SMEs face an average of eight legal problems per year, according to new survey data from legal firm LawBite and the CEBR (Centre for Economics and Business Research). While these issues appear to cover a wide range of areas, they have two things in common. Firstly, they’re expensive, costing billions. Secondly, they have a lot to do with business relationships.
Common legal issues
The comprehensive survey canvassed the views of SMEs from across 20 different sectors and found that the most common source of legal trouble were disputes. These were raised by 13.2% of the businesses surveyed.
Also in the top five were issues with employees and key contractors (12.5%) or with customers and suppliers (11.4%). Considering that there can be some overlap between disputes, this suggests that SMEs may lack some of the necessary structures and protections to avoid misunderstandings and minor mistakes being blown out of proportion.
Dealing with the complex range of legal issues faced by SMEs could mean focusing on HR and putting processes in place to deal with these issues before they become an issue. This might include using a forum for discussion and debate or employee representatives and councils, but also ensuring you review contracts regularly and follow legal processes in sensitive cases like disciplinaries.
However, it also means pricing in the problem and having the systems in place to protect yourself. Ensuring your business is properly insured for your business activity is part of the solution, but equally important is closely managing cashflow to ensure you can meet any unexpected costs.
How the costs stack up
While it might be tempting to assume that, as a small business, you don’t have to worry about some of these legal matters, the risk that comes with a wrong call are too big to neglect. The LawBite and CEBR survey estimates that annual costs of legal disputes amount to £1.7bn, while issues with employees and contractors and with customers and suppliers account for another £1.6bn each.
That’s serious money for any small business – and when something as simple as long-term employee illness can cause major disruption, these figures could mean the end for unprepared businesses.
For more information about how Dukes Bailiffs could help your business, contact a Dukes operator today.