By Clive Rich, below, CEO and Founder, LawBite
It has been a rollercoaster ride for SMEs over the last few weeks. From recession and energy bill concerns to this weeks’ announcements on the non-domestic energy price cap and the mini-budget, small business owners have a lot to contend with, alongside running their businesses. With inflation at its highest rate in 40 years, SMEs are fearing the worst, with 53% expecting to stagnate or fold. This lack of growth has profound consequences for the wider economy, and while the recent mini-budget announcements on the scrapping of the NI rise and energy support provide support, all SMEs will need to analyse overheads and costs, and look for inefficacies.
The legal advice they can access, and the way in which they access that support, will be crucial in navigating the months ahead, as many businesses will be needing to fight in order to survive. 2021 research found that the failure to take care of legal issues might lead to overall losses across the SME community of over £13.6bn a year. Once we consider inflation, as well as increased risks resulting from recession, the figure will surely increase for this year. It begs the question – why are small business owners fearful of seeking the appropriate legal support?
Research from the Legal Services Board on SMEs’ perceptions of the legal industry found many found the experience of working with a law firm ‘cumbersome’, ‘expensive’, and ‘time-consuming’. This perception means that small businesses tend put off engaging early with legal support, allowing the issue to worsen. When they do then seek legal advice, their experience often serves to reinforce their initial opinion. They are left with mounting bills and a sense that the law is not designed for them.
It is with this challenge in mind that alternative providers such as Lawbite were created, using technology and remote, flexible legal experts to provide an equal standard of legal advice with significant lower cost to SMEs. At a time of rising costs across the board, small business owners have a right to access legal support which has been designed with them in mind, and which does not cut corners or sacrifice on quality.
At the heart of this is a change in mindset. For large multinationals, having a retained law firm and in-house legal counsel is second nature. To do otherwise would be negligent. This isn’t common practice for SMEs, however it is equally risky for these firms to only communicate with a lawyer once the worst-case has arisen.
Instead, SMEs should treat legal support in the same way as an insurance policy – a low cost investment that protects them from the cost of things going wrong. With a subscription model, small businesses have the security of knowing that in return for a small monthly outgoing, they can access specific legal help when they need it, as well as receiving proactive materials and pointers to help them to mitigate risks.
Reviewing your financial exposure and addressing liquidity issues are a key part of that risk mitigation, and will be essential to weathering the upcoming recession. The areas to examine will depend on where in the market your business sits; suppliers will be looking to protect their income flow, whilst customers will want to minimise liabilities. This commercial dynamic, and the contracts that underpin it, should be a SME’s first port of call to manage costs.
Other areas SMEs will need to consider – ones which give many business owners sleepless nights – are employment agreements and commercial property contracts. SMEs will want to understand how to avoid redundancy whilst keeping the right people with the right skills to deliver the work. Legal support will ease this process and reduce the risk of unintended consequences or unfair dismissals. Similarly, as energy prices rise this winter, SMEs should evaluate their commercial property contracts and lease provisions for energy costs.
Rather than this information being hidden from view or heavily guarded, a new approach to the law would help remove the fear, address the disconnect between proactive and reactive legal needs and ultimately save small businesses money in the long run. Fears around an approaching recession can act as a catalyst for this change in approach.
Many small businesses will be feeling anxious and isolated as they read the news and consider the implications of rising interest rates and inflation. Making proactive steps to recession-proof your business by addressing inefficiencies in how legal support is accessed can help put the power back in small business owners’ hands. There’s no time to lose.