Legal Fees

The Client’s Damn Legal Budget

Sometimes clients call lawyers and announce what their legal budget is for a proposed project. New lawyers sometimes struggle to handle the situation because the scope of the work is uncertain or the proposed budget is insufficient to do the job properly.

As an example, consider a client who calls to say that they want to provide an employee with shares as an incentive and that their budget is $1,500.   

New Lawyer # 1:

Outside Voice (“OV”): Sure I can do it for that price.

Inside Voice (“IV”): I am hungry for work. I have no idea whether or not the client’s budget makes sense. I can’t possibly say no to a paying client.

New Lawyer #2.  

OV: I cannot do it for that price.

IV: They probably need corporate documents, a purchase agreement, and a shareholder’s agreement. I have no idea whaat type of due diligence is going to be done and how intensive the negotiations are going to be. The minute book may be a mess. I will need to coordinate with a tax expert. That amount is way too low. I don’t want to put in a whack of hours and not get paid. Let the client go elsewhere.

Experienced Lawyer, speaking to someone who is perceived to be an unsophisticated tire-kicker without funds:

OV: I cannot do it for that price.

IV: The client seems inexperienced, unsophisticated, and short on funds. This work cannot possibly be done competently for $1,500, and they may not accept my explanation or if they do, will not be able to pay a proper amount. I am unlikely to find a solution which will be acceptable to them and I do not want to waste my time trying. I am not going to get drawn into a situation which will undoubtedly end up with everyone being unhappy. I would rather spend my time looking for clients who fit my ideal client profile.

Experienced Lawyer, speaking to someone who is perceived to be sophisticated and able and willing to afford a fair fee:

OV: (after doing conflict searches) I suggest that we meet and speak about what you need. Perhaps you can send to me a copy of the  minute book and all of the relevant documents to help me prepare for the meeting.  When we meet, we can discuss the situation and your goals for this transaction and identify the key issues. When I have the whole picture, I can make some recommendations about how we should proceed and give you some options as to how to do this as cost effectively as possible and we can see if we can fit this into your budget. If you decide that our meeting provides you value, I will invoice you $X for the initial meeting. If you decide that our meeting does not give you value, I will not invoice you. 

IV:  I go to plenty of lunches with no guarantee that I will see any business from them. This person sounds like they may be for real. I might as well invest some time in finding out.

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