When’s the “Right Time” to Hire In-House Counsel?

Today, I’ll consider when the “right time” to hire is — or rather, how much work you ought to have before you hire a full-time in-house lawyer.

As usual, I’ll start with a bunch of questions to ask yourself:

  1. How many deals are you doing each month?
  2. Do you need “consistent” support, or are your needs “spiky” so that you need help “on demand”?
  3. Are there any legal issues you’ve been avoiding?
  4. Are your legal needs growing, steady, or tapering off?
  5. How much are you spending per month on outside counsel?
  6. Is most of the legal expense related to what your company does (i.e. day-to-day business deals), or is it connected to “extraordinary” or big “one-off” activities (like litigation, financings, large M&A transactions, or a major partnership deal)?

What’s the “Right” Answer?

By now, you’ve probably figured out that I’m a lawyer at heart, and “it depends” is my favorite answer.

And, sadly it’s true here as well… there isn’t one right answer to these questions. Each company is different, and the right time to hire will depend on a lot of different factors.

But here are some things to keep in mind that may help:

  • An experienced lawyer with 7+ years of experience is going to expect to earn north of $175-200K in base compensation. A GC will likely be closer to $225-250K. And that’s before bonuses, benefits, and equity compensation.  So if you’re consistently spending more than $20K per month in a particular area, you probably should considering hiring — otherwise it may be too soon.
  • If you’re spending only a little in legal fees, it’s probably not the right time to hire (unless you’re “playing ostrich” and avoiding dealing with legal issues — in that case, you may need someone to help unbury you.).
  • If you’ve been using an outside attorney more than 50 percent of the time for over 6 months, then you should start doing a cost/benefit analysis.  But also take into account non-monetary factors, such as any limitations on that attorney’s availability that may require finding someone else in order to get the dedicated, reliable service you need.

The Big Myth of Hiring

There’s a big myth out there that I feel compelled to dispel.

Hiring someone does not mean your outside counsel fees will go down to $0.

As you develop your internal resources, you’ll rely less on outside counsel and internal resources can be more efficient, so you might see a drop. But you may also find that hiring a lawyer highlights problems that you were ignoring, which may increase your legal spend initially.

And, it’s likely you’ll need a specialist at some point for extraordinary work (like an unplanned litigation matter or hot acquisition opportunity).

So don’t get too excited with that red pen when going through the budget.

It Sounds Like I Shouldn’t Hire, but I Still Need Help!

If you can’t justify a full-time hire, don’t despair! You have several options, each with its own pros and cons.

Start by considering whether you need someone working on the inside or if they can be outside counsel.

If they can be outside counsel, law firms have a lot of resources, depth of expertise, and are available 24/7. Of course, as we all know, the costs can be unpredictable and quite expensive.

There’s also the option of individual consultants, who can be flexible, and there are consultants that cover almost every area of expertise. The downside is that you have to find each attorney for each specialty, their availability isn’t guaranteed, and they don’t necessarily easily integrate either with your law firm or your business team.

If you need someone who is integrated with the business, obviously you can hire, but if you’ve gotten this far, you’ve probably decided that you don’t need someone full-time or you’re not sure you can’t justify that fixed expense.

If this is the case, try checking out interim in-house options that now exist (like FLEX, of course!). Interim in-house counsel will integrate with your business team, may have more cost-effective billing models, and offer part-time options (which work perfectly with “less-than-full-time” needs).

Coming up next: Is prior industry experience necessary?