A good fractional in-house lawyer can add value to a business in many ways beyond the traditional legal context. They can work across the business to proactively identify new ways to structure commercial opportunities and support stakeholders’ decision-making. When we work with clients, we always look beyond the initial legal request to understand the commercial challenge behind it. Sometimes the best solution isn’t always the most legally obvious choice. We are always looking for ways to see the bigger picture, preserve commercial relationships, and add longer-term value so our clients can better achieve their business ambitions.
We spoke with our experienced fractional legal counsel, Michael Wong, who says effective legal advisors do much more than act as lawyers. He sees his role as a trusted advisor who helps clients solve business challenges, not just legal ones.
Here are four examples of how a strategic, commercial approach to legal matters can change the potential outcome of a particular problem.
Scenario #1: Recovery of Bad Debt
An important client has failed to pay several outstanding invoices. The company’s FD and CEO would like legal to get involved to recover the debt.
A traditional legal approach might be to:
- Ask in-house counsel to draft and issue a formal demand letter.
- Escalate the matter towards legal proceedings to chase the unpaid debt.
- Prioritise debt recovery over continuing the working relationship.
A strategic legal counsel might instead:
- Explore other options and understand the reasons for late payment.
- Assess the historic, current and potential value of the existing business relationship and contract and examine how important it is to continue the relationship.
- Recommend alternative solutions such as a further discussion with the customer about the reasons for late payment and finding ways to accommodate those reasons, such as implementing scheduled payment plans or where appropriate, exchanging the outstanding balance for equity payment solutions. This can preserve the relationship while recovering the financial value of the unpaid debt.
Sometimes the most obvious legal option isn’t the most suitable commercial decision.
Chasing unpaid invoices may be the finance department’s job, but legal counsel can advise on how to protect the contract’s longer-term commercial value while also recovering the unpaid debt.
Scenario #2: Leveraging existing network relationships
While strategic referrals and introductions are common, they are not always monetised. When two companies do business together and have wider synergies in the industries their clients and suppliers operate in, you can build additional commercial value into those relationships.
A traditional legal approach might be:
- For the contract between the two parties to only focus on the direct business relationship with each other.
- Identify risks and liabilities in a partnership negotiation.
A strategic legal advisor might instead:
- Explore and identify potential collaboration and revenue stream opportunities between their respective customer and supplier bases.
- Build value-added clauses into the contract (such as introduction or referral fees) which will reward a party who introduces new partners or additional revenue streams to the other party.
- Bring commercial acumen into the partnership process, so that both parties can achieve longer-term benefits beyond their direct business relationship.
Looking beyond the initial partnership agreement or introductory referral means examining how to build and develop longer-term revenue. By prioritising growth opportunities, partnerships can become far more successful over time, with both companies benefitting from the wider opportunity.
Scenario #3: Negotiating commercial flexibility into deals
A common problem facing start-up and scale-up businesses is affording the procurement of services or potentially losing a contract because their products/services are too expensive.
A traditional legal approach might be to:
- Focus on achieving the deal within the initial commercial boundaries of scope and fees.
A strategic legal advisor might instead:
- Suggest flexible contract terms or alternative deal structures.
- Negotiate a reduced immediate fee in exchange for royalties, equity or success bonuses based on agreed revenue increases or increased enterprise value.
- Explore wider avenues to facilitate the deal going ahead by overcoming any barriers, commercial or financial constraints.
This approach recognises that you can look beyond the traditional fees-for-services model and negotiate more commercially flexible contract terms to facilitate doing business in a way that benefits all parties involved.
Scenario #4: Historical contractual reviews
Many companies are doing business under contracts negotiated several years ago when the bargaining positions of the parties were perhaps quite different. Fees may not have increased despite increases to the costs of doing business. Another often-overlooked factor is the financial value a partner may have brought to a relationship (e.g., increased revenues, enterprise value, or share price). Therefore, periodic reviews of historic contracts are valuable exercises for assessing whether you can extract more value from them.
A traditional legal approach might be to:
- Take the advice of the business to extend or renew contracts as is.
- When contracts are due to expire or renew, focus only on legal risk issues rather than financial ones.
A strategic legal advisor might instead:
- Proactively work with the wider business to understand the pros and cons of the relationship under the existing contract.
- Seek to understand the full commercial value of the contract.
- Review whether provisions of the contract such as royalty or success bonus clauses have been applied, managed and applied correctly.
- Initiate good faith commercial discussions with the other party to negotiate more favourable terms while seeking to maintain (and improve) the commercial relationship and long-term value of that contract.
The most effective in-house lawyers are business enablers. By understanding the wider commercial context, they can help businesses navigate risk, protect valuable relationships and find practical, commercially savvy ways to move opportunities forward.
At LegalEdge, your fractional in-house lawyer works alongside your team as a trusted commercial partner – bringing the legal expertise, business experience and flexibility you need to make confident decisions and achieve your growth goals. Talk to us about how the right in-house legal support could unlock more value for your business.
