Why Your Small Business Needs A Lawyer On Retainer

You’ve owned a business for the last few years.   Things are going reasonably well; the company took a bit of a hit during the last couple of years, but things are stable.  

Nonetheless, there are a few things keeping you up at night.  You wake up worrying about the employee who was upset at getting fired – will he sue?  Will he go work for a competitor and try to steal your clients away?  What about that customer who is disputing a valid bill – the amount is too big to write off, but the conversation is one you just hate having.  You’d like to expand operations or update some of your old equipment, but are not sure you can afford it, and are concerned that the seller wants a personal guaranty.   These questions or others like them keep you up at night, and eat at you during the day. What to do?  

Do what the big companies do – call your lawyer. The big companies have a General Counsel on staff.  Your company is not as big as that, but if you’ve been smart, you’ve hired a lawyer on retainer to help you answer the questions that keep you up at night.  When you have a lawyer on retainer – i.e., a flat monthly fee – you will usually not get a separate bill for each phone call. The point of a retainer is to know you have a lawyer who will be available to you, without worrying about how much each call will cost.

A “retainer” is, technically, a flat fee paid to a lawyer to secure the lawyer’s availability for the client. Typically, the amount of the retainer is proportionate to your needs. So, for example, if your needs are about 1-2 hours per month (one or two questions, with some research the lawyer might need to do, and discussion of the answer), the retainer will be approximately equivalent to 1-2 hours of the lawyer’s hourly fee. If you end up needing more of your lawyer’s time one month, you don’t get charged more – the flat fee is just that.   Likewise, if you end up needing the lawyer for less time on a given month, the flat fee is still owed. The goal is to have a retainer that realistically reflects your company’s needs. Retainers may be adjusted periodically as you and your lawyer see how your needs are being met over time. 

The advantages of a retainer become clear once you realize you have an open line to a trusted adviser.

1. you have a fixed monthly cost you can plan for.  Budgeting is clear and predictable.
2. you can finally get those worrisome things off your chest and someone to help handle them for you.
3. you will notice you start thinking more proactively about you business.  You can get that employee handbook updated; instead of using the contract you got from some competitor as your model, you can get your contracts reviewed and tightened by someone who knows your business, and finally get an explanation of what all that boilerplate means  (your old competitor’s contract won’t help you.  A lawyer on your team will).
4. if you do get threatened with legal action or if some alarming issue suddenly pops up, your lawyer is already there and already knows your business.
5. if your lawyer sees an issue requiring the assistance of someone with specialized technical knowledge (a tax issue?  Permitting authorities threatening to shut you down?), he or she usually has the resources to track down the right specialist to help out.

Think of the lawyer on retainer as your company’s own General Counsel, who takes the “counsel” part very much to heart.  Your attorney may know an excellent banker who is looking for good candidates for an SBA loan; or she knows a CPA who has a gentle touch for those who are loath to deal with the books; an HR specialist who can consult on how to set up your employee files and keep you advised on the latest L&I category changes and posters you have to display; a good commercial insurance agent who can shop around for the right policies for your business and its key personnel. Your General Counsel can do more than simply bail you out of a crisis; your General Counsel can help your business thrive. 

It’s a complicated world for small businesses, but with a lawyer on retainer you have a knowledgeable and trusted adviser looking out for your interests. Do what the big companies do, and have your own General Counsel there to help you out.