As small businesses grow, they will often encounter a number of legal issues, such as acquiring business premises, agreeing contracts with suppliers and solving employee disputes. For many, it can be a challenge to access the funds needed to pay for quality advice. Traditionally, services are required to be paid for by the hour, usually making it difficult for small businesses to afford bespoke support.
As a result, the majority of small and medium-sized enterprises (SMEs) avoid using lawyers and law firms, with some even opting to try and deal with the situation themselves. The Legal Services Board found only 10% of small businesses actually invest in legal advisers. Just 13% view lawyers as cost effective, and over half of small businesses experiencing a problem will take a DIY approach. Often costing considerably more than if expert advice was sought before issues were encountered.
Taking shortcuts decreases quality
In some instances, when a business requires legal advice but cannot afford an expert solicitor, they may resort to using non-lawyer companies that will provide a service at a lower price. These companies will offer a range of professional and business services, from HR and employment law to accountancy and administration support.
It’s usually the case that these companies attract businesses by offering what looks like a great deal at a fraction of solicitors’ costs. In actual fact, most require clients to enter into long contracts over three and five years, and will increase the rates during this term.
When it comes to quality assurance, this can only be guaranteed by seeking advice from fully qualified solicitors. Non-lawyer companies cannot offer the same level of quality. These firms will not have the same depth of expertise and will usually follow a template when advising clients, instead of offering a bespoke service. Legal correspondence and letters drafted by these companies can often contain mistakes, particularly when citing relevant law, and therefore may not be taken seriously by the other party. Even spelling mistakes can lead to documents being ignored.
So when finances are restricting, how can companies access the best legal advice available?
Funding quality advice for unexpected issues
‘Before the event’ (BTE) insurance is one way that businesses can source funding when they unexpectedly need legal support. BTE insurance is commonly added on as an extra to other policies before any issues arise. For example, it may be added to a business’ public and professional liability insurance or its property insurance.
When a legal dispute does occur, the BTE insurance could cover the cost of bringing in expert representation. It could be that the business is chasing payment from a client, and needs to bring in legal help to settle the unpaid invoice. When opting to use BTE insurance to cover the legal fees, it’s important to check out what is covered. Each policy can of course depend on the insurer, but standard insurance will usually cover the lawyer’s fees, any costs ordered against the business, and court and tribunal fees. One disadvantage of using this type of cover could be that the insurer insists on the business using one of its panel firms, at a rate that has already been agreed between the insurer and law firm. This could mean that the business has to use a law firm from a different area and may not deal with just one solicitor throughout the case.
Seeking support for the long-term
For businesses that require legal support on a more regular basis, perhaps in the form of drafting contracts, employee handbooks and terms and conditions, some law firms offer a full-service retainer package. Based on the amount of support it needs, the business will pay one fixed fee per month and will be given a set amount of time to use on a range of legal services. The business can then use these hours each month to receive support on areas such as dispute resolution, employment and HR law, commercial property and general business law.
An example of this would be the retainer-based service offered by MLP Law, called Flex. It gives clients the option of three package levels to best suit the business’ needs – entry and middle level, along with a tailored level for those with more specific requirements. The monthly fee is calculated based on 12 months’ service, but clients are not tied into any contract and can terminate the retainer at any time as long as all completed work is paid for.
Clients can benefit from the flexibility of spreading the cost, and have more certainty over how much is spent on resolving legal issues. They’re less likely to be hit with a big bill when a problem arises, as they will already have provisions in place.
Legal costs should not be a burden on a business’s finances, and also should not restrict access to good quality support. Companies will inevitably face legal issues at some point during their growth, and without seeking expert advice, the long-term costs could be much greater and even lead to the failing of the business. As the statistics from the Legal Services Board show, business owners still fear seeking legal advice but need to be aware that there are options available to reduce costs. It is often the case that prevention is better, and cheaper, than the cure.
By Stephen Attree, managing partner at MLP Law