Many small firms wonder whether they should offer free or low cost legal services to start-up companies or small businesses in the hopes that those companies will generate more lucrative business as they grow. Sounds great in theory, in many cases, once those baby start-ups mature, they may dump you for a more established law firm, irrespective of the quality of the work that you performed or the value that you created. At least, that’s been my own experience, recently confirmed in a post by Bruce Macewen of Adam Smith, Esq.:
Partners with those small clients will tell you (will they not?!) that “somewhere in here is the next Microsoft.” Not true. Almost universally, small clients remain small clients. And experience has shown that those that grow into sizable enterprises are disloyal to their “starter” law firms and want to rapidly move up to more established and burnished brand name law firms as soon as they feel they have the stature to do so. How does it feel to be a money-losing doormat to greatness, which will decamp?
You can’t blame these companies either, at least without being hypocritical. After all, as we grow our law firms, don’t many of us try to phase out small fry clients in favor of bigger fish? As we begin to earn more money, we all upgrade our practices in one way or another, and for many companies (especially once VC enters the picture) upgrading means bringing in a name brand firm. It’s like buying the Lexus or BMW after having driven a Prius: the fancy cars don’t drive any better nor do they add value when it comes to gas mileage. But they’re a status symbol that many believe conveys an image of success. (That’s why salespeople and realtors often drive fancy cars).
Now, this doesn’t mean that you shouldn’t cut your rates for a start-up if you perceive a worthwhile trade-off. Will representing the company provide an entre into a new industry? Will it generate referrals or a positive testimonial? Will it keep you at the cutting edge of your practice? And of course, you can still take credit for helping to build a successful company even if it eventually leaves you for another firm. So why not experiment with offering your services to a start-up once or twice and assess whether it’s worthwhile.? Perhaps you’ll even find a way to make yourself an exception to the upgrade rule.
What is your experience with representing small companies that grow? Have they kept you on…or moved on? Send your comments below.