Liability & indemnity

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

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.