Slightly more than 10 years ago I was living in Durham, NC working full-time on my startup on Ninth St. right near the edge of Duke’s East Campus. I was actively involved in the fledgling Research Triangle startup scene with the Council for Entrepreneurial Development (CED) as the heart. At the CED I participated in a great program called FastTrack that came from the Kauffman Foundation (side note: one of my goals is to start a Cummings Foundation one day that is similar to the Kauffman Foundation with a focus on entrepreneurship) and through the program I had the chance to meet several entrepreneurs as well as startup-focused service providers in the area.
One of the lawyers that spoke at the program did a great job and was very approachable. After his talk at the class I went up and introduced myself and what we were doing. He said he liked what he heard and that we should get together and talk more. I diligently followed up and we met for an hour to talk about my startup. At the end of that conversation he asked if I had a business plan, so I naturally said yes (that was the thing to do then although I recommend against business plans now). He said if I’d like he take a look at it and give me feedback. Wow, I was thinking, this guy is super helpful.
After our meeting I promptly emailed him the latest version of my business plan hoping to get some great insight from him. Well, two weeks later I received a fax from his assistant where he had taken a printed version of the business plan and handwritten a few number of comments and questions in the columns. Hmm, I thought, that’s an interesting approach to feedback, but I was anxious for any third-party thoughts on what I was doing. I quickly sent a thank you email and commented on his comments.
A week later I received a bill for $500 for his time commenting on the business plan. I was stunned. It wasn’t the $500, although that was a ton of money for a bootstrapped startup that did $15,000 in revenue that year, but rather that he would charge for it without clarifying in advance it was billable hours. It was a good lesson learned early on. My advice: always ask the cost for any services up front and beware of lawyers charging to edit business plans.
What else? Have you had any experiences like this?
9 thoughts on “Beware Lawyers Charging to Edit Business Plans”
So did you pay the dirtbag or not!?
I’ve also noticed that lawyers are sometimes not often up front about what costs you will incur by dealing w/ them. I’m guessing you paid him but that you’ve never been caught of guard like this again 🙂
“Cummings Foundation”…I like the sound of that!
Good advice. I always ask upfront if there is a fee for anything, especially when it comes to lawyers, accountants, and consultants. Even if I ask to speak with someone about an idea, I ask for a free consultation. If they say “no,” then I walk.
I suggest getting second opinions (from a CPA/Accounting Firm) on your financial operating agreement from a law firm.
Some lawyers will add tax elements to the operating agreement that require significant time from you, your controller or accountant to file correctly. Some of the structures are really useless until you’re profitable or have many investors.
Did you pay the bill? He did not provide you an engagement letter.
I paid the bill. Unfortunately, I didn’t know at the time that he should have provided an engagement letter, which he didn’t.
As a lawyer and former classmate of yours, I have to say that I don’t think (at least I hope not!) this is typical of most lawyers. I would have not billed you for any work without first (a) running a conflict check (which admittedly would probably turn up nothing in this situation); and (b) signing an engagement agreement with you. The engagement letter and associated conversations would have clearly laid out the anticipated fee structure and expectations. Before doing these two things, I would not have done the work, or at least I would not have charged you for it. Especially $500 measly dollars. This is as much to protect me as you. I hope this did not sour your perspective on lawyers in general.
Hope all is well,
I was lucky, I took part in the princes trust enterprise program and got free feed back from two different mentors free of charge. Do you have anything like the Princes trust in the us?