Want predictable costs? Engage a NewLaw team, says one GC
In order to ensure accuracy in financial forecasts, one general counsel feels that engaging external providers that employ NewLaw methodology, such as monthly fixed costs, is a great way to reasonably presume overall costs for a business.
In conversation with Lawyers Weekly, JobAdder general counsel Simone Vrabac — who last year spoke on The Corporate Counsel Show about the rise of the start-up GC and the bounty of opportunities for in-house lawyers to work in start-ups — said that predictability of spend is critical in ensuring accurate financial forecasts for any business.
To continue reading the rest of this article, please log in.
Create free account to get unlimited news articles and more!
“Cost predictability has become particularly important in the current funding and inflationary environment,” she reflected.
“The legal function at JobAdder, like every other part of the business, forecasts its foreseeable external costs as part of the annual budget planning process.
“Exceeding that forecast erodes your credibility with the CEO and the CFO as money has to be found from elsewhere in the business to subsidise a function’s overspend.”
For Ms Vrabac, engaging NewLaw firms as a business’ external providers has been beneficial in ensuring that predictability, but also affordability.
“NewLaw firms are a great way to cater for overflow legal work when you don’t have the consistency of work volume, or the budget, to justify a new legal headcount and where the work is not of a type that needs to be done by a larger firm,” she posited.
“NewLaw firms offer services across a breadth of legal areas and generally operate on a fixed-cost monthly retainer, which you can lock in for a period, so you know what that cost looks like for the financial year.”
To get the most value out of a NewLaw firm, Ms Vrabac advised, it is “important to identify the sorts of legal matters that you want to outsource under a retainer and to confirm that these types of matters are within the firm’s skill set and the scope of their retainer model”.
When asked what she has learned over time about the importance of fixing costs, she said that having such certainty, particularly on larger matters, gives the finance department and other business stakeholders a reasonably accurate forecast of the budget that needs to be allocated to a matter.
“It also creates transparency between you, the business and the firm, as you each have a clear understanding of what you will receive for your spend on a matter,” she said.
Ms Vrabac offered guidance to other law department leaders who might be looking for ways to better manage their external legal costs amidst ongoing market uncertainty and turbulence: “Obtain estimates from multiple firms, and don’t be afraid to ask for a fee match.
“Wherever possible, try to engage on a fixed fee/fee to a cap/retainer model and ensure that the estimate specifies the work that comes within the scope of the estimate or retainer.
“Make clear in the engagement letter, or email approving the estimate, that the firm must obtain written approval before it can bill for work that is outside the scope of a retainer/fixed quote, or to exceed a fee cap for a particular piece of work.”