What are your plans going into the next fiscal year? Are you considering bumping up your legal team’s headcount, assigning more tasks to ALSPs, or procuring new technology?

Regardless of what your priorities are, you’ll need to draft a legal budget that shows how much financial resources your team requires, justifying how each area of expense matters, not just to your team’s productivity but also to the organization’s long-term objectives.

According to Axiom’s report, legal budgets are finally increasing across the board. But with 99% of legal leaders also reporting a surge in workloads, legal teams are still under pressure to tighten their belts and make every dollar count.

So, if you’re serious about creating a legal budget that secures buy-in, this guide has all the insights you need.

Why you need a solid legal budget

As the new year draws closer, corporate legal departments are gearing up for shifts in financial strategies against a backdrop of technological disruptions, evolving regulations, and rising operational costs.

In all this, a well-planned legal department budget remains key to every legal team’s success as it not only keeps the team on track with resources but also enables them to deliver measurable value to the company.

#1 Efficiently allocating resources and prioritizing spending

When budgets are tight, every dollar needs to work overtime. A robust legal department budget ensures you’re putting your money where it counts most, channeling resources into high-impact areas that move the needle.

Whether you’re growing your headcount, outsourcing to outside counsel, or investing in a CLM, a smart budget keeps you from spreading yourself too thin and ensures your efforts pack a punch.

Also read: How to Prioritize Legal Resources

#2 Demonstrating the value of the legal department

“At the end of the day, we want to see the right outcome for the business. There are a couple of ways to get there, and we should decide based on our business, our talent, our current resourcing, [or] our current experience, which way we want to skin the cat.”

~ Megan Niedermeyer, Chief Legal Officer, Apollo.io
Aligning Legal's Limitless Potential to Business Goals

Corporate legal departments have been viewed as cost centers for too long. This is because their contributions are mostly centered around risk mitigation and damage control.

However, a well-planned budget flips this script by connecting legal expenditures to measurable outcomes.

For instance, you can show how using a CLM to manage all phases of the contract lifecycle can speed up contracting processes and help the organization close more sales with minimal legal risks.

By doing so, you show stakeholders that your team has a real influence on revenue.

Also read: Demonstrating Legal Team Value: Effective Strategies and Tips

#3 Balancing legal priorities with organizational objectives

A solid budget helps ensure your legal priorities align with the company’s bigger picture.

It’s all about striking the right balance between protecting the business and supporting its growth.

Whether it’s risk management, compliance, or headcount investment, a good legal department budget shows how your legal requirements contribute to the organization’s goals.

#4 Improving cost predictability

It is true that legal work comes with a lot of gray areas, especially when it comes to budgeting because you’re dealing with so many “potentials.” This makes predictability a well-appreciated competitive advantage.

A thorough legal department budget puts this on a platter for you, minimizing the chances of getting blindsided by unexpected costs. It takes into account current industry trends and events that impacted financial decisions in the past, allowing you to set up necessary spending guardrails.

#5 Promoting accountability and transparency

A clear budget leaves no room for smoke and mirrors. It promotes accountability by showing exactly where funds are being spent. It gives transparency into the legal department’s financial decisions, making it easy to track every penny and measure its impact.

Current legal budgeting trends and predictions

To better understand what your legal budget should look like, it is often helpful to turn to insights from reputable resources. Here are some recent trends you might be interested in.

#1 Companies are slowly ramping up their legal budgets

After years of reviews and slashes, legal department budgets are finally witnessing a bounce back. According to a report by Axiom and Wakefield Research, more than half (55%) of GCs said they got a budget increase in 2024.

The increment is relatively small, at an average of 4%. However, 61% of respondents expect even more increments in 2025.

#2 The rise of agile legal budgeting

More GCs are beginning to reconsider the zero-based budgeting (ZBB) approach, which has long been a staple in the industry. This is driven by the unpredictability of the current legal ecosystem—marked by regulatory changes, economic fluctuations, and rapid technological advancements—which has exposed the limitations of inflexible frameworks like the ZBB model.

35% of GCs say they've already started working with agile budgeting models like the rolling and precedent-based budgeting approaches. 61% say they’re either considering or actively working towards shifting from the ZBB model.

Agile budgeting approaches allow for the continuous evaluation and adjustment of legal budgets in response to the prevailing realities of each quarter.

#3 More budgets for legal tech and outside counsel spend

As more organizations prioritize legal automation, more funds are getting funneled toward legal tech. According to a report by Gartner, 66% of legal leaders are planning to ramp up their spending on legal technology. By 2027, the global legal tech market will double in size, the report predicts.

Additionally, Axiom predicts an increase in the use of external legal talents in 2025, with 41% of legal department leaders confirming plans to accelerate spending on Alternative Legal Service Providers (ALSPs) and virtual law firms to meet growing demands in responsibilities.

Also read: Top 10 Legal Trends in 2025: A Deeper Look into the Legal Industry

Common challenges legal teams face with budgeting

Source: Jodie Baker via LinkedIn

Budgeting seasons can come with mixed feelings for many people. On one hand, it’s your chance to map out the resources you need to crush your goals for the year ahead. On the other hand, it’s a whirlwind of uncertainties, competing priorities, and the pressure to make every dollar count.

So, what are the bumps along the way that might make this process trickier than you’d like? Here are some common hurdles you’ll want to watch out for:

#1 Securing approvals

In Axiom’s report, 77% of GCs say they've had disagreements with their CFOs at some point. Among this group, 1 in 4 say their conflicts centered on securing budget approvals.

Getting buy-in from the finance unit is often difficult for legal departments primarily because of conflicting priorities. Finance teams are tasked with keeping costs under tight control. So, they may not be so keen on ramping up resources for EVERY legal initiative, especially since most areas of legal contributions—like risk management and compliance—have no direct ties to revenue generation.

#2 Getting boxed in by industry benchmarks

“The surveys often paint with a pretty broad brush, and that can be very challenging. What goes into a legal budget changes across companies. So they [the benchmarks] are not always so helpful. My one caveat here is that I do my own benchmarking. It’s very DIY and manual, but it has gotten me further than the classic ACC or Thomson Reuters benchmark, and the finance person appreciates how I highlight what’s going in the industry that’s more applicable to our business.”

~ Celaena Powder, GC, Seismic
Optimizing Budgets and Resources in Modern Legal Teams

Many stakeholders turn to industry benchmarks for insights on how to allocate resources for their legal departments. But the truth is, these reports cast a wide net and do not account for all the nuances and individual conditions of every legal department.

Making budgeting decisions solely based on these benchmarks means squeezing the legal department into a one-size-fits-all mold and consequently shortchanging them.

Benchmarks might set the bar, but they don’t reflect the unique pressures, workloads, or strategic goals business units are juggling.

#3 Managing unpredictability

Source: Catherine Krow via LinkedIn

Legal departments often face challenges with budgeting due to the unpredictable nature of legal costs. Unforeseen litigation, regulatory changes, or emergencies can arise at any time, leading to unexpected costs that weren’t factored into the initial budget.

Most legal counsel incorporate a contingency fund to cover these unforeseen expenses. But the real question is: how much is enough? Too little, and you could find yourself scrambling to cover the costs. Too much, and you’re tying up resources that could be better utilized elsewhere.

Striking the right balance is key, but with so many variables, it’s largely a guessing game.

#4 Allocating resources across different legal functions

Legal counsel often finds themselves pulled in different directions, with multiple functions like litigation, compliance, and contracts all competing for resources.

Allocating your budget fairly across these different areas can be tricky, especially when every function is critical to the team's overall success.

Without clear criteria for prioritization, it’s easy for one area to get overlooked while another gets more than its fair share.

Source: Edward Poll via LinkedIn

Steps for creating a well-rounded legal budget

A well-rounded legal budget isn’t just a bunch of numbers on a screen. It is a blueprint for keeping track of your team's financial health and aligning your financial goals with your company’s overarching business strategy.

To create a budget that fits this description, ensure you follow the steps below:

#1 Start by mapping out your legal team’s goals and priorities

Before you start crunching numbers, take a step back and assess where your team stands.

Take stock of ongoing projects, staffing levels, upcoming cases, regulatory changes, and any new technologies you plan to implement. Be honest about where legal excels and where resources may be stretched thin. Ask yourself:

• What legal challenges are on the horizon?
• Are there any new initiatives that will require additional funding?
• Where does the department stand with technology?
• Is there a need for new hires, or is it better to work with external counsel?

#2 Evaluate past performances and industry trends

Review your spending from the previous fiscal year and see where you hit the mark and where you overshot. If you consistently spent more on certain areas, consider whether that's due to a trend (e.g., more litigation or compliance work) or something the team can better manage next time. This will help you make more informed estimates.

Also, don’t forget to keep an eye on industry trends—what are other companies budgeting for in terms of technology, compliance, or staffing?

However, be careful not to get lost in the benchmarks. Only focus on insights that truly apply to your team’s reality.

#3 Categorize your cost centers

“When brainstorming resource allocation with my peers, one of the key areas is ‘keep the lights on’ versus ‘transformation’. Keep the lights on is work that’s constant, like contracts, HR work, and other high-volume matters that are best handled in-house. Transformational work typically comprises one-and-done projects. For these, we mostly work with ALSPs to save time.”

~ Celaena Powder, General Counsel, Seismic
Optimizing Budgets and Resources in Modern Legal Teams

Think of this like setting up buckets for different areas of legal expense. Typical categories include litigation costs, compliance, legal technology, outside counsel fees, training, and employee compensation.

Make sure you prioritize the high-impact areas—those that will drive the most value for the business. For instance, if automating parts of your contracting process will improve efficiency and reduce risk, that should be a high priority. 

Likewise, if a new compliance regulation requires a boost in legal resources, make sure that’s reflected.

#4 Factor in the unexpected

No matter how well you plan, things are bound to pop up—emergencies, unplanned regulatory changes, or sudden legal disputes. That’s why you need to have a buffer for those rainy-day moments.

Add a contingency line to your budget (usually around 5–10% of the total legal spend) to absorb the impact of unexpected events.

#5 Make your first draft

At this stage, it’s time to pull all the pieces together. Draft your first budget with as much detail as possible, ensuring that each cost center is represented appropriately. Think of this as your initial blueprint—it doesn’t need to be perfect, but it should serve as a solid starting point.

Once you’ve put the numbers in place, you’ll have a clearer idea of whether your estimates align with your team’s needs and financial constraints. This draft will likely undergo adjustments, but it’s important to have a tangible framework to refine and build upon.

#6 Review and adjust

Once you have a draft, hold a review session with your colleagues. They’re the ones on the ground, so their input is invaluable. Maybe there’s a new CLM they’ve been eyeing that you haven’t considered, or perhaps there’s an area where you can cut back without affecting performance.

Having this conversation ensures everyone’s on the same page and that your budget reflects the reality of what the department needs to succeed.

A blueprint for securing stakeholder approval

Once your legal budget is all buttoned up, it’s time to present it for approval. You may think you’ve done a stellar job crafting a thoughtful, airtight budget. But that’s only one piece of the puzzle.

If your budget doesn't resonate with stakeholders, it will have zero impact.

So, how do you ensure you get that much-needed green light? Here are proven tips you should consider:

#1 Start early

“Securing buy-in from stakeholders starts with planting the seed early and upfront. And you need to be strategic in the timing in which you plant that seed.”

~ Denika Dwyer, Director of Legal Operations, Fivetran
Optimizing Budgets and Resources in Modern Legal Teams

The worst time to explain why you need more headcount or a tech upgrade is when your budget’s already on the table. That’s like trying to plant seeds and harvest crops on the same day.

You have to build relationships with finance teams and key members of other company departments months ahead. Learn what’s on their radar and how legal fits into the bigger picture.

For example, if the company is exploring SOC-2 certification to land bigger clients, that’s your cue to show how legal can help—but only if you have the right resources, like an in-house compliance officer or funds for additional training.

Flagging needs early makes you look proactive and builds a foundation for your budget’s story. You also get enough time to let stakeholders know you’re tuned into their priorities. That way, they’ll see your annual budget as a tool for collaboration, not just a list of asks.

#2 Connect every line item to outcomes that matters

Source: Luís Graça RodriguesLuís Graça Rodrigues via LinkedIn

Your company's leadership isn't combing through every line item with the same attention you gave. They're skimming for the "why" behind the numbers.

Don’t let your budget read like a departmental wish list. Instead, tie every future spend to a strategic outcome. For example:

• Need a CLM? Show how it reduces contract turnaround time, helping sales close contracts faster.
• Requesting more headcount? Explain how new hires ensure compliance with tightening regulations, saving the company from penalties.

Be specific and speak their language. Instead of saying, “We need $75,000 for compliance training,” try, “Investing $75,000 in compliance training this year will reduce the risk of non-compliance fines, which cost companies an average of $2 million annually.”

Anchor your budget to outcomes, not just overheads. That way, they’re far more likely to give the green light.

“I grew my teams based on what the company needed. I was turning in contracts within 24 hours and I needed an extra hire to be able to cover other areas that supported the revenue team. Either that, or I’d need to change the SLA. It was easy getting the buy-in because of the level of service we were providing.”

~Erik Graham-Smith, GC, FloQast
Optimizing Budgets and Resources in Modern Legal Teams

#3 Reinforce your budget with data

“Most C-Suite executives bank on data and hard metrics and not word-of-mouth. When you have certain metrics that shed light on how legal have contributed to growing the revenue stream of the company, it becomes easier for the GC to make business cases.”

~ Gitanjali Pinto Faleiro, General Counsel, Company Secretary & CCO at Greenhill & Co.
Navigating the C-Suite as a GC

Data turns your budget from a wish list into a strategic investment. It makes your case compelling and hard to argue against.

Use benchmarks from similar companies, historical spending trends, and case studies to support your requests.

For instance, if you’re asking for $50,000 for enterprise contract management software, show how much time legal currently spends on manual processes—and what that inefficiency costs the company.

You can frame it like this:

"Our legal unit currently spends approximately 500 hours annually manually managing contracts. This costs the company $35,000 at an average rate of $70 per hour, excluding the indirect costs of delayed contracts impacting sales closures and project timelines.

Investing in enterprise contract management software can reduce manual hours by at least 70%, saving $24,500 annually in labor costs alone. The software would pay for itself in approximately two years. Additionally, faster contract turnaround times will directly support revenue-generating departments by closing deals more efficiently.”

Also read: When to Buy a CLM Solution and How to Acquire Budget and Buy-In

#4 Be ready to compromise

In reality, it’s tough to get 100% of what you ask for. But budget negotiations aren’t about winning or losing. They’re about finding common ground.

Go in knowing your priorities. What’s non-negotiable, and what can wait? If leadership doesn’t go with your entire request, be ready to say, “Okay, if we can only fund one thing this quarter, it has to be X because Y. Here’s what’s at risk if we don’t act now.”

Compromise shows you’re realistic and collaborative. It also builds goodwill for when you need to revisit those deferred asks later.

Wrapping up

A legal budget is core to the success of every legal department. It isn’t just numbers on a spreadsheet, it’s your team’s roadmap for delivering value to the company.

Ensure you tailor your budget to suit your organization’s long-term strategy. Start early to lay the groundwork, but stay realistic about your expectations.

Want to get the direct perspectives of seasoned leaders on legal budgeting? Watch this webinar.

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