A lot of fast-growing companies get by for a long time before hiring an in-house lawyer. It isn't that startups don't have legal work that needs to be done. In the early stages of growth, it makes sense to outsourcing all legal work. It is a matter of allocation of scarce resources, and most early-stage startups can get by with outside counsel alone.
When is the right time to hire an in-house lawyer? Both an art and a science are involved in the decision. Let's consider some of the key factors.
It may seem like your startup is dealing with a lot of legal work, but you need to consider whether it is enough work to keep a full-time lawyer busy. If there is a lot of work at the moment, determine if it is driven by an atypical circumstance that is leading to a big but temporary outside counsel spend.
It’s better to hire your first in-house lawyer when it hurts a bit — when you start to feel stretched thin — rather than too early in your business’ lifecycle.
It's better to hire your first in-house lawyer when you start to feel stretched thin, rather than too early in your business. As you grow into needing full-time support, you can find highly competent outside lawyers to bridge the gap. Legal issues can impact an organization's efficiency, with the burden being felt most acutely by the founder and key executives.
If your outside legal fees reach two times the cost of hiring a good in-house lawyer, then you should hire a lawyer who can take on a lot of the work currently being done by outsourcing.
If your company has not been investing in legal issues such as contracts, intellectual property and employment policies, you should consider changing your legal spend. There may be more legal work than you think, and an in-house lawyer will have to clean it up.
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