Many startups spend more than $10,000 on legal bills over the course of their first year. For a bootstrapped startups, that can amount to more than 25 percent of the company’s startup capital.

Starting up your company should not put such a dent in your early capital. Here are a few tips that can help entrepreneurs save thousands of dollars while still getting high quality legal services.

Use smaller firms, solo practitioners, and virtual services

Most of the time, finding the right lawyer is not easy. You might have to look up and call ten different lawyers and get price quotes. Many times, this means just getting hourly quotes as opposed to a firm idea of much something will cost. Often, entrepreneurs get fed up searching and make a selection out of frustration or go with a referral from a friend, which can still lead to overpaying. This is especially true when you need a la carte legal services, such as drafting an agreement or reviewing a document.

Finding the right attorney in our experience comes down to two basic understandings:

  1. Independent and boutique lawyers can be just as effective as big law firms for 90 percent of your legal needs; and
  2. Having a local lawyer is not as important as you think (i.e. virtual lawyering is where the puck is headed).

Smaller law firms and independent practitioners can be just as good as the big law firms. In fact, many of the lawyers who start their own practices came from these bigger firms. Relying on online reviews or social media connections can help you to assess quality of these small outfits which lack brand recognition. This is why online reviews are becoming so important. The one downside of using smaller outfits is that not everything is under one roof. You may need to work with several lawyers to service all of your needs, but you will save bundles.

Experience can include local experience, if that is important for you. For most business issues (outside of real estate and landlord/tenant lawyers), most lawyers doing business in the same state as your company will suffice. An increasing number of businesses are working with lawyers virtually from other cities in their state, choosing to do everything via email and phone.

We have seen around 60 percent of the entrepreneurs we work with have no preference for local lawyers because their rates more cost effective than San Francisco or Silicon Valley firms’. Thanks to virtual lawyering, cost effective and high-quality legal services are becoming more available from non-local lawyers.

Get it done right the first time

Some of the most expensive legal work is correcting work that was not done correctly the first time. More often than not, this occurs when using a document automation and filing service. Talk to any startup lawyer, and they will tell you they spend 15 percent of their time (or more) correcting the mistakes made by such services, most notably in company formation.

It is not because these services are bad services. They are actually good at doing a few things very well, but their services are limited and leave out requisite steps in critical processes that usually require a lawyer to complete. If you choose to use one of these services, make sure you do all your homework and know every single step that must be taken or the most important part of the documents you are automating. Otherwise, you will be paying 10x what you saved initially by using one of these services.

Take care of legal stuff sooner than later

There are most certainly legal tasks that you can and probably delay. I typically do not recommend forming a company until one has a product or a real team working on a product close to being released. Most of the time, however, the right time to take legal action is now.

One of the most common things we see is when entrepreneurs start operating their business without doing a trademark search and even getting a trademark. Only after operating their business for months do they realize there is another company with a similar name in a similar industry, or worse yet, they get a cease and desist letter. The costs to rebrand can be extreme.

Another common example is having contractors join a company. In the haste of getting people started, so many entrepreneurs do not put an agreement between the company and contractor in place. This formality gets put off and then before you know it, you have a dispute with a contractor and they take off with code or do not complete the work you paid them for — both costly results.

When faced with saving money, entrepreneurs have blazed the trails in finding ways to get high quality and cost effective services. Legal services are no exception and we should expect the industry to change dramatically over the next 10 years. By finding the right lawyers and avoiding some common mistakes, you can help save your startup valuable capital needed for the most important thing, growing your company.

Matt Faustman is co-founder and CEO of UpCounsel, a site for finding and hiring legal counsel. Prior to UpCounsel, Faustman worked as a startup attorney in Silicon Valley helping consumer and enterprise internet companies get started and grow.

Top image courtesy of Gunnar Pippel, Shutterstock