When Does a Small Business Need Outside General Counsel?

There is an awkward stage in the growth of almost every successful small business. The company has become too large and too complicated to keep treating legal work as an occasional emergency, but it is nowhere near the point where hiring a full-time general counsel makes financial sense. At first, that gap is easy to ignore. The business owner handles most issues personally. The operating agreement goes into a folder after the company is formed. Contracts get signed because the deal needs to move. A customer falls behind on payment and someone sends a few emails. A vendor changes its terms and nobody loves them, but business continues. When something truly unusual happens, the company calls a lawyer. That approach can work remarkably well for a long time.

Then the business grows.

More revenue usually means more contracts, more relationships, more employees, more vendors, larger transactions, more valuable customers, and more money at stake when something goes wrong. If there are multiple owners, the relationships among them may become more complicated too. An acquisition opportunity might appear. An owner might want out. A major customer may refuse to pay. A key employee may leave. A contract that seemed routine when the company was smaller may suddenly carry six figures of exposure. Eventually, legal questions stop being unusual events and start becoming part of operating the business. That does not necessarily mean it is time to hire an attorney as an employee. But it may mean the business has outgrown having a lawyer only when something goes wrong.

That is the gap Business Solutions Counsel™ is designed to fill.

What Does Outside General Counsel Actually Mean?

Outside general counsel sounds more complicated than it is. At its core, it means developing an ongoing relationship with an outside attorney or law firm rather than starting a new legal project every time a question arises. The business gets access to counsel who gradually learns how the company operates, who owns it, how it makes money, where it is going, and where problems tend to develop. That institutional knowledge can be valuable.

Consider the difference between receiving a contract from a lawyer who knows almost nothing about your company and receiving advice from someone who already understands the transaction, your negotiating position, the history of the relationship, and what the agreement needs to accomplish from a business perspective. The legal issue may be identical. The context is not.

An ongoing relationship can also change when the lawyer gets involved. Under the traditional reactive model, the call often comes after something has happened. A contract was signed. A payment was missed. An owner made a demand. A deal started falling apart. A lawsuit was threatened. By then, the lawyer may be dealing with facts that cannot easily be changed. Outside general counsel moves that conversation earlier. The question becomes what should happen before the contract is signed, before the ownership dispute explodes, before the acquisition closes, or before a collection problem becomes litigation.

That does not eliminate risk. Business involves risk. But having counsel involved earlier can give an owner more options for managing it.

Growing Businesses Tend to Accumulate Legal Debt

One of the reasons we developed Business Solutions Counsel™ is something we see repeatedly in growing companies: legal debt. The concept is similar to technical debt in software or deferred maintenance in a building. A shortcut today may be completely rational. The business has limited time and money, so an issue gets pushed down the list. Then another one does.

The operating agreement was drafted when there were two owners and now there are four. The customer agreement came from a template someone found years ago. A handshake deal with a partner was never fully documented. The company has no clear process for an owner who wants to leave. Different customers are operating under different versions of the same contract. The business has grown into new lines of work, but its agreements still describe the company it used to be.

None of those issues necessarily creates an immediate crisis, which is exactly why they are easy to ignore.

The problem appears when circumstances change.

An owner wants out and everyone discovers that the operating agreement does not provide a workable answer. A customer stops paying and the contract has weak collection provisions. A buyer begins due diligence and finds legal housekeeping that should have been completed years ago. A dispute erupts and nobody documented the conversations that mattered.

What looked like an insignificant shortcut can suddenly become expensive.

The solution is not to have lawyers crawl through every corner of a business looking for theoretical problems to bill for. That would miss the point entirely. A growing company needs to know which risks actually matter, which issues deserve attention now, which can be addressed later, and which are simply part of doing business. Legal spending should compete for resources the same way every other business expense does. That is where an ongoing relationship can become useful.

The Question Is Not Whether Your Business Has Legal Risk

Every business does. The better question is whether legal issues have become frequent or important enough that managing them should be part of the company's normal operating rhythm. There is no magic revenue threshold for that. A $2 million business with simple operations and one owner may have relatively modest recurring legal needs. Another company at the same revenue level may have several owners, dozens of customer contracts, aggressive acquisition plans, significant vendor relationships, and constant negotiations. Those companies should not have the same legal strategy simply because their revenues are similar.

Instead, look at what is actually happening inside the company.

Are contracts crossing your desk regularly? Are customers or vendors negotiating terms? Have ownership questions become more complicated? Are you expanding into new markets or business lines? Are you buying companies? Are payment disputes becoming more common? Do major decisions increasingly end with someone saying, "We should probably ask the lawyer"?

When those questions become routine, the business may have reached a point where episodic legal work is no longer the best fit.

We Built Business Solutions Counsel™ Around That Reality

The Skeen Firm's Business Solutions Counsel™ program is our outside general counsel model for qualifying small and growing businesses in Pennsylvania and West Virginia. The concept is straightforward: instead of forcing every company into the same package, the level of ongoing counsel should increase with the complexity of the business.

Our Essential Counsel plan begins at $750 per month and is intended for established companies with recurring but relatively straightforward legal needs. It provides a way to maintain an ongoing relationship with business counsel without trying to create an internal legal department.

Growth Counsel, at $1,250 per month, is designed for businesses where legal issues have become a more regular part of operations. These companies may have greater contract volume, more ownership and governance questions, negotiations, acquisition activity, developing disputes, or strategic decisions that benefit from earlier legal involvement.

For companies with substantially more complex needs, Strategic Counsel begins at $2,500 per month. This level is intended for businesses where counsel needs to be more deeply involved in significant transactions, governance, negotiations, risk management, succession, acquisitions, or other major business decisions.

Businesses that pay the applicable annual recurring counsel fee upfront receive a 10% discount. The point of the tiers is not to sell every business more legal service. It is the opposite. A company should have a level of legal support that makes sense for what it is actually doing. And that is why we do not start by asking which tier a company wants.

We Start by Understanding the Business

Before beginning an ongoing Business Solutions Counsel™ relationship, new clients start with a 30-Day Business Legal Assessment for $750. The assessment gives us an opportunity to understand the company before recommending what an ongoing relationship should look like. Depending on the business, that may include looking at ownership and governance, recurring contracts, existing legal problems, documentation gaps, growth plans, acquisition activity, succession concerns, and areas where the company may be carrying unnecessary risk. From there, we can prioritize.

Some issues may need to be addressed immediately. Others can become part of a six- or twelve-month legal roadmap. Some may not justify spending money on at all. That last category is important.

Good outside general counsel should not measure success by finding the greatest possible number of legal problems. The goal is to help the business make better decisions about where legal work creates value, protects something important, supports growth, or addresses a meaningful risk.

Sometimes the right answer is to revise the agreement. Sometimes it is to negotiate harder. Sometimes it is to document the deal. Sometimes it is to walk away. And sometimes the right answer is that the business has more important things to spend money on right now.

That is business judgment, not just legal analysis.

The Real Value Is Having Counsel Before the Decision Is Made

Business owners sometimes think about legal fees only in terms of documents produced or disputes handled. Those things are obviously important, but they are not always where an ongoing counsel relationship creates the most value. Sometimes the value is a fifteen-minute conversation before a decision. A customer wants unusual payment terms. An owner is considering making a promise to another owner. A potential acquisition has an odd liability issue. A vendor relationship is deteriorating. A deal feels wrong, but nobody can quite identify why.

When calling the lawyer means locating someone, explaining the company from the beginning, worrying about an unknown bill, and opening a new matter, there is a natural tendency to wait until the issue feels "legal enough."

That delay can be expensive. An ongoing relationship lowers the barrier to having the conversation earlier, when the business may still have several good choices available. It also allows counsel to see patterns that may be difficult to identify when every matter is treated independently. One problematic contract may just be a problematic contract. Five similar problems may indicate that the company's standard agreement or sales process needs to change.

That is the difference between simply responding to legal work and incorporating legal thinking into the operation of the business.

You Probably Do Not Need a Full-Time Lawyer

For most small and middle-market businesses, hiring a full-time general counsel would be difficult to justify. Salary, benefits, overhead, and the need to keep that person sufficiently busy make an internal legal department impractical for many otherwise sophisticated companies. But "we do not need a full-time lawyer" and "we do not need ongoing legal counsel" are two very different conclusions. There is a substantial middle ground between calling a lawyer only after something goes wrong and putting one on payroll.

That middle ground is where outside general counsel fits. If your company is signing more contracts, buying businesses, dealing with more complicated ownership issues, encountering recurring disputes, or simply making bigger decisions with more money at stake, the question may no longer be whether you occasionally need a business attorney. The question may be whether having one who already understands the business would help you run it better.

Stop Waiting Until You Need a Lawyer. Have One.

We built Business Solutions Counsel™ around a simple premise: Your business should not meet its lawyer for the first time during a crisis. You may never need a lawyer sitting in an office down the hall. You may not need someone involved in every decision. And you certainly do not need to turn every business question into a legal project.

What you may need is someone who understands the company well enough to know when a legal issue matters, when it does not, and when getting involved early can make a meaningful difference. That is what outside general counsel is supposed to provide.

Learn more about Business Solutions Counsel™, including the $750 30-Day Business Legal Assessment and our Essential, Growth, and Strategic Counsel options.

If your company has reached the point where legal questions are becoming part of running the business, book a Discovery Call or call The Skeen Firm at (724) 250-8841.

Attorney Advertising. This article is provided for general informational purposes only and does not constitute legal advice. Reading this article or contacting The Skeen Firm does not create an attorney-client relationship. Representation is subject to conflicts review, jurisdiction, attorney availability, and execution of a written engagement agreement. Pricing, included services, and scope are governed by the applicable written engagement agreement and are subject to change.