FORREST FIRM’S MANAGED LEGAL SERVICES MODEL

By James Forrest

All companies have regular and diverse legal needs. These needs often include contract negotiation and review, employment issues, intellectual property, commercial real estate, tax, corporate governance issues, regulatory matters and litigation.  These needs are generally met by a business through engaging an outside legal firm, or by hiring an attorney to work full time in the business.  Each of these approaches have some pros and cons that I’ve seen play out with many businesses I’ve known or worked with over the years.

By utilizing an outside law firm, a company retains a good amount of flexibility (fairly easy to switch firms) and gets access to a wide array of substantive skill sets (larger firms have very niche and specialized lawyers).  On the other hand, hourly rates are expensive and probably more importantly, billable hours usually lead to a great deal of inefficiency and unpredictability in a company’s legal spend, both monthly and annually.  No matter the size of a business, predictable spend for any vendor should be of paramount importance.

Also, one of the natural consequences of unpredictable pricing is that many clients only call their attorneys for “emergencies” that necessitate paying for those billable hours, rather than including their counsel in day-to-day conversations that empower business development while mitigating risk. This “emergency phenomenon” eventually leads to key issues going unaddressed by the company’s leadership, as legal counsel is not intimately involved in the business. All in all, outside counsel tends to be reactive rather than proactive.  This is to be expected in some regard, as business law firms usually have hundreds of clients.

For mid-market and larger companies, typically well into the seven and eight figure revenue range – they may decide that it makes sense to hire full-time general counsel.  This creates some pricing certainty on legal spend (salary plus benefits), which is in sharp contrast to the outside counsel/billable hour model.  In addition, the company is presumably getting dedicated coverage 40 hours per week which addresses the “emergency phenomenon” discussed above.

On the other hand, hiring full time in-house counsel has its potential pitfalls.  Usually, a single lawyer has one (maybe two) areas of the legal expertise, but a business is going to have legal issues arise across a myriad of substantive legal areas (see the first paragraph of this post).  In these situations, inside counsel often ends up hiring outside counsel (i.e., one lawyer hiring more lawyers!), bringing the inefficiency and unpredictability of the billable hour full circle.  In addition, if inside counsel goes on vacation or is out of the office due to illness, PTO, emergency, etc. – a business can get stuck because the work flow processes are dependent upon that one individual.  Lastly, if inside counsel is terminated or resigns, a large void is usually left that may takes months to back-fill which can adversely impact a business in dramatic fashion.

Based on these observations, our firm has created a Managed Legal Services program that we believe strikes a reasonable balance on these issues and creates a “win-win” for companies. With this program, we provide: (a) comprehensive legal coverage on a wide variety of legal topics, (b) access to all of our professionals to ensure consistent coverage, (c) regular on-site meetings with executive teams, (d) responsive turn-around times on deliverables, and (d) predictable pricing (both monthly and annually).

I’m always surprised by how this type of model is embraced by very small, start-up clients as well as large companies.  No matter the size of a business, we think this type of program has applicability and value.  Many of our clients have moved to this type of arrangement and the response we’ve received has been overwhelmingly positive.  They are usually spending less than what they would pay a full-time employee annually and are getting comprehensive and proactive legal services.

But don’t just take our word for it.  Here’s Creative Allies CEO Donald Thompson’s take on the limitations of the traditional billable hour model: “Often, it’s difficult for industries to realize when a current pricing model has run its course and change is required. In the past, the billable hour was the only mechanism for us to establish a relationship with the legal and finance communities.”  For Thompson, who also sits on the board of directors at several Forrest Firm clients, the new model is about value. “This structure creates a relationship that does not lend itself to the critical point of value that most leaders need, which is preventative maintenance,” he said. “The Forrest Firm has worked with my team to establish a working practice of estimating work accurately, and allowing us the fee predictability that has actually encouraged us to call our lawyers more often.”

According to American Underground chief strategist Adam Klein, the model is geared to the often frenetic pace of startup opportunities. “The American Underground is a campus for entrepreneurs and a place where things move fast every hour,” Klein said recently. “I count on the Forrest Firm to help our organization with complex legal questions and guidance and to do so quickly and predictably so we can focus on supporting our entrepreneurs and growing our business.”

For Michael Druga, CEO of SinnovaTek, Inc., working with the Forrest Firm’s Managed Services model has been instrumental to the growth of the organization. “We are a young technology company in the food and beverage industry. Throughout our start, the team at Forrest Firm have been a great resource and instrumental in assisting our growth. Under their Managed Services program, we have been able to keep pace with our clients’ legal demands on a predictable and affordable budget. From tasks as simple as confidentiality agreements to as complex as license agreements, Forrest Firm has always made our needs a priority and delivered top tier legal advice and services. I’m grateful to have such a dynamic and talented team representing my interests while maintaining a personal touch and forward looking approach.”

For more information on our Managed Legal Services program, please contact me at james@forrestfirm.com. After reviewing your company’s unique set of needs, we can recommend a customized program that offers your team sophisticated counsel at a predictable price point, giving you the freedom to focus on growing your business while knowing that you are doing all of the right things on the risk management front.