Lawyers don’t make it easy for SMEs. Many charge sky-high legal fees and bamboozle with jargon, yet they do not deliver obvious ROI. It’s no wonder many entrepreneurs don’t know where to start and, in fact, don’t have a legal budget at all. These four pieces of advice from Legal Edge will set you right on how to manage your money, whilst protecting and growing your business.
Find the right resource for the job
You don’t need a cardiologist if you’re looking to treat chickenpox. The same goes for lawyers because they are not all created equal, offering a wide range of different specialities and approaches.
Many SMEs will opt for an expensive specialist when, in fact, they need a good business or ‘in-house’ lawyer, who understands how companies operate and will be more cost-effective.
SMEs need help managing day to day legal matters, such as dealing with investors and shareholders, contracting with customers and suppliers, protecting assets and managing staff – all these responsibilities can be handled by an in-house lawyer.
If you go down this route, be sure to engage a lawyer who has worked in a business similar to yours, so they know what is important and how to prioritise. Consult specialists when you require niche advice for tax or litigation, for example, or on complex projects like a big acquisition or IPO.
Shop around and find a lawyer who understands your business, as well as the bigger picture, to help you achieve your goals. Don’t work with lawyers who insist that theirs is the only approach, or confuse you with legal jargon.
Put your house in order
Think of your business like a house: it needs regular maintenance, and if you ignore that damp patch for long enough, your ceiling could come crashing in.
What was once an easy-to-fix leak could become a major and expensive repair project. Start-ups often get away with being reactive but to grow your business successfully you need a proactive, grown-up approach.
Examine all your business functions, from sales to marketing, IT to HR, and facilities to finance. Note any red flags, such as projects that are starting to go wrong, high-risk deals, and so on. Consider whether you have processes in place to deal with them.
If not, get them sorted as a necessity, as this will distract you from scaling and growing. Then you can prioritise according to the likely impact and level of risk to your business.
By spending some time setting up processes and managing priority issues you’ll avoid expensive and avoidable crises in future.
Have a legal line item in your budget (and someone to help manage it)
Legal budgets vary depending on many factors, such as being in a regulated industry, the stage and size of your business and the type of customers you deal with.
Nonetheless, it is crucial to include a legal line item in your budget otherwise inevitable legal spend will always come as a horrible surprise.
The right legal resource can help set up the right budget and stick to it. This, in turn, will allow you to grow your business faster whilst managing risk and keeping spending in check. So stop thinking of it as a necessary evil or distress purchase, and start viewing it as an enabler to growth.
Where to start?
- With help from the right sort of lawyer, allocate budget to the urgent, business critical areas you’ve identified above, prioritise them and get them sorted.
- Look at each function of your business and allocate some budget for ongoing maintenance and support, in priority order, such as streamlining customer contracting processes, protecting assets like intellectual property, and so on.
- Think about business milestones you have coming up in the following year. It can be adding new products or services, expanding into new markets, restructuring, securing investment, new infrastructure, and the like. Allow appropriate legal spend for each of these projects.
- Put some contingency in the budget for the unexpected, like a project going wrong or a disaffected employee making trouble.
We often see SMEs tied up in knots with unnecessarily complicated contracts or never-ending negotiations that delay getting the deal signed and revenue in the door.
This can happen when lawyers get hung up on debating esoteric points, whilst they rack up time on the clock, rather than focusing on what is critical and the end game. We call this ‘over-lawyering’.
Make sure your lawyer keeps their activities focused, relevant and practical. The right legal resource should be responsive and enable business, not prevent it. If your lawyer isn’t helping you achieve your goals then it is time to make a change, and do it quickly.
About the author
Donna Sewell is CEO of Legal Edge – a cost-effective, commercial legal service especially for SMEs, with a team of flexible lawyers who all have worked inside businesses before. It helps SMEs manage their legal strategy, process and budgets better. This allows them to reduce their costs, boost their revenues, make the most of opportunities, such as investment or partnerships, and avoid barriers to growth like bad deals or poor contracting.