Finding a lawyer or law firm

We see (and get) emails like this all the time (NB: one of us is a former practicing corporate lawyer):

Subject: Looking for good business attorney
I just started at a small XYZ firm/company and am looking for a referral to a good business attorney for general legal matters. We’re looking for a good balance of local experience, expertise with small companies, and reasonable rates.

Rather than continue to draft responses, we’ve decided to put most of our advice here so that folks can get much closer to what they’re likely to want or need.

Some general advice:
1. What do you need? Before you pick a lawyer or firm, you need to have some idea of what your legal needs are, in terms of practice areas, volume of work, and level of difficulty. For example, if you are starting up a small business, you would likely select a different firm than if you were forming a $100m venture capital fund. Similarly, if you need help with a one-off project, you might overlook certain considerations that won’t affect you on the practical level.

2. Fees — everyone wants reasonable rates. We want reasonable rates, yet we know that our JD partner billed out at over $300 per hour as a 5th year associate many years ago. Law is a profession; skill and efficiency are not guaranteed; you are much more likely to get what you pay for, or less. You’ll seldom get more. Think about your own business and how you think about why your prices are justified. Lawyers bill by the hour because unless you’re doing a cookie-cutter type of project (such as “file these pre-drafted forms” or “file our quickie divorce”), it’s notoriously difficult, if not impossible, to accurately assess how much time a specific project will take. So fees are open-ended, and you will have to figure out what happens when the budget you set is going to bust. The only way that you will actually get a break on rates is by being accommodating on point #3, payment.

3. Payment — most lawyers will ask for a retainer, which protects them from not getting paid because you change your mind after 20 hours of work, etc. (High legal costs are one reason for this; go figure.) Do not expect an experienced lawyer to waive a retainer for the “privilege” of getting your future business. There’s no way to lock you up as a client and no real reason for the lawyer to take on the risk of your success. Also, don’t expect any but the largest firms to waive or defer fees for start-ups. After the dotcom bust took out several Silicon Valley firms, those that remained learned their lessons. If you give a lawyer a pretty full-sized retainer, guaranteeing the lawyer that she’ll get paid, many will give you a further break on fees. Finally, you should not generally worry about losing the money that you pay as a retainer: lawyers are generally required to keep your retainer in a special trust account so that it’s available to you if it’s not used for legal fees. Most states have a special program or insurance fund to compensate clients who lose funds from an attorney trust account.

Have you thought more precisely about what legal needs you have? For example, you might very wisely select different folks to give you generic corporate advice (e.g., form of entity & structure), to create form agreements for use with customers, or to handle disputes. If you can give me some guidance about what you think you need, I can give you some different options.

In general, as you’re evaluating other referrals you might get, we think that you’ll want to stay away from a larger firm (anything over 20 lawyers) unless your business is already well beyond the “just-started small IT consulting firm” phase. You should probably aim for a group of under 10 lawyers, getting a corporate generalist to handle those matters and one litigator to write letters and advise you on disputes. (Note that you should expect not to actually litigate anything unless there’s well over $50k at risk, since the costs of litigation are just too high.) What you want on that litigation front is good advice more than an available trial team. Finally, depending on your accountant, you may benefit from having a tax lawyer in the group to give you more high-value tax advice.