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Legal Needs of Small Businesses
In order to keep up with the changing needs of small businesses, the legal world also needs to adapt. Given the recent recession, traditional solicitors’ work, such as conveyancing and probate, has not been in such great demand. Along with every other player in the UK economy, law firms have been forced to consider how they can best serve their existing clients, and how to generate new areas of business.
In light of this, the Legal Services Board conducted research into the legal needs of small businesses. In May 2013, the findings were published in a report titled, “In Need of Advice? Findings of a Small Business Legal Needs Benchmarking Survey”. Some of the findings are detailed below.
The report analyses the survey responses from 9,703 small businesses (fewer than 50 employees). Of those, 4,389 (45%) were single-person businesses, 4,266 (44%) were micro businesses (2 to 9 employees), and 1,048 (11%) were other small businesses (10 to 49 employees).
There are around 4.8 million private sector and 81,000 not-for-profit enterprises in the UK, and around 99% of these are small businesses. Therefore, this sample of 9,703 represents a huge section of the UK economy, which generates one third of the turnover and accounts for one half of the jobs outside the public sector.
The findings detailed in the report are broadly categorised into small businesses’ experience of legal problems, the impact of those problems, and the response of that business.
One point of note is that a large proportion of small businesses do, in fact, encounter legal issues. During the 12-month study alone, 38% of the small businesses experienced at least one legal problem. Moreover, it seems that the larger the business, the more likely it is that legal issues will arise, with 77% of businesses with 10 to 49 employees facing legal issues.
The impact of these problems was also extensive. 45% of legal problems were reported to have had a tangible effect on the business, with the mean cost of problems being £6,700 (and the median cost being £1,200). Across the UK as a whole, the Legal Services Board estimates that the annual loss to small businesses as a result of legal issues could be in excess of £100 billion.
In fact, very few small businesses were equipped to deal with these issues themselves. Only 6.4% employed a qualified solicitor, and only 9.1% had retainer agreements for legal services. Nevertheless, the businesses surveyed opted to deal with the issue themselves in 52% of cases. 29% obtained some form of independent legal advice, but only 14% chose to seek out a solicitor or barrister.
This final statistic does not appear so surprising given that only 13% of small businesses agreed that “solicitors provide a cost effective means to resolve legal issues”, with 45% disagreeing. It would be interesting to find out how many of this 13% were also among those that had taken advice from a solicitor or barrister.
Clearly, however, the Legal Services Board, and the legal profession as a whole, has a lot to do to change how it is perceived by small businesses, and possibly then to begin to better meet the legal needs of those businesses.
If you would like legal advice in relation to any legal issues faced by your small business, please contact Salim Mansoor at firstname.lastname@example.org.