Startups typically face several legal hurdles in the early phases of creating their businesses. The average legal costs for a startup is hard to predict, but some 2013 estimates indicate that, on average, startup companies were paying a little over $1k per month for the first three years of their business.

In 2011, Silicon Valley attorneys made an estimated $27 million in revenue from startup alone; yet, as startups have been forced to become more capital efficient, they’re also taking a hard look at their legal costs and looking for ways to save on their startup legal fees. The following are simple ways startup owners and entrepreneurs can save big cash on their startup legal fees.

1. Self-educate and Draft Documents Yourself

If you’re a startup founder, you owe it to yourself and the future of your company to get minimally educated on legal issues. Here’s an important tidbit you may have never considered before: legal information is no longer locked in big, unreadable books or behind stone walls. It’s true. By reading a few articles on the subject and taking some time to self-educate, you can save big bucks. Especially for the most common contracts and small deals, you can (and should!) consider widely adopted alternatives.

Consider this example: you have a website and collect some personal information from your customers; probably an email address and their name at the very least. So, you need a privacy policy to explain how you will use those bits of information so your customer knows that you won’t sell their email address, etc.

Using an online free privacy policy generator or starting with a template means you can probably get a decent first draft that your attorney can review in an hour or so for a fixed price. Avoiding the cost of paying your lawyer to draft the document can save you a lot of cash.

2. Ask for Payment Alternatives

While many lawyers bill by the hour by default, times are changing and the legal industry has gotten the message loud and clear that their clients want alternatives. Not every lawyer is in a position to offer alternatives, but it never hurts to ask and have an option or two of your own to offer.

Consider this example: your startup is running on a tight budget, you’re doing all the work yourself, and yet you need a few legal documents to keep yourself safe.

You might ask for a fixed fee and many smart lawyers already offer this payment arrangement for the more common items they do regularly. Fixed fees are good for you and the lawyer because it gives the lawyer an incentive to be efficient, but be sure you understand the fine print in the agreement.

You might pay your attorney in equity instead of cash. Not all attorneys will accept this option, but if you already have an established relationship of trust, it can be worth asking. Of course, a smart entrepreneur knows not to give away too much equity too early for a range of important reasons, but you knew that already.

3. Hire Outsourced General Counsel

Recent studies indicate that companies are leaving pedigreed law firms in droves as they seek out agile law firms that can provide what they need when they need it. You might think that this option isn’t available to you, but if your company is small but not small enough that you get to avoid the administrative and corporate responsibilities like board of director’s meetings, human resources compliance, insurance, and the like, hiring outsourced general counsel can be the way to go.

How does it work?

Hiring outsourced general counsel is like having a part-time attorney who will visit when needed and work on retainer. Many legal firms offer limited general counsel services and they can be very flexible and useful, especially for smaller firms and startups. Ideally, it means you’ll have your lawyer on hand when you need him or her, but you can also control exactly how much their services cost your firm.

About the author

Matt Faustman

Matt Faustman

Matt is the co-founder and CEO at UpCounsel. Matt believes in the power of online platforms to change antiquated ways of life and founded UpCounsel to make legal services efficiently accessible. He is responsible for our overall vision and growth of the UpCounsel platform. Before founding UpCounsel, Matt practiced as a startup and business attorney.

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