Insurance · 8 June 2017

DIY approach to small business legal issues costs owners £7m per hour each year

small business legal issues
Founders were twice as likely to believe legal disputes would affect rival companies than their own

A failure to seek professional advice for small business legal issues cost UK founders over £13.6bn in 2016, according to new research.

The YouGov study, commissioned by law-tech firm LawBite, surveyed 20 different sectors and 1,000 firms to suggest the average small business faces eight legal cases each year.

The findings revealed the five most common legal issued faced by small business owners.

  1. Disputes – 13.2 per cent
  2. Employees and key contractors – 12.5 per cent
  3. Customers and suppliers – 11.4 per cent
  4. Terms and conditions – 9.2 per cent
  5. Software – 9.1 per cent

Disputes accounted for the highest losses, with owners spending a total £1.7bn settling cases. Following closely, legal cases relating to employees and contractors as well as customers and suppliers cost founders £1.6bn each.

A concerning attitude among founders towards the ability of traditional law firms to resolve small business legal issues was uncovered by the research.

Just eight per cent of respondents believed legal fees were good value for money, while only a fifth rated service as “good”. A further 70 per cent said legal documentation was too complex and inaccessible.

However, a direct correlation appeared between the reluctance to use law firms and the amount business owners had lost.

Curiously, when asked if these small business legal issues were a threat to future profits, just 12 per cent believed their own business was likely to be affected. Looking at outside their own company, 25 per cent of founders believed other businesses would be affected by the same issues.

Commenting on the findings, Clive Rich, LawBite chairman, suggested owners needed to face the reality of neglecting expert advice on small business legal issues.

“SMEs wrongly assume that risky outcomes are more likely to happen to other businesses than to themselves,” he said in a statement.

Our resident legal expert, Grid Law founder David Walker, has covered small business legal issues in great detail, guiding readers through common disputes, and even outlined how to win a court case without a lawyer.

Take a look at some of David’s Business Advice articles:

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ABOUT THE EXPERT

Simon Caldwell is a reporter for Business Advice. He has a BA in politics and communications from the University of Liverpool, and previously worked as a content editor in the ecommerce industry.

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