But what kind of problems does this raise?
You need a few basic documents to get you started, but law firms just don’t work that way.
One guy went to a lawyer and they said that he needed a distribution agreement. Nothing about the incorporation of the business or anything else.
I’ve met people years down the track and don’t know what the shareholder agreement is! It’s an issue you need to address early on, but you can go on for two years without one.
As soon as you can afford it, you need to see lawyer. But you’ll stifle the growth if you spend too much too early.
There are lots of ways you can put things in place in the interim. I’ve seen multimillion dollar deals done on the back of napkins and that was enough to enforce a business’ rights.
A lot of SMEs get very excited about doing things to the ninth degree but then you have some millionaires who agree stuff over email. And they do get protection. People forget the law looks at all aspects.
So, you should chance it?
If you’re in the business of starting up, you’re in the business of risk. But you should only do what you can afford.
Once you start to think a bit larger, people think if they’ll actually get paid if they sue you. So hold off spending the money and make your business profitable. But don’t leave it too late – people come to me only after they’ve had a dispute.
You’ve switched around the standard billing arrangement with your start-up. Can you explain how?
There’s a real move in the legal profession to talk about how billing is done. Lawyers are sick of billing by the hour, while they want to bill on value. But it will take a while to filter down.
At the moment, two template-style agreements can cost you $2,000. To respond to a statement of claim, it could cost you another $2,000 or up to $10,000 once you involve a lawyer and then go to court.
The ideal service is an overview of your business. You should say ‘here’s my business, what do I need?’ And then take it from there.
Law firms should provide a fixed fee service that provide you template agreements and a consultancy. It doesn’t seem to happen now.
Start-ups hardly ever go to a law firm and they say ‘that was cheaper than we thought it would be’. It’s always more expensive. There needs to be a fixed fee.
I have four clients on retainers. They pay $2,0000 for a report where I do due diligence on them and agree a plan to meet deliverables to get them in A1 condition.
Also, lawyers sick of working themselves to death. They can get burnt out, so this model allows them to set the size of their business.
You need to justify 10 clients for a full-time job, five if you have larger clients. If a lawyer wants to work three days a week, they can have fewer clients.
Want seven new clients in the next six months, so there’s proof of concept of this. We almost want to crowdsource general practice counsel.
As far as I’m aware, I’m the only one doing this. There are a few innovative law firms out there, but they are again aimed at blue chip companies.
So, what needs to change?
My hope is that our business encourages other law firms to do the same to help small businesses grow.
I have a lot of contacts in big law firms and they are finding it tough at the moment. They are aware of lawyers going it on their own, but the danger is they set up in just the same way, which doesn’t suit small businesses.
But now things are tighter, they are finding it hard. They are looking at ways of doing things differently. There will be a change, but I can’t see the big firms moving quickly.
