Smaller companies start with outside counsel but with growth bring in legal work and lower their total costs
Small companies spend such a high percentage of their revenue on legal matters because of the importance of legal services and their cost. The 2010 ACC/Serengeti Managing Outside Counsel Survey found that companies with less than $100 million in annual revenues spend 0.94% of it on outside counsel. I assume the figure is a median. “For medium companies ($100M to $1B in revenues), the corresponding percentage is much lower at .30%.” As to companies larger than $1 billion, the survey found that they drop the outside counsel percentage another third, to .21%.
Small companies, reluctant to bring a lawyer onboard, rely on outside law firms and perhaps don’t manage them well, so their percentage of spend outside dwarfs that of larger companies that have added a lawyer or more on staff. Data from the General Counsel Metrics global benchmark survey clearly shows a declining trend line for total legal spend as number of lawyers and revenue climb.