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Saturday, August 8, 2015

Starting Up a Business - Keeping Professional Costs Under Control

In a start-up situation, where money is often tight, and there are many demands on what money is available, it is tempting to avoid spending money on legal, accounting and other professional advice. Often the thinking is to delay spending money on these professionals until the business is turning a decent profit. While this sort of cost saving is tempting, it is also a mistake. Proper professional advice is an investment in the future of any business venture. The costs of not getting the right advice could be substantially more than the fees paid for that advice.

However, there are ways to reduce those costs. First, talk to them up-front and find out what they charge for their services. If you talk to a few you can get a sense of relative costs as between professionals. And be up front about your cost concerns. Sometimes professionals will offer an initial free meeting, or may allow payment over time or waive part of the retainer.

Second, see if you can get a "flat fee" quote (as opposed to being billed based on time taken). Professionals will often offer flat-fee services for common matters. This can be to your advantage as your bill will not go up even if the task takes more time than anticipated. And often these services are priced competitively.

Third, ask about their policy for billing expenses. Find out what expenses you can expect to see on your bill. You should be billed for fees incurred on your behalf (such as government incorporation fees) and will likely be billed for couriers and long-distance calls. Some professionals will bill you for everything - phone calls; photocopies; stamps etc. - and those small costs can really add up over time.

Fourth, make sure the professional has relevant experience. This can be very important with respect to law for example, where lawyers tend to focus on only one or two areas of practice. Dealing with a lawyer who practices in corporate and commercial law will be a lot easier than one who does not (and may have to research issues that a specialist would know about - research you may end up having to pay for).

Finally - self-educate! You do not have to be an expert, but doing some basic research before you talk to professionals is important. For example, before seeking legal advice about incorporation, look into the basics about setting up a company including some of the common questions to be addressed and what the alternatives are. That will help focus your questions and provide clearer instructions, making the lawyer's job easier and quicker. Make use of the internet as both government and private websites can provide inexpensive education tools that can save you time later when you are dealing with your lawyer.

I practiced law in Ontario for almost 16 years, with a focus on helping small businesses. Being in sole practice also meant I was running a small business. I have written a series of legal education guides aimed at the new small business person for Whitespire Venture Capital Network. The guides can be found online at http://venture-capital-network.com/

By John C M Sayers

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