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Overview
To better understand the costs associated with individual legal queries—whether ad-hoc (quote-specific) or due to missing information—Mohammed conducted a detailed review of our 2024 legal spend.
Key Challenge:
Our legal expenses are poorly categorised beyond ‘legal spend’. This is largely due to inconsistent or vague descriptions submitted at the point of invoice processing. Although adequate for accounting purposes, they lack the specificity needed for strategic analysis. For example, it's difficult to retrospectively classify a cost as “Ad-Hoc” or “Termination”.
Impact:
This lack of categorisation makes it challenging to derive data-driven insights or implement concrete cost-saving strategies. Therefore, standardising invoicing descriptions is a key objective of this project.
The Cost of One-Off Queries
The bulk of legal spend fell into the following categories:
One-Off Queries accounted for €666.28 across 2 transactions.
This is significantly less than anticipated. This is likely due to poor categorisation rather than a genuine lack of such queries. Implementing a more robust invoicing description process will provide better visibility in future analyses (e.g. a single word like, “Ad-hoc”, or, “Contract”). This would allow us to easily extract this information in the future.
The Decision Problem
With an average cost per one-off query of €939.12, we face a strategic challenge:
This decision is complicated by our average client churn rate of nine months, impacting the total potential revenue from any given client.
Suggested Spend Approach
To make informed decisions, we should first determine if the issue is a Gap or an Ad-hoc Query.
Gaps
If, after following , the issue is identified as a knowledge gap, we should seek legal advice. Here’s why:
Why Not Blanket Spend to Solve?
While it might be tempting to conduct a blanket gap fill, this approach is inefficient and costly. Some questions may never be asked, or may only come up years later. Paying for these in advance is not commercially viable.
Instead, we should prioritise filling gaps that directly impact current sales opportunities.
Ad-hoc Query
If, having followed the issue is clear a one off, client specific query (e.g. is building data centres in the Nordic tundra blue collar project work) we should seek to apply a more data-driven approach.
How It Works:
Example Calculation:
For a query related to a EUR 1,000/month client (EUR 9,000 over 9 months) with high strategic value and medium risk:
Why This Works:
Internal v Chargeable
Internal = Gap
Chargeable =ad-hoc.
Implementation
Excel Calculator: This formula should be implemented in an Excel template for the Sales team, allowing for quick calculations and easy decision-making.
Tracking and Analysis: By logging each query, we can better track legal spend, improve forecasting, and refine the decision-making process. This can be done via the
Sales Question Tracker.
Better Invoicing Descriptions: Standardising legal invoice descriptions will enable more accurate tracking of legal spend, improving future analysis and decision-making. This will only need to be one word at the start of the description.
Integration with Gap Analysis and Sales Question Tracker: Aligning this approach with and the will provide a holistic view, ensuring our legal spend is strategically aligned with sales and growth objectives.
Conclusion
This approach provides a structured, data-driven methodology for evaluating the cost-effectiveness of one-off legal queries. By balancing potential revenue, strategic value, legal cost, and risk, we can make commercially sound decisions that protect the business while empowering Sales.
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