Small business consumers

Our review found very limited research into the characteristics of small businesses as consumers of legal services. What research is available is qualitative but does correlate with the findings on individuals’ responses to legal problems. In summary:

  • “Most common issues for all small firms include business set up, contracts, tax and regulation. Once firms take on staff they are faced with additional problems including employees contracts, health & safety and property, meaning a distinction can be drawn between Micro and Small businesses. Many sole traders are unwilling to expand their businesses as a result of these problems. These businesses rarely seek issue resolution and legal needs for small businesses seen as exceptional – legal associated with terms like expensive, serious, last resort. Knowledge of legal rights is also limited1.”
  • “SMEs most likely to need employment advice are 20+ employees who are big, but not big enough to employ and HR manager2.”
  • This is similar to the findings of research in Hong Kong looking at the demand for legal services, which suggests that 46% of SMEs found it difficult to solve legal problems but viewed legal services as costly and unaffordable3.
  • This may in part drive the level of legal persons acting as litigants in person: “One in five County Court cases involved individuals taking cases against organisations. Taken together the dominant role of these County Courts was to adjudicate (or process) disputes between organisations and individuals: about three quarters of the non-small claims civil cases fell into this category. About 1 in 9 cases involved organisations against other organisations and about 1 in 7 involved individuals against other individuals.4
  • Research into intellectual property rights (IPR) suggests that small firms don’t take as much advantage of the patent system as they could and there is a lack of knowledge about intellectual property rights among SMEs. In one piece of research5, firms were asked whether they had ever sought advice on IPR and if so from whom. That survey found that over 70%, had sought advice about IPRs. For firms with 50–249 employees, however, the proportion dropped to 43%, to 25% for firms with 10–49 employees and for micro-enterprises with fewer employees the figure was only 20%. Large companies obtained advice mainly from external patent or trade mark attorneys or external solicitors and to a lesser extent from such staff in-house. SMEs had greater reliance on the patent office than on in-house sources. Micro-enterprises relied predominantly on advice from solicitors, the patent office and external patent and trade mark attorneys and in particular from a range of ‘other’ sources of advice that other firms tended not to use. The main sources of advice were: the UK Intellectual Property Office, external patent/trade mark attorneys, in-house patent/trade mark attorneys, external solicitors, in-house solicitors, licensing consultants, or ‘other’ sources. Those firms that listed ‘other’ as their only source of advice, the majority were small or micro-firms. Other sources many were industry associations or Business Link organisations.

In July 2012 the LSB published a framework for undertaking a quantative study of small business legal needs.

Large business and Government

Our review found virtually no information on  large businesses and government as consumers of legal services, but they are clearly a major consumer in terms of value. Consumer research has found that, “Large business participants who tended to access providers on a more frequent basis valued the relationships they established and, aside from trust, described other advantages from which individual and SME business participants were less able to benefit. These included providers having more in-depth knowledge of their business and business needs, providers giving a more flexible service e.g. ‘off the clock’ advice, providers requiring less input into the process by the consumer and the consumer having greater control over the process and the confidence to ‘push back’ on certain aspects e.g. fee negotiation6.”