawyers.
So we always include a binding arbitration clause with specific timelines and processes to get to a resolution. There may be a disagreement. But arbitration will save everyone time and money.
Don't Fear The Law.
The first time I got a demand letter I panicked.
A mentor of mine said: "if you're in business long enough, you'll get sued. Don't worry." and he's right.
Working With a New Law Firm?
⭐️ Ask them to email you every time they hit 5 hours ⭐️
It's a little extra work for them, but it will save you a ton of money.
We recently hired a local real estate attorney. He sent us an invoice in 3 weeks with 35 hours, for a project that should have taken 4 hours!! I wish we asked him to email us every 5 hours. Once the time is racked up, it's hard to go back and negotiate.
Negotiate, Always.
When I start any new service relationship I ask for a 10-20% discount for the 1st year. It's worth it for them to get you over the hump of being a new client. And an easy win for you.
We have an arrangement with a couple of our main lawfirms that they give us a 20% discount on any "broken deal" fees. It's a nice thing for them to do for us, and keeps us working with them forever.
Don't Talk Business With Lawyers on Calls
When we're buying a business, we do many calls with our lawyers and the seller's lawyers to work through the legal documents.
Sometimes we spend the first 45 minutes working through business questions with the other owner. Then 15 minutes covering a couple legal questions.
This means we just wasted $500 in legal costs for us and the owner too. Lawyers don't need to be on your business negotiation calls. They don't help much with that.
Instead, organize a business call first with the owner (it's free for you and the owner). Then have your group lawyer call afterward to work through legal questions.
Is Your Deal Dying With Lawyers?
Do you feel it's taking forever for lawyers to review your documents and get you feedback and slowing your deal? Remember time can kill a deal. And lawyers will take as long as they need (they're busy with other clients too).
After a first round of revisions, I request two group lawyer meetings a week for 20 minutes each.
"But Sieva, you said send an email instead of meeting above. This seems like a contradiction, no?"
Yes, above I'm suggesting you use email to cut down on costs with your lawyer.
In this situation the main priority is trying to get a deal done. Managing two lawyers from different sides which can feel a bit like juggling while riding a unicycle in a cage with a lion. This strategy will help you manage the process better.
Don't ask a lawyer to do what anyone else can.
Lawyers are helpful and smart. If you ask them a question, they will work to find out the answer. But you need to be resourceful and find other ways to get your questions answered.
For example, we work with a labor attorney. I can ask her any question and she will research it and get it answered for $500/hr. But one of our companies has an HR firm we pay $200/month. And we can ask them unlimited questions.
Save your high impact questions for lawyers. And use other services like Chat GPT, accountants, google, HR firms to save yourself money on other things.
Over the last decade I've hired 15+ people to be CEOs for companies I've worked with. Some have worked out incredibly well. I spent some time reflecting on what makes for a "great" CEO at our companies and came up with this list.
It's not exhaustive, but hopefully it's helpful to you...
Sieva Kozinsky
Sieva