There’s no two ways about it – running a midsize company is hard. Between employment contracts, sales deals, fundraising, PR and more, midsize companies have a lot to deal with. Additionally, even though they tend to have more money than startups, they still typically can’t afford to address each and every concern that arises in the most comprehensive way possible.

That means that every issue is a judgement call for midsize companies. They have to be strategic about when they choose to save money by improvising a solution themselves, and when they spend the extra money to call in an expert. This balancing act between frugality and professional advice is a constant reality for midsize companies, and making the wrong decision could cost the company dearly.

This is especially true with respect to legal matters. Substandard advice on a very important contract could cost the company hundreds of thousands of dollars, if not more, in lost revenue. On the other hand, calling in high-priced experts when they’re not needed could quickly run a company into the ground.

The balancing act between frugality and expert advice is a constant reality for midsize companies.

[tweetthis]The balancing act between frugality and expert advice is a constant reality for midsize companies[/tweetthis]

That’s why it’s so important that midsize companies choose wisely when seeking legal counsel. Unfortunately, many midsize companies fail to do so. All too often, they select the wrong provider to handle their current legal needs, and that is the biggest mistake that we at UpCounsel see midsize companies make. Whether they choose a large law firm that is far too expensive for a routine matter or a small one that lacks the expertise that the project requires, the consequences can be severe.

1.) Using a Brand Name Law Firm for Routine Work

The appeal of big law firms is obvious – their prestige and brand name recognition make midsize companies confident that all legal work entrusted to the firm will fall into the most capable of hands.

In some ways, this assumption is true. Big law firms have so many attorneys at their disposal that they will undoubtedly be able to provide one whose specialty is a perfect match for the current project, no matter how niche the legal area.

However, hiring and retaining these experts isn’t cheap. Associate salaries have skyrocketed in recent years, reaching $180,000 per year at some firms and that doesn’t even include signing bonuses. Moreover, law firms have a lot of overhead costs, such as office space, support staff, recruitment perks and more. 

For routine projects, there’s no need at all for the army of attorneys that big law firms provide.

[tweetthis]For routine projects, there’s no need at all for the army of attorneys that big law firms provide[/tweetthis]

All of that adds up quickly, and naturally, the burden of those expenses falls on the customer. In order to generate enough revenue to cover those costs, senior partners at big law firms charge an average of $727 per hour, with rates at the most prestigious law firms reaching $1,500 per hour.

When stakes are high and the project could make or break the company, it might make sense for a midsize company to pay such rates in order to ensure an airtight legal solution. But for everyday matters such as review and negotiation of contracts like employment contracts and filing patents, it simply doesn’t make sense to hire a big law firm.

For such routine projects, there’s no need at all for the army of attorneys of every speciality that big law firms provide. Nevertheless, when midsize companies work with a big law firm on simple projects, they pay for access to all of those attorneys. In effect, the invoices they receive include fees for services they don’t need or use, and that is an unnecessary expense that midsize companies simply cannot support.

2.) Using a Small Law Firm with the Wrong Specialty

Small law firms can be a great resource for midsize companies. Their rates are generally much lower than those at brand name law firms, and the legal counsel they provide is often just as good. Additionally, according to a survey conducted by Harvard Business Review, attorneys at small law firms are more responsive than their big law counterparts and are less likely to send work down the pipeline to inexperienced entry-level associates.

However, the problem with small law firms is that they are just that – small. With few attorneys, they are unable to provide quality counsel in every legal area and generally specialize in only one area, such as intellectual property or employment

Small firms can’t provide quality counsel in every legal area and usually specialize in only one area.

[tweetthis]Small firms can’t provide quality counsel in every legal area and usually specialize in only one area[/tweetthis]

The result is that midsize companies must work with multiple law firms at once in order to ensure that they receive quality counsel in every legal area, even on a single project. Unfortunately, many midsize companies fail to realize the necessity of hiring more than one law firm, and so they make the mistake of entrusting all of their legal work to a single provider with a single speciality.

It goes without saying that making such a mistake can result in serious consequences. Using an attorney whose specialty doesn’t match the project opens the door to errors and oversights, and depending on the matter at hand, such blunders could leave the company vulnerable to lawsuits or cause sales deals to fall through. Either way, the ultimate outcome is lost revenue, which is something that midsize companies truly cannot afford at this critical stage in their growth. Therefore, arranging quality coverage in all subject areas with multiple small law firms is a must. Nevertheless, there are some downsides to doing so.

The problem is that it takes a lot of time to manage several law firm relationships. In fact, at big companies, a large part of the in-house attorney’s job is supervising these relationships as a project manager. Midsize companies often don’t have a GC, and so the burden of this responsibility falls on executives who undoubtedly have numerous other matters to attend to.

How UpCounsel Can Help

When faced with a choice between brand name law firms with outrageous rates and small law firms with narrow specialties, it can be very difficult to find legal counsel that’s a good fit for your project. In fact, that dichotomy offers very little flexibility and is usually why midsize companies make the mistake of selecting the wrong provider. 

Freelancers have few to no overhead costs to cover, so can charge lower rates than law firms can.

[tweetthis]Freelancers have few to no overhead costs to cover, so can charge lower rates than law firms can[/tweetthis]

Luckily, there is a third option. Legal marketplaces, such as UpCounsel, give clients immediate access to hundreds of qualified attorneys, all of whom have been carefully vetted before receiving access to the platform. These attorneys represent a wide range of specialities, from contract management to employment and intellectual property to commercial litigation and venture capital. The variety of subject matter experts available makes it easy for midsize companies to select the attorney whose experience, specialty and even personality are a perfect fit for the company and the project.

Often midsize companies question the quality of service that these freelance attorneys provide. But over the last decade, entrepreneurial attorneys who have trained at the best law schools, including the University of Chicago Law School, Stanford Law School and Harvard Law School, and top law firms, including Cooley, Latham & Watkins and Wilson Sonsini, have taken a non-traditional route and started their own firms or become freelancers.

And the structure of these marketplaces means that attorneys charge lower rates than can be found at most law firms, large or small. That’s because freelancers have few to no overhead costs to cover. For instance, they don’t have marketing and facilities teams or a cadre of associates to pay. Therefore, clients don’t pay inflated rates to cover such costs. The invoices that they receive reflect nothing more than cost of the attorney’s time and labor, which results in “an overall cost premium in the 60+% range,” according to Harvard Business Review. 

Legal marketplaces make it easier for companies to receive quality legal advice on a budget.

[tweetthis]Legal marketplaces make it easier for companies to receive quality legal advice on a budget[/tweetthis]

Using Marketplaces in Conjunction with a Big Law Firm

Despite the expertise and cost effectiveness of freelance attorneys, there are times when legal marketplaces may not be the best resource for midsize companies. In particularly high stakes situations such as litigation, the phalanx of attorneys available a big law firms might be necessary. On the other end of the spectrum, there are many free legal documents available online, and those can suffice when the contract in question is one of low importance that likely won’t create issues in the future.

However, between these two extremes are legal marketplaces, which are a perfect legal solution for midsize companies whenever they don’t need or can’t afford the services of a brand name law firm but still want to be sure that they receive high-quality legal advice from subject matter experts.

This ability to choose a provider based on cost, quality, experience and any other factors that the customer deems important is at the heart of the rapidly emerging on-demand B2B economy. Within this new economy, people have many more options to choose from in a variety of industries, such as transportation, hospitality and of course, legal services. The rise of B2B legal services makes it significantly easier for midsize companies to receive high-quality counsel while remaining within their budget, which is one of the biggest challenges they face as they mature and develop.

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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