Legal advice on a budget

For many entrepreneurs, phoning an attorney summons images of a ticking clock and mounting bills. Now law firms are trying to win new customers by offering deep discounts for start-ups.

Some firms are offering small businesses a flat monthly fee rather than charging them by the hour. Others offer flat rates for certain services, such as handling the paperwork for starting a company.

Many small companies say the discounts are a big help at a time when budgets are tighter than ever. Ray Case, a plumbing contractor in Ann Arbor, Mich., says flat fees from attorney Ken Gross proved precious as he journeyed through bankruptcy court, folding one company and forming another. He paid $10,000 total for at least 100 hours of work, and estimates he saved at least $15,000 over typical hourly rates.

"When you're basically out of money," says Case, "you can't give an attorney a blank check."

Born of Necessity
The impetus for these deals is simple: Lawyers need to drum up more business, but many entrepreneurs can't afford traditional payment plans these days. "The economy has melted down, and a lot of work we're doing is for people on a tight financial budget who can't commit to an hourly fee schedule," says Gross, managing partner at Thav, Gross, Steinway & Bennett PC in suburban Detroit.

Gross, whose firm started offering flat rates to small businesses in 2005, says his small-business clientele in the first half of 2010 was quadruple that in the same period of 2005. "You have situations where people got buyouts and had little nest eggs of money," he explains. "They're trying to replace income from the jobs they lost."

Sadly, he says, there's another reason demand is booming: Many small-business clients, like Case, need help with debt resolution and bankruptcy-related matters, rather than with starting up.

The deals are springing up across the country. In New York, MasurLaw offers small businesses a flat rate, starting at $500, for services such as help with launching a company. Senior partner Steven Masur says that "when the recession hit, we felt that predictable pricing would take the guesswork out of legal fees," raising the comfort level of potential clients and fostering continuing relationships with them through their early days.

In Blacksburg, Va., Creekmore Law Firm PC introduced a plan last year that charges small businesses a flat rate of $75 a month, after an initial fee of $750. "Some small-business owners would come in for an initial consultation, find out our hourly fees and wouldn't come back," says Keith Finch, an associate at Creekmore. "They'd just disappear."

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