Imagine walking into a restaurant and after being seated you are presented with a menu...that has no prices. After asking the waiter how much your dish of choice costs, you’re told “I can’t tell you until after you finish eating.” Odds are you wouldn’t eat there.

Imagine pulling a stunt like that with one of your clients after being asked to present a firm price quote. It just wouldn’t fly. Yet for some reason, many small business owners accept (grudgingly or otherwise) this type of response from none other than their lawyers.

Why do owners accept the status quo?

There are many reasons why companies continue to accept ambiguous pricing from the legal industry. When faced with a legal matter, most people just want the problem to go away and are willing to pay for that. There is also a lack of transparency when it comes to understanding the level of effort required to execute specific legal tasks. Finally, the complexity of the legal system in the United States makes it difficult for non-lawyers to understand what is really going on in many cases.

Given this situation, is it possible to control your legal expenditures?  Yes.

Controlling your legal costs

I recently had the opportunity to speak with Diana Kander, President of KR Legal Management. KR is revolutionizing the way medium-sized companies engage legal services providers—eliminating clients' uncertainty associated with legal budgets by identifying legal needs, selecting expert providers, negotiating costs in advance and providing analytics to owners regarding their legal spend.

Diana provided four valuable recommendations for ensuring that your company’s legal bills stay within budget and within reason:

1. Don't take no for an answer

Requesting a budget for the legal expenditures associated with a given project is a completely reasonable request. Ask for one. Many business owners who request a cost estimate are satisfied receiving the hourly rate in response. That’s just not enough. Request a detailed budget which calculates rate per hour and total number of expected hours plus fixed fees that may also be required. Like any project cost, there is a good chance that the total cost may incur overruns, but without that initial budget to serve as a starting point, it will be difficult to determine if the additional costs are justified.  If an attorney isn’t willing to give you a budget, it could be a sign that they haven’t performed the type of legal work you need and therefore aren’t sure how much it will cost.

2. Break it down

Managing the costs of a large legal project is a daunting task—all projects, however, can be divided into manageable pieces. Each one of these pieces consists of their own cost drivers. For example, if your company is involved in litigation, the process can be broken down into different stages:

• Initial demand
• Lawyer’s letter
• Pre-litigation settlement discussions
• Filing of formal suit
• Answer to formal suit
• Discovery
• Motions
• Pre-trial conference
• Trial
• Judgment
• Post-trial motions and appeals
• Collecting on judgment

Manage each stage as a mini-project.

3. Work with specialists

Many small and medium-sized businesses work with a single attorney or firm to satisfy all of their legal needs. This isn’t always the most cost-effective scenario. Since attorneys charge for their time, as a client you want to use only the amount of time necessary to achieve your goal. Working with a specialist ensures that.

A specialist who focuses on a specific area of law will be far more efficient than a generalist who may be competent to handle multiple areas of business law but who will need additional time to “get up to speed” on your specific needs. It’s true that one attorney can handle your immigration, employment and litigation needs, but working with three specialists will take less time, cost less and most likely achieve better results.

4. Benchmark

Benchmarking of costs and timetables is highly suitable for legal work. While some legal work is highly customized for your firm, many legal tasks are procedural in nature. There is ample data available to benchmark your proposed budget. Key sources include past legal work required by your company. Another great source of benchmarking data is your peers—asking other business owners informally about their experience and expenses is an effective way to obtain anecdotal cost data for benchmarking purposes.

Take action today

Now is a great time to take a proactive stance on your legal expenses.  According to research data compiled by Wells, Fargo & Co., the effective billing rates charged by top law firms have either decreased or increased modestly over the past several years.  This is in sharp contrast to the average 6 to 8 percent annual increases enacted since the late 1980’s.