If you are the owner of a small or medium-sized business (SME) facing a dispute, chances are that you are already losing money if you have not yet spoken with or instructed a lawyer. A solicitor can help you bring large or small problems to a speedy resolution.
It is a common perception that instructing a lawyer to handle a commercial dispute is very costly. The truth is that if you find yourself in a dispute, not instructing a lawyer early in the process can be very costly! A lawyer will swiftly and effectively deal with any dispute before it becomes more complicated and so more costly. A report from the Legal Services Board (LSB) stated that 23% of SMEs which did not deal with disputes quickly and effectively reported a significant loss of income.
This article examines ways to prevent a dispute in the first place and if prevention is not possible, how to resolve a dispute – leaving you to get on with running your business.
How to prevent or resolve a commercial dispute
Most businesses are involved in a commercial dispute at one time or another. This may be with a customer, a supplier or a competitor, resulting in a range of direct, indirect and hidden costs for the business which can have a negative impact upon its ability to invest, innovate, grow and take on employees.
Top 3 tips for a dispute resolution strategy
- Prevention: this can be achieved by effective credit control, contract management and employment procedures. If prevention is not possible, then seek resolution.
- Resolution: act as quickly as possible to ensure the lowest possible cost without recourse to litigation. If a resolution is not obtainable, then litigation might be needed.
- Litigation: you have access to a range of pricing and funding solutions to enable you to engage in litigation should the need arise.
Preventing a business dispute
The majority of commercial disputes are contractual and result in problems of late or no payment between business customers and their suppliers.
Small businesses are particularly vulnerable in dispute situations because they do not have the resources to sort out the dispute on top of managing the day job, and growing and sustaining their business. It is therefore critical for SMEs to minimise the cost of a dispute and its negative impact on day to day operations. Keys to dispute prevention include:
- effective credit control; and
- good management of commercial arrangements.
Our advice for SMEs is to speak with their lawyers about managing their contractual processes, and updating relations with customers and suppliers. These changes are one way to avoid disputes arising in the first place, and can put a business in the best position to win a dispute should it arise.
Resolving a business dispute
A report by the LSB [link?] highlighted the serious impact on SMEs of not dealing with disputes quickly and effectively.
SMEs which do not tackle a dispute are usually doing one of three things:
- In the worst situations, they are burying their heads in the sand, hoping the matter will go away.
- Others appreciate they have to act but choose to handle it themselves and often get it wrong, leading to a hike in costs.
- Some will turn to other professional advisors who lack the skills or expertise to provide proper advice about dispute resolution, such as their accountant, bank or financial adviser, when they really need to be speaking to a legal expert.
The LSB report asked SMEs about the effects of not engaging lawyers to address legal issues when they arise:
- 23% of SMEs reported a significant loss of income.
- 12% reported an increased cost.
- 9% reported damage to their reputation.
- 6% revealed that employees had to be shed and/or the business closed down.
- The average financial cost of each issue that went unaddressed was £13,812.
The report went on to make the link between the most successful SMEs and their ability and willingness to access the right support and advice, particularly on matters connected with the law and dispute resolution.
It is therefore crucial for SMEs to minimise the costs of a dispute and their negative impact. It is at this point that a solicitor can add considerable value in the following ways:
- Identifying and clarifying the issues in dispute.
- Advising a business upon the merits of its case and the options available.
- Exploring with its opponent whether settlement is possible including the use of alternative dispute resolution.
If the dispute slides into legal proceedings, it is essential for a business owner to instruct a solicitor.
Frequently, clients say to me: “If only you had contacted us earlier”. This is usually because all too often by the point at which a client instructs me as their litigation lawyer, they have prejudiced their position and/or are forced to spend more money to resolve an even bigger problem.
The key obstacle to SMEs being able to engage in litigation is cost. This includes:
- The cost of engaging lawyers; and
- If unsuccessful:
- Not being able to recover any of their own costs; and
- Being forced to pay the other sides costs.
When litigation is unavoidable, our clients have a range of pricing and funding solutions. This enables them to pursue a case even when they might not otherwise not have the means to do so. Options include:
- hourly rates
- fixed fees
- conditional or contingency fees
- third party finance
- funding together with putting in place insurance to meet their opponent’s costs if their case fails.
If you find yourself facing a dispute, or would like additional advice about preventing a dispute, please get in touch for a free, no-obligation discussion.
T: 01244 616621