SMEs are currently losing an estimated £13.6 billion a year, by failing to tackle legal issues. The average UK SME is likely to encounter more than eight legal issues a year. Despite this, these types of businesses are often far less likely to protect their business by regularly using a lawyer, than they are to take out insurance policies to protect against other areas of risk. Why? According to YouGov, SMEs are likely to assume that risky outcomes will happen to other businesses, not to them.
That said, they do understand that using lawyers is likely to improve things for their business and reduce the risk of future costs. But, while knowing that legal support is valuable, SMEs are often casual in their approach to seeking it, and will often do so on a purely reactive basis or as a last resort, rather than seeing getting things right legally as fundamental to the business.
There are significant weaknesses to this ‘as and when’ approach to getting legal support:
- By the time you instruct a lawyer, you may already be at a disadvantage. Whether the issue is that a dispute is further down the line than it might otherwise have been, had you sought legal advice earlier, or that your position has been prejudiced by the early handling of the dispute. Alternatively, you may have already signed up to commercial heads of terms or a contract, which could have been improved upon by earlier legal engagement.
- In terms of quality and value of legal support, this will be diminished if you do not know what you need and who can provide this well. A key benefit of a more integrated view of legal support is the development of ‘trusted adviser’ relationship with your lawyer. With that, comes a sense of security for you that your legal adviser already knows you, your business operations, and aspirations well, and that this knowledge will form an integral part of that lawyer’s advice and support.
- Most significantly of all, you are not protecting your business against hidden risks and threats – the ‘unknown unknowns’.
So how can a more integrated and protective form of legal support be gained to address the issues disclosed by the YouGov Report?
One option is to employ inhouse lawyers, and larger organisations, realising the business benefits and cost efficiencies of consistent inhouse legal support, will often do just this. However, most SMEs will not be big enough, nor have the finances, or workload, to justify employing someone full time. This gap can, however, be bridged by a consultancy arrangement with a lawyer on the basis of a retainer for as many days, or half days, as are needed. The key benefits of this arrangement are as follows:
Future proofing your business
A retained consultant lawyer works with you to identify and proactively manage hidden risks and threats which, if not addressed, may cause significant disruption, or actual obstruction, to your current business operations, as well as future plans and strategies. These may lie in the supplier’s terms and conditions you habitually sign off or in the lease of your premises, which may allow your landlord to force you to vacate at a future date (clearly a key issue for SMEs whose premises are absolutely critical to their success). There may be hidden employment risks to your operations and there are likely to be regulatory issues that lie in the background, but affect everyday operations, such as data protection, consumer rights and modern slavery, which, if overlooked or breached, can have significant financial, operational and reputational impacts.
Deeper business understanding
A consultant lawyer works centrally within the business and has particular regard for strategies and ambitions, which can sometimes be lacking in external advisers, particularly if work is delegated to more junior staff.
Keeping you ahead of the game
The consultant lawyer can provide legal updates, training and the provision of an invaluable ‘sounding board’, to enable you, or your staff, to check out issues you are unsure of, but which you would not ordinarily incur the expense of instructing external solicitors on.
The embedded nature of consultancy support means your lawyer already knows you and your business well, and so can respond quickly and appropriately to your legal needs. You will always be dealing with the same person and not having to retell your story. The provision of legal services on a retainer basis, provides some certainty around overall legal spend.
Quality and cost control
Whilst retaining a consultant lawyer will not eliminate the need for outside legal advice, much of your legal work, which is within their field of expertise, will be carried out in-house, and this brings significant cost efficiencies. When you do need to use external advisers, the consultant lawyer can source and manage the appropriate expert lawyer for you, thus ensuring that you get the advice you actually need in a very targeted way, with the added benefit of the consultant having negotiated the fee arrangements for you.
So, the old saying ‘a stitch in time saves nine’ is very pertinent to SMEs and their legal dealings. The more you work with your lawyer, the better prepared your business will be. If SMEs can overcome their reluctance to regularly use lawyers to take care of their legal business, legal costs and uncertainty can be avoided, risks mitigated, and future plans fulfilled.
Philippa Cobb is commercial property lawyer at Keystone Law.