Small companies now make up over 99 percent of all UK companies. What is surprising therefore, is that so little has changed in terms of the awareness of small companies of the legal bear pits they can fall into. They are routinely making the same mistakes they made a decade ago.
Over the past 10 years we have seen a full revolution in start up Britain.
The number of SME’s in the UK has now climbed over 5.6 million from 3.9 million in 2005 – an increase of almost 50 percent. Tech City in London has grown from nothing to become Europe’s leading Capital City incubation space. Small companies now make up over 99 percent of all UK companies. What is surprising therefore, is that so little has changed in terms of the awareness of small companies of the legal bear pits they can fall into. They are routinely making the same mistakes they made a decade ago, but why?
They have every excuse under the sun. Given the pressures we are under, whether it involve raising monies, getting products to market, finding and keeping staff or fighting off competitors. There are a growing number of SME’s which nonetheless have some unproductive habits that refuse to change. Well, asking yourself these simple questions will help you stay prepared and not fall into a 10 year old rut.
1) Do you have a ‘last minute’ mindset?
We don’t tend to focus on legal issues until they have become a big problem. An ounce of prevention is worth a pound of cure, as the saying goes. The Legal Services Board reports that legal issues cost Britain’s SME’s £100 Billion a year, so that’s a lot of curing that could be avoided if legal issues were dealt with in a more timely and focused way.
2) Have you got it written down?
It’s very common to see businesses not getting paperwork in place covering important arrangements like their relationship with their shareholders or key trading accounts. They then come unstuck when a row develops. It’s easy to say ‘we’re best friends, it wont happen’, but having agreements written down will help you remember what was actually said years down the line.
3) Are you keeping IP on your radar?
On the whole SME’s are not mindful of their intellectual property. IP often accounts for a large proportion of the potential valuation of a company, and enables it to protect that value. However, small companies frequently have a relatively low appreciation of what IP they have or what it could do for them. Copyright, trademarks, patents and design rights are all worth exploring, but are not always on the SME radar.
4) Keeping an eye out for the small print?
SMEs are often in a bit too much of a hurry to negotiate contracts effectively. Sometimes they are anxious about just getting the deal done on any terms, sometimes they feel that they have less bargaining power than they actually do, and sometimes they are just too busy focusing on other priorities (raising money, product development) to concentrate on the finer points of the negotiation.
5) Spending time on your business not in it?
Small companies frequently do not get the best out of the legal services available to them in order to protect themselves properly. Sometimes we (understandably) think that legal services are likely to be too expensive, too slow and too complicated, and so we busk it on their own, frequently making avoidable mistakes. But affordable and understandable legal services are out there for SME’s and these services can help small companies take care of their legal business at a price they can afford.
So, as the start up revolution continues to gather pace in the UK what we will soon be seeing is a legal revolution keeping up, or even starting, so that small companies begin to consistently handle their legal matters in a way that maximises their revenues, margins and exit values…