Legal Resourcing for SMEs: What are the options?

SME Publications/ SME XPO 2024

By Kirstie Penk, below, co-owner and director of The Legal Director, a company that provides SMEs with senior in-house lawyers on a part-time or flexible basis

As an SME, there are different ways you can tackle the legal work in your business. You may be dissatisfied with your current situation, or you may not even be aware of some of the options that are open to you. Deciding which route is best for you can be a minefield, and so here are some factors you ought to consider and some pros and cons about the choices available for SMEs in today’s legal landscape.

What are you doing now?

To address your legal needs effectively, you need to first have an accurate, up-to-date snapshot of your business and its legal needs. Have a closer look at your business and ask yourself some questions:

  • What legal services have we used in the last six months?
  • What is coming up that requires legal support?
  • What are the areas that we are dealing with confidently?
  • And what are the areas that have been neglected, that we are currently “muddling” through?
  • Has the business changed since we set it up?
  • How do we deal with contracts? Could this be done more effectively?
  • Do our staff require training to understand legal implications better?
  • What state are our policies in?
  • How do we deal with HR and employment issues?

Having this understanding will help you make a more informed decision. You may want to consider bringing in outside support to undertake this audit. If your business is growing, its legal needs will be changing constantly, and you may not be best placed to know everything you ought to be addressing. An experienced commercial lawyer will have insights into your business and its legal requirements that will bring clarity and throw light on some potentially overlooked areas.

With this knowledge, you’ll have a clearer view on how best to resource your legal needs.

Mainly DIY with a bit of external support

For a lot of SMEs, the day-to-day legal responsibilities fall to the CFO or CEO. For legal work that is business critical, or perhaps beyond the expertise of anyone internally, you are then reliant on external law firms.

This can be a sufficient solution but often has its drawbacks. It’s not uncommon to be passed on to a junior lawyer (sometimes a different one each time) who does not fully understand the brief or hasn’t the experience of business to represent your interests effectively. You will then often be given a list of legal options rather than advice and the onus is still on you to make the decision. You may also feel that your business’s appetite for risk is approached inconsistently.

For a CEO/CFO to have to explain their situation repeatedly to different lawyers brings the added frustration of being taken away from their core role when they ought to be devoting their energies and expertise into growing their fledgling business. And if your business is growing rapidly, your legal needs inevitably increase, costs spiral, and you’re faced with legal fees that you hadn’t accounted for. This can be quite destabilising for less-established businesses trying to get to grips with their finances.

Saying this, if your legal work is fairly consistent and predictable, an arrangement with an external lawyer may suit you. To maximise the effectiveness of this set-up, shop around. Choose a law firm where you can develop a relationship with one particular lawyer who has some understanding of your business and its operations. And remember, it can be a false economy to go for the cheapest, most junior option. An experienced business lawyer working more effectively can end up saving you time and money.

Is employing a lawyer in-house an option?

The alternative to external support is to engage an in-house lawyer. The benefits of having this resource internally are evident. You have someone who represents the business interests, who gives actionable advice, who, as a salaried employee, is a known expense, and who is available when needed. In an in-house lawyer, you also have someone who does not just address business critical matters, but who has input at board level, establishing good practice in governance and compliance throughout your organisation.

Part-time or fractional in-house support

Though you may now be convinced that going in-house is the way forward, for many SMEs, a full-time in-house lawyer will seem unattainable. There simply may not be enough work to occupy someone full time. In this case, consider bringing someone in on a part-time basis.

Perhaps, however, this is still too big a commitment and that you can’t justify another head count at your current stage of growth. Or maybe you are put off by the complication of being in uncharted waters. If you’ve never employed an in-house lawyer before, it is tricky to identify clearly what skills and experience you require, or for that matter what work needs to be done. A company’s legal requirements vary enormously depending on size and the nature of the business and you may be unaware of all the legal or compliance issues that you ought to be addressing.

If this is true of your business, there are still in-house options available. The legal arena has changed considerably in the last decade. Firms using a revenue-sharing model to engage its advisors and offering more flexible distributed working options have  and these firms are re-inventing how legal services are delivered.

They give options to bring lawyers in on a flexible, part-time basis, on a retainer basis (where you can use the time as you want), or just for project work or to support you during busy periods.

This model works most successfully where the lawyer coming in is senior so needs less input and when some effort is made to get a good cultural fit for your organisation.

Whatever you decide is best, take the time to get a good understanding of your operations first. It’s the key to resourcing your legal needs effectively.

SME Publications/ SME XPO 2024