High-Growth Businesses Shouldn’t Wait to Hire Their First General Counsel

Many fast-growing businesses tend to overlook the value, and importance, of adding legal counsel until it becomes a critical event. Investing in a General Counsel (GC) might not appear to be a priority at first glance. However, when considering that the right GC can deliver immediate and sustained returns, the decision becomes clear.

The truth is, legal is not a cost center, it is a savings center that over time pays for itself and then some. According to the Association of Corporate Counsel, an in-house counsel’s knowledge of the business can add 20-25% to the bottom line, while their expertise can lower outside legal costs by up to 30% and their preventative legal efforts can save an additional 10%-15%.

It takes a business-minded GC to shift the perception of the legal department from an expense to a strategic asset. Through proactive risk mitigation, optimized legal processes, and enhanced contract management, they can not only streamline overall operations but drive significant cost savings, speed up go-to-market, and contribute to the company’s overall financial health. It is also true that the right GC will educate and improve the quality and capability of other functions with respect to legal issues affecting the company. An excellent GC can provide demonstrable ROI across crucial areas of business operations, especially for the portfolio companies of private equity firms and other growth-oriented businesses, reinforcing their value in sustaining and improving meaningful growth.

It is never too early to consider hiring a GC if your business could benefit from the following support:

Strategic Financial Management

According to a report from Corporate Counsel, the “in-house legal hiring market continues to boom, in part because general counsel are bringing more work in-house to control costs and economic uncertainties are fading.” One reason behind this shift in-house is to cut down on bills from outside counsel, of course, but also to embed the legal function into the core financial drivers of the company to achieve business goals quicker, and in a more efficient manner.

Reducing Outsourced Legal Expenses

As of the end of 2023, hourly rates at U.S. law firms are at highs not seen since before the 2008 financial crisis, increasing 6% year-over-year according to Thomson Reuters 2024 Report on the State of the US Legal Market. By handling more legal issues internally, and better managing outside counsel, a GC can significantly cut the costs associated with external legal counsel for their business. This not only results in substantial fee savings but also ensures that legal strategies are consistently aligned with the company’s business objectives. The right GC will pay for itself on this point alone.

Expert Contract Management

Effective contract creation, automation, management, and oversight by a GC further safeguard against revenue leakage and contractual risks, which are critical in maintaining the financial integrity of any company and speeds the contracting process to allow you to close deals faster. Particularly in the early years of a company’s growth journey, this ability to streamline and standardize agreements ensures that all contracts are strategically aligned with the business goals, enhancing overall operational efficiency. Research conducted by World Commerce & Contracting found a company can save 9% of top-line revenue by having better management of contracts and key agreements.

M&A Strategy and Integration

Mergers and acquisitions play an important role in most high growth businesses but can present a range of potential legal complications and significant outside legal cost. A GC plays a critical role in ensuring that these transactions are strategically and legally sound. Their involvement ensures optimal due diligence and integration, along with proper legal structuring, which can help to maximize deal value and transaction success across the M&A landscape.

Tailored Legal and Business Insight

Perhaps most importantly, a good GC can combine their legal prowess with business insight and serve as a strategic advisor to the C-Suite, aligning legal strategies with business growth objectives. The GC bridges the roles of the COO and the CEO, ensuring that everything the company does not only fit within compliance guardrails but remains so even during periods of rapid growth. Rather than presenting roadblocks that slow down business growth, they also can better align the legal function with sales and marketing to ensure ongoing compliance at scale, no matter where the business is headed. This is especially crucial in PE-backed companies, where strategic decisions are closely tied to aggressive growth targets and investor expectations.

Streamlined Policy and Procedures

Bringing on a GC as early as possible ensures that your company establishes and maintains efficient legal frameworks and operational procedures right from the start. This foresight not only prevents costly legal mishaps and inefficient practices but facilitates smoother future adjustments aligned with business growth. After all, what worked for a business at $10M ARR will not necessarily work at $100M. This early legal work can set a company up for success going forward after growth changes the nature of the business’ day-to-day operations.

Compliance and Risk Mitigation

In the intricate tapestry of today’s regulatory environment, a GC’s specialized expertise is indispensable for developing robust compliance frameworks and maintaining corporate controls. This proactive legal oversight significantly reduces the risk of fines and costly legal setbacks, safeguarding the company’s reputation and financial stability.

Support During Hyper Growth

Businesses rapidly growing encounter unforeseen problems when they are not well positioned for it. For companies experiencing rapid expansion, a GC’s role becomes crucial. Their guidance ensures legal and regulatory compliance while facilitating scalable growth, thus avoiding the pitfalls that often accompany high growth phases. Sometimes this growth necessitates not only hiring a GC, but a legal team depending on the amount of work to be done and the complexity of the regulatory landscape.

Dual Role Considerations

Companies may entertain the idea of having a GC take on the duties of a Chief Administration Officer (CAO) or Chief Human Resource Officer (CHRO) in addition to legal, to further internal cost savings. The right GC may have the labor and employment expertise to reduce labor disputes, employment issues, and employee policies and procedures. At a minimum, a GC will add value in partnering with HR even if there is a CHRO or CAO at your company. Importantly, a dual role for a GC may be more tenable during the early stages of a company’s growth.

Finding the Right GC for You

Hiring your first General Counsel can be a game changer for your high growth company aiming to maximize operational efficiencies and better position itself for strategic financial gains. JM search can secure top legal talent that provides immediate and lasting returns on investment, truly making the GC role a cornerstone of strategic corporate leadership. Connect with us to start the conversation.