Legal advice needs to be accessible for SMEs
5 min read
16 October 2013
Clive Rich says small firms are put off by high fees.
Many small businesses resent the size of the legal fees they find they have to pay and find the advice they receive is hard to understand .
Often, small businesses avoid engaging the services of a lawyer altogether. The prospect of complicated advice or contracts, and more importantly hefty legal fees, leads many of them to bury their heads in the sand.
Unfortunately, that’s when the law can become stressful, complicated and costly. It’s hardly ideal to be resorting to legal support and guidance after events have created their own momentum.
Of course, it’s not always about managing a crisis. It might be that you’ve recently taken on a new member of staff or a consultant and need to draft a safe, secure contract or need legal advice on selling shares or taking on finance.
And, of course, there is the risk of the worst case scenario. A litigious client might sue for breach of contract, or a disgruntled ex-employee might accuse you of unfair dismissal or threaten an employment tribunal – all very stressful, time consuming and potentially expensive.
Whether it’s day-to-day legal matters or more critical legal problems, DIY law is highly risky and not cost-effective.
While we’re not in the business of scaremongering, it is clear that the last thing small companies should do is just shut their eyes and hope for the best. Every business needs legal advice sooner or later, and of course everybody wants premium quality and affordable prices.
But this is easier said than done. A poll by the Legal Services Board (LSB) found that many SME owners are reluctant to use professional legal services at all.
It also showed that a mere one in eight small business owners felt lawyers provide a cost-effective solution to solving their legal needs. The main reason was what they perceived as the exorbitant charge-out rates of lawyers.
The upshot is that many SME owners resent the level of fees they have to pay. Many are also afraid to pick up the phone to a lawyer lest they be faced with painfully high hourly rates. Yet this approach can put a business at grave risk if it leaves itself open to disputes or in a vulnerable position when it comes to trading relationships.
My company has examined the fee structures of a number of high street lawyers and larger firms, and found many between £250 and £600 for only an hour of their time.
Yet the average start-up owner may not even earn that in a week. With an hour’s phone call to a solicitor costing the same as a week’s salary, no wonder many SME owners feel aggrieved at what they pay or are tempted to “wing it” and try to handle legal matters on their own.
Our view is that the law must become more accessible for everyone, and particularly for small businesses. Rather than leaving business owners to chance it on their own, or making them spend large amounts of money law firms ought to be actively winning over their SME customers.
We aren’t saying all lawyers are bad, or the legal profession is not professional – the truth is that many great lawyers provide excellent value; and for bigger companies the high-cost, highly detailed advice can be valuable too.
However, there is a real argument for the ‘democratisation’ of the law, i.e. making readily available the legal advice that small businesses need to survive — and in a language they can understand.
The right legal protection isn’t something small businesses can risk; frankly, it can be as important as profit, because it can enable or protect profit. The key is to find a way to get the advice they need at a cost that isn’t ruinous.
Clive Rich is the founder and chairman of the online legal service LawBite.