Legal Services Increase Value, in Addition to Protecting Value and Revenues, and Facilitating Revenue Generation

Most often the value of legal services is expressed in terms of avoiding risks and loss, which is very true. This line of reasoning focuses on how a small business is able to keep the revenues it generates, keep its assets, protect its assets and resources, and similar issues.

Beyond avoiding risks or losses, it seems lawyers have a hard time showing that the work they do is increasing, or could contribute to increasing, revenues.  Lawyers do not set client prices, do not often create deals, do not really reduce the cost of production, and do not usually directly generate paying customers.  The savings is usually a  future amorphous amount contingent on events which may or may not occur.  Because there is, at best, an indirect connection between the lawyers work and the revenues generated, small business often have a hard time justifying hiring a lawyer whose cost looks like an expense which does not necessarily directly increase the value of product or services provided.

There are ways to explain how legal work can actually relate to an increase in revenue in different situations, but they are not well suited for short blog posts or elevator pitches and are more often indirect.

However, while revenues may not directly increase from the work of a lawyer, and the lawyer’s work may help to keep businesses from loosing revenue, there is a difference between value and revenue. Lawyers often help businesses increase value and capture value.

An analogy is real property which appreciates in value over time or due to improvements even though no cash is received until there is a liquidity event such as a sale, or actual use of the improvements. Legal work is like the creation and maintenance of the improvements to property.  One spends resources building a house, remodeling the kitchen, adding space for customers or inventory, refinishing the deck, and so on. While the initial outlay is an investment, the work itself does make the property more valuable at the time it is done.  It also makes the property easier to live in or more functional, but it doesn’t necessarily directly increase cash on hand. But the improvements do make it possible to increase revenue, perhaps in a more secure manner or flexible manner.  And the legal improvements make the business more valuable to potential purchasers of the entity.

It is not until the improvements and property is used or sold that the increase in value is realized.  In short, it is possible to live on a plot of land in a tent, but it is better to have running water, a roof, walls, and a carpet. Legal work for a business is like putting up walls, adding a roof, installing a heater and other improvements that make use of the business more functional, secure and comfortable.  It may not increase revenue directly, but it certainly has value.  Furthermore, the legal work for a business creates value that may not be realized until there is a transfer or sale.