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Insider Tips on How to Put a Cap on Spiraling Legal Fees

Since mediation is not about an adjudicator choosing between a winner and a loser, but rather about the parties resolving a dispute for the benefit of both of them, relationships are far more likely to survive a mediation process than litigation.

Yvonne Wakefield

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Last year a flippant email exchange between lawyers discussing a client’s mounting legal fees surfaced in court papers submitted as part of a fee dispute between the client and the law firm. The lawyers worked for one of the world’s largest law firms and the offending email stated: “That bill shall know no limits.”

The law firm in question has since denied that overbilling took place and described the emails as, “an unfortunate attempt at humour by three former lawyers of the firm.” However, apart from resulting in a public relations nightmare for the firm, this is one of several cases that have once again thrown the international spotlight on legal fees charged by commercial lawyers.

The burning question of cost

It is not surprising then that for any business requiring legal services, whether large or small, the burning question usually is whether a fair deal from a law firm is even possible.

Yvonne Wakefield, founder of Caveat Legal, says small and medium business owners are not alone in worrying about the cost of legal advice.

“Big corporates have similar concerns,” says Wakefield. “The difference is that they are doing something about it.”

Last month the Association of Corporate Counsel (ACC), a global in-house bar association for legal departments, reminded their members as well as law firms that legal professions across the globe should be working towards the following three targets:

  1. Reducing the client’s total legal costs by a significant amount;
  2. Providing near-complete predictability in cost and process; and
  3. Significantly improving outcomes.

Navigating a minefield

Wakefield says in an attempt to avoid spiraling legal fees many small and medium business owners choose to struggle through legal minefields without the guidance of a legal expert.  But Wakefield explains that  avoiding legal advice at the right time can lead to costly unintended consequences later.

“Foregoing legal advice often results in businesses being incorrectly structured or basic business agreements not being in place. We also find that entrepreneurs frequently incur unnecessary opportunity costs by trying to progress important business deals as far as possible on their own in order to minimise the costs of briefing a law firm.”

So how do you ensure that your business does not become the victim of the bill that knows no limits? Wakefield has the following advice for entrepreneurs (or in fact anyone in need of legal advice):

Do your homework before seeking legal advice

There are many different legal service providers out there and your specific requirements should dictate whom you brief. Only limited categories of legal work such as litigation and conveyancing are the exclusive domain of attorneys practicing at a law firm.

If, for example, you need help with drafting contracts, advice on buying or selling a business, or help with commercial dispute resolution big law firms are not your only options. Independent legal practitioners and legal consultants will be able to help you at a fraction of what a big law firm charges. You are also likely to find that many of these lawyers come with big law firm credentials.

Understand the system

The reality is that lawyers at most large firms work towards monthly fee targets. These are used to judge their performance and determine eligibility for promotions and bonuses. While this does not necessarily lead to “bills that know no limits” at the large firms, this does mean that big firm lawyers are likely to be more interested in taking on cases that are complex enough to deliver the hours. 

A stitch in time 

If you are likely to need help from a lawyer, contact the right person for the job as early as possible. Getting lawyers involved too late often results in them having their hands tied, with far fewer angles to pursue to get you the best results.

Also, as your legal challenge grows in complexity, the more expensive it will be to resolve.

Request a quote or a fee cap 

Just as you would request a quote first before signing up for major surgery or dental work, you should also request a cost estimate from your lawyer.

Understand that time is a lawyer’s currency. Since most lawyers use time-based billing, ask what the hourly rates are for the lawyers that you would like to engage and request an estimate of how much time will be required. This will give you a good indication of what to expect from your legal bill.

Once you and your lawyer have an understanding of the ambit of the brief, you can also impose a fee cap, meaning that you communicate to the lawyer that you will only spend a certain fixed total amount on the work in question.

Be realistic

Do not underestimate the amount of time required by your legal team to properly deal with your case and deliver a solution of high standards.

While you want to be charged a fair price for the work to be done, you also don’t want to put unrealistic pressure on your lawyer to deliver a professional outcome without spending the necessary time.  Similarly, you would never ask a surgeon to do his or her job as quickly as possible.

Be well prepared

Prepare an instruction to the lawyer by carefully collecting all relevant documents and listing the relevant facts. A written instruction is always a good starting point and helps the lawyer to prepare before consulting with you.

Lengthy time delays for collecting documents and information on your side may mean that when the lawyer picks up the matter again after a time lapse, he or she may have to spend time reading back into the matter. Understand that you will be charged for this.

Also avoid to-ing and fro-ing. Each time a lawyer is asked to incorporate further changes to documents already drafted, the cost rises. Therefore, if you need a document to be reviewed by several people, gather all the comments and only then ask the lawyer to incorporate them.

Communication is key

Ask your lawyers to keep you updated regarding the progress of your case and to highlight any complexities arising that may require more time. If yours is a complex matter that is becoming time consuming, ask for mid-month fee summaries so that you can track the costs.

Communicate to your legal team that you are happy for work to be delegated to junior legal professionals where appropriate. This way junior lawyers who charge lower hourly rates do the legwork under the supervision of more experienced (and expensive) seniors.

This is only a good option, however, for straightforward aspects of your matter. You do not want to insist on having junior lawyers working on a complex issue, which then results in the work taking much longer than it would have in the hands of a senior lawyer.

Insist on technology to reduce costs

If your legal case involves the processing of volumes of documents, ask whether your lawyers use technology allowing for the most cost effective processing and management of documents. There are excellent solutions that have been developed for this purpose and all lawyers should be doing what they can to avoid using hourly-billing professionals to manually work through volumes of documents unnecessarily.

Consider mediation over litigation

Mediation is often quicker and more cost effective than litigation when it comes to resolving commercial disputes, workplace disputes and those involving family trusts.

Parties to a dispute generally opt for mediation for three reasons: they want to maintain their business association with each other, they want resolution as quickly as possible, and they want to prevent exorbitant legal fees.

Yvonne has a BA (law) and LLB from Stellenbosch University, a Diploma in International Studies from Antwerp University, and an LLM from UCT. She has qualified as both an attorney and an advocate in South Africa, and as a solicitor of England & Wales. Yvonne now heads up Caveat Legal, a legal consultancy aimed at making quality commercial legal services more accessible to the business market.

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How to Guides

Is It Time To Consider Renewable Energy To Power Your Business?

Can your business afford the 33% electricity hike that Eskom is proposing? If not, you should look into some of the renewable energy options South Africa has to offer.

Nicole Crampton

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In the past there was load shedding, now there are proposed high price increases, and more potential load shedding due to the strike action. Many businesses previously resorted to generators as alternative energy sources, but with the growing customer demand for more environmentally conscious options, they won’t be satisfied with this alternative energy solution.

Keeping a business operating in South Africa is hard enough without losing funds every time the electricity goes out, and although generators are known as the back-up, with the increase in petrol/diesel prices is this still a feasible long-term solution?

You may want to consider a more permanent renewable energy alternative, to both reduce your electricity bill, regardless of future tariff hikes, and demonstrate that your business cares about the environment.

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How Brigid Prinsloo Made (A Lot Of) Money On Airbnb

With the explosive success of Airbnb, the property investment landscape is changing. An increasing number of property owners are finding that it’s far more lucrative to rent out a property by the night than to install a long-term tenant.

GG van Rooyen

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It is possible to build property riches starting from a small base. This couple shows you how they did it. They’ve also launched a business that makes it easier to rent your property on Airbnb.

Although Brigid Prinsloo is a dyed-in-the-wool Capetonian who absolutely loves the city, she isn’t spending a whole lot of time there right now.

Like many young people, she’s pulled up stakes and hit the road, determined to see the world. When Entrepreneur spoke to her via Skype, she was busy exploring Vietnam with her Fiancée.

But, unlike many people who finance their travels by selling their homes and possessions, Prinsloo hasn’t liquidated her assets.

Related: 10 Weird And Wonderful Airbnb Listings, Including A New York Taxi And An Igloo

Instead, she has done the opposite – she has invested in a couple of properties that she lists on Airbnb.

The income from these rentals is significant enough to not only cover their respective bonds, but to bankroll her travels as well.

How has she managed it? And, more importantly, is it something that others can accomplish as well? Entrepreneur asked her to reveal the secrets to making a killing on Airbnb.

1. Getting Started: Listing Your First Property on Airbnb

How did you start listing on Airbnb?

Brigid Prinsloo

Brigid Prinsloo – Superhost SA

I used Airbnb during a trip to London and Dublin, and the experience was a very positive one. When I got home, I decided to try being a host. My fiancé and I had a spare room in our flat, which had morphed into a dishevelled storage room.

Almost on a whim, we decided to try and rent it out on Airbnb. We had a very ‘Lean Start-up’ approach to the whole exercise. Our small room acted as a minimum viable product (MVP), we listed it simply as a way of gauging interest.

Well, within an hour of listing the room, we received our first inquiry. Within the first day, we had our first booking. We weren’t prepared.

We ended up moving our own comfy bed into the room, just to ensure our guest could enjoy a decent night’s sleep, and slept on a spare bed ourselves.

By the end of that first month, we had earned close to R10 000 by renting out the room. The rent for our entire two-bedroom flat was R10 500 per month. We realised that we could earn a tidy sum by renting out an entire flat.

My fiancée and I purchased a property that we now rent out, and I also purchased a second property with my dad and my sister, which we’ve also listed on Airbnb.

Resource: New Ways SMEs Can Find Funding

2. Return on Investment: Making Money on Airbnb

How much income can you expect to earn on your Airbnb property per month?

There are obviously loads of different kinds of listings on Airbnb – everything from cheap spare rooms to lavish mansions. Based on the investment we’ve made, though, I’m very happy with the return we’ve seen.

If you take the entire amount that my fiancée and I have earned from renting our flat out through Airbnb and divide that by the number of months that it’s been listed, the average monthly earning is about R23 000.

And this is a property that had been rented out to a long-term tenant for about R6 000 by a previous owner. What’s great about this sort of investment, of course, is that the income generated is fairly passive, which is why I can afford be in Vietnam while everything ticks over at home.

Airbnb-accomodation

High quality images are important when listing your property on Airbnb.

3. Birth of Superhost: An Airbnb Management Company

Is there an easy way to manage multiple Airbnb properties?

If you’re renting out one room – or even one flat – managing your rental is fairly easy. However, once you start listing a couple of properties, managing them can become quite a task.

For example, someone needs to welcome guests and hand over the keys, ensure that the flat is clean, and even take care of all the admin that goes with managing a listing on Airbnb.

superhostsouthafrica

Brigid Prinsloo has made far more by listing her property on Airbnb then she could ever earn through long-term rentals.

We started a service called Superhost SA, which assists Airbnb hosts in managing their listings. As the popularity of Airbnb has grown, companies focusing on offer management services have popped up in lots of major cities.

Resource: 10 Businesses You Can Start Part-Time

For around 17% of the revenue earned, a company like Superhost will assist with the nitty gritty of renting out a space on Airbnb.

4. Location, Location, Location? Which is Best for Airbnb Property Owners

How important is location when it comes to listing a property on Airbnb?

Location is important, there is no doubt about it. A lot of travellers will judge a listing by what is within walking distance of the space.

So it is worth trying to get hold of a property in a decent location, even if it means you might have to go for something a tad smaller.

That said, however, you’ll find that the listings on Airbnb in Cape Town are surprisingly spread out. Services such as Uber have made it easier for people to travel in foreign cities. So location is important, but you certainly don’t need to be situated in the very heart of town.

Airbnb-location

Airbnb guests look for listings that are affordable, centrally located and well-equipped.

5. How to Build An Airbnb Property Empire

Can you build real wealth through Airbnb listed properties?

Some people are using Airbnb to build empires, there’s no doubt about it. You find that some people in large cities like New York have massive Airbnb portfolios with 200 listings.

Airbnb is providing an interesting alternative to the traditional strategy of buying properties and renting them out to long-term tenants to pay them off. You can make far more money from Airbnb.

That said, Airbnb isn’t going to turn you into a multi-millionaire overnight. Building up a portfolio will take time.

We might be able to pay off the bond on our flat in four years instead of 20 thanks to Airbnb, for example, but it’s not a get-rich-quick scheme. It will still take time.

Another interesting way to potentially make money through Airbnb is to rent a property and list it on Airbnb. But you don’t want to do it illegally.

Related: Watch List: 11 Teen Entrepreneurs Who Have Launched Successful Businesses

Airbnb has had to deal with some backlash overseas because of tenants who were illegally subletting their flats. You need to be honest with the landlord and make sure that he or she is okay with it.

Airbnb-lounge

Want to attract the right kind of guests? Create a listing that is cosy and inviting, and adds some local flavour.

6. How to Make Your Listing Stand Out

How do you achieve and maintain a high occupancy on Airbnb?

A lot of people are noticing the income potential of being an Airbnb host. In fact, Cape Town alone now boasts close to 10 000 listings on the website. So how do you make your listing stand out? Here’s Brigid Prinsloo’s suggestions:

Airbnb-listing

Airbnb boasts millions of listings so it’s crucial to make your listings stand out. High quality images are important.

1. Create a pretty listing

Hide the laundry, flush the toilet and make the bed before you upload an image of your flat on Airbnb.

Not only should the flat you’re listing look clean, modern and inviting, but you should also make sure that you post excellent pictures of it online. It’s even worth making use of a professional photographer.

2. Undercut the competition

You might not be better, but you can certainly be cheaper. Undercutting the competition is a worthwhile strategy.

The more people have visited you, rated your place and commented on your service, the higher your listing will be placed on the website. This means that new hosts can find themselves languishing at the bottom of search results, far from the eyes of potential guests.

Prinsloo suggests listing your space just below the market standard (5 – 10% below). “Most people filter search results by price, so being slightly cheaper than the competition will help you get noticed,” she says.

3. Connectivity is important

Around 70% of South African Airbnb guests are from overseas.

While these people won’t be travelling thousands of kilometres to sit in a room and watch TV, they’ll probably still want access to DStv.

Wi-Fi is another must-have for those looking to share their ‘African experience’ on social media. And it better be fast and uncapped.

4. Be friendly and helpful

As mentioned, reviews are important on Airbnb. And if you want to receive a good review you need to provide a great experience.

“A lot of people are looking for that personal peer-to-peer experience. They don’t want to feel as if they’re living in someone else’s room with their clothes in the cupboard and toiletries in the bathroom, but they do appreciate that personal.

Being friendly and helpful goes a long way. If someone is from out of town, it’s a good idea to provide them with hints on where to go and what to do in the city,” says Prinsloo.   

5. Add personal touches

You’re not a hotel, but you can still try to make your space as cosy and inviting as well. A good way of doing this: Provide those nice-to-haves like soap, shampoo and great coffee.

Related: 10 Tips for Finding Seed Funding

Prinsloo always provides a couple of bottles of local wine as well.

7. The Risks of Listing a Property on Airbnb

What are the risks associated with listing a property on Airbnb?

1. Damages

Whenever you hand over the keys to your house and possessions to complete strangers, there is an element of risk involved. However, Airbnb tries to mitigate this risk by allowing hosts to vet guests (and vice versa) to an impressive degree.

Guests and hosts verify their IDs by connecting to their social networks and scanning their official ID document. Although there are some horror stories out there, listing needn’t be terribly risky.

You just need to try and make sure who you’re dealing with.

Air-bnb-property

Handing your valuable possessions over to strangers can be intimidating. It’s important to do everything you can to mitigate the risks.

2. Liability

What happens when a guest breaks a leg while descending your stairs, chops off a finger with your kitchen knife or shocks himself with your electric fence (foreigners aren’t as familiar with electric fencing as we are).

Related: Luthuli Capital Co-Founder’s Advice On How To Start When You Can’t Get Finance

We live in an increasingly litigious society, and should something go wrong, you could find yourself being threatened with a lawsuit. Because of this, it’s a good idea to ask guests to sign a waiver that absolves your from any culpability.

3. Squatting

It’s great when guests arrive, but what happens when they won’t leave?

Airbnb rental falls into a murky category of property rental that could see you deal with the same legal hassles as someone trying to get rid of squatting long-term tenants. Squatter’s rights can make this very difficult.

It is a good idea to consult a lawyer to help draft a contract that will offer some form of recourse in the event of squatting guests.

4. Regulations

Some body corporates and home-owners’ associations will be less than impressed with the prospect of total strangers coming and going from your property at all hours.

Related: How Kevin Hart Went From Being A Comedian To The Guy Who Owns Comedy

You need to ensure that other home owners don’t have problem with the listing of your property on Airbnb. The last thing you want is for them to take their frustrations out on your guests.


Related: Watch List: 20 SA Tech Entrepreneurs Making It Big In The Industry

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How to Guides

(Podcast) Phone Calls Often Solve Email Problems

Irate customers can become your most ardent supporters, but it’s important to treat your clients like people. People like people, and phone calls are more personal than emails.

Nicholas Haralambous

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Emails solve problems – but they also create them. When a real problem arises in your business, is an email the best way to solve it, or should you pick up the phone and give your customer a more personal experience?

Irate customers can become your most ardent supporters, but it’s important to treat your clients like people. People like people, and phone calls are more personal than emails.

Listening time: 3 minutes

Related: (Podcast) Being An Entrepreneur Is Painful

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