HAVE YOU THOUGHT ABOUT FRACTIONAL IN-HOUSE COUNSEL?
March 3, 2016
Many companies at every stage of the business life cycle have regular and diverse legal needs. These needs may include contract negotiation and review, employment issues, intellectual property, commercial real estate, and litigation. Often companies must reach a certain size in revenue, typically well into the seven and eight figure range, before it makes economic sense to hire a full-time general counsel to handle these needs. As well, while a company’s budget may be sufficient to hire an in-house attorney full-time, that one attorney’s skill set often has limitations that don’t align with legal issues that arise, necessitating outside counsel services (i.e., more lawyers!).
In addition, most law firms generate revenue by a traditional model driven by tracking billable hours–which often leads to a great deal of inefficiency. Under the billable hour model, 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.
At the Forrest Firm, we are continually trying to chip away at tensions and problems that naturally exist in the typical attorney-client relationship. To address the issues described above, our firm has created a “fractional in-house counsel” program that many of our clients now enjoy. With this program, for a flat/predictable monthly fee per month, we handle certain scopes of services for various clients.
We think that the client benefits of this model are multi-fold:
• Predictability, month over month, with regard to legal spend
• Discounted services, via a reduced retail hourly billing rate based on volume commitment on an annual basis
• Accessibility to legal counsel when necessary, without anxiety related to spend
• Freedom to focus on other key leadership tasks, as the Forrest Firm takes on day-to-day contracting and other miscellaneous legal matters
• FF attorney skill sets are multi-dimensional (including corporate, contracts, employment law, commercial real estate, etc.)
While we think the model makes the greatest economic sense for clients in the $1-50 million revenue range, you’d be surprised by outliers that benefit from fractional in-house counsel at the high end and the low end. Companies at $50 million revenue may spend five-figure sums on a monthly basis in the model, while some smaller clients see great value in as little as $2,000 per month in spend. Clients are enjoying the fact that their legal spend is budgetable at a price point that is usually lower than a typical lower level FTE on an annualized basis.
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 Paige Goss, Vice President of Operations at The Select Group, working with the Forrest Firm’s fractional in-house counsel mode has been instrumental to the growth of the organization. “No matter the time or situation, FF attorneys are always available to answer questions, review documents, or help us create new agreements as things come up in our business.”
For more information on our fractional in-house counsel services, please contact the Forrest Firm. After reviewing your company’s unique set of needs, we can prescribe a customized solution that offers your team sophisticated counsel at a predictable price point, giving you the freedom to focus on other tasks.