Paying for legal services is like paying for a medical prescription; it’s a necessary evil. However, business owners are paying the price for disregarding their importance
Fresh off our feature this month highlighting the importance of having a lawyer, the financial ramifications of overlooking such an investment have now come to light. Suffice to say, a figure of £100bn – the overall cost to small businesses this year – should be enough to kick many an entrepreneur into action.
This staggering statistic comes courtesy of new research from the Legal Services Board, which also found that over a 12-month period, 38% of all small businesses experienced a significant legal problem. And while these problems affect small businesses in a variety of ways, 45% of them left a negative financial impact with the average cost of each problem being £6,700. The most common of these related to non-payment, disputes over quality and a supplier becoming insolvent.
It is clear that small business have faced a horde of legal foes on the battlefield but what’s more intriguing is that only one in eight of business owners sought legal advice from solicitors’ firms. This is perhaps not surprising given that the survey also found business owners expressing little faith in available legal solutions with fewer than 13% of the belief that lawyers provide a cost-effective means to resolve legal issues.
In the same breath, more than half (52%) of respondents opted to handle legal problems on their own and 43% of our resourceful entrepreneurs turned to their trusty friend, the internet, as a source of aid, especially in the area of regulation and intellectual property. Ironically, half of respondents agree that legal processes are essential for businesses to enforce their rights, but it’s interesting that more people turned to the internet rather than to legal personnel.
Chris Kenny, chief executive of the LSB said the research provided “an open window to what small businesses want [and the forms they need it in]. Legal advice shouldn’t just be seen as the last port of call and one which is only turned to if absolutely necessary and unavoidable.”
The apparent conclusion of the research – not to paint a grim picture for our readers – is that legal problems happen frequently and some can have dreadful financial implications. Thus, for small businesses, the best thing to do is bite the bullet and do it right from the get go.
Don’t say we didn’t tell you so.