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Demonstrating the value of legal services to small businesses

Would you expect to stay in business if just 1.4% of your clients agreed strongly that your law firm ‘provides a cost effective means to resolve legal issues’?  No, I didn’t think you would.

How about if just another 12% could at least bring themselves to merely agree (if not strongly) with that statement about your firm?  No, probably not, as this does not look too good either.

Yet these are some of the detailed statistics provided in a recently published report, “The Legal Needs of Small Businesses – an analysis of small businesses’ experience of legal problems, capacity and attitudes”.  The report is a result of survey research conducted by the Small Business Research Centre at Kingston University for the Legal Services Board (LSB).  A copy of the full report can be found here.

One question asked of small businesses in the survey was ‘do you agree that lawyers provide a cost effective means to resolve legal issues’.  Only 1.4% of respondents agreed ‘strongly’ with this statement, with another 12% at least agreeing.

As you might expect in light of these cost satisfaction levels reported above, most small businesses use legal service providers as a last resort when needing to solve legal problems.

This seems a pity on many levels, not the least of which is the estimate in the report that the total annual losses to small firms in the UK caused by legal problems is £9.7 billion pounds.



Cost or value to a small business?

While it’s true that every business today – not just legal businesses – need to do ‘more with less’ and bear down on costs, I don’t think this is the whole story here.

I think a more relevant issue is the way lawyers communicate the value of the work they have done, or could do, for clients.

Client perception is everything.  If clients believe that lawyers do not provide a cost effective means for solving legal disputes, surveys like this will reflect that belief.  The important point to grasp is that it’s not the clients fault for thinking like this. The fault lies with the lawyers for being unable, or unwilling, to convince their clients about the cost-benefit of the work done for them.



Put yourself in the client’s shoes

Let’s assume for a moment you are a senior manager in a small business.  You are transitioning from one software supplier to another but you are worried that your current supplier might seek to pull the plug in a fit of pique, as your relationship with your supplier has deteriorated markedly.  Potentially, the effect on your business of an abrupt termination could be catastrophic.

Somewhat reluctantly, you seek legal advice and go through the options with a solicitor.  Some comfort is gained immediately because you are receiving legal advice from someone who has seen this kind of thing before from a legal perspective.  The solicitor’s advice helps you with contingency planning as well as providing you with a clear termination agreement which your supplier accepts (with minor amendments).  In fact, the agreement has helped manage the parting of the ways with your supplier more amicably and professionally than you previously thought possible.

The solicitor you instructed is in a small law firm.  Unsurprising, as I think the vast majority of legal services supplied to small enterprises are provided by small to medium law firms.  Lets say the total cost of the legal advice comes to less than two thousand pounds (£2,000).

Personally, I’d say this is money well spent and, compared to the potential losses you were facing, looks like a bargain.

Following the clear evidence presented by the Kingston University survey, why might you, at some later stage, have difficulty agreeing that your solicitor has provided a cost effective means of resolving your legal issue?



Poor communications during the matter

More than likely, while the solicitor did an excellent job regards the technical legal work he did a much poorer job of communicating the value of that work to you and your business.

Although communications to you during the matter were swift, they were reactive.  That is to say it was largely down to you to call or email your solicitor to ask about how the matter was progressing.  It seemed as though you had to chase your solicitor to find out what was going on.

Moreover the solicitor showed a clear preference for discussing the narrow legal issues at hand rather than seeking to find out more about you and your business.



Poor communications when billing

After the matter was completed, say two months later, you received the solicitor’s bill for almost £2,000.  A bill for £2,000 plus VAT may not seem very much in context, but being a small business a bill of this size is something which you query automatically.  Especially in this case where there is little by way of explanation about what the work involved other than a line or two ‘for services rendered’.

As a senior manager in a small firm you are really very busy and with the passage of time you unconsciously downgraded the threat to your business posed by your IT supplier a few months before.  So you asked the solicitor for a reminder and further explanation of the work done.  What did you get in return?  A print out of a time sheet.  No context was provided.  This was simply a listing items such as ‘telephone call in’, ‘telephone call out’, alongside which was the standard charge out rate per 6 minute unit, multiplied by the number of ‘units’ spent on the telephone.  Moreover, to add insult to the injury, the time charged out per 6 minute unit does appear, looked at in isolation, to be rather expensive.

Little wonder then that, after the event, you have some difficulty in believing that your solicitor has provided a cost effective means of settling your legal dispute.

In fact it should be quite easy to alter clients’ perception for the better in cases such as this, and the key to it is improved communications.



How to improve communications during matters

The first thing for lawyers to do, even in relatively small matters, is to be much more proactive communicators.  Project managers have found that the simplest way of doing this is to send regular project (matter) update reports.  The reports need not be bespoke.  A standard template can be used to update clients about matter progress in key areas.

Even small matters tend to go on for at least a few weeks of elapsed time.  A couple of update reports sent by the solicitor placing the work done in context, in this case referring to the wider commercial threat to the client’s business, would do wonders I’m sure.

A recent Lexis Nexis survey showed that clients rate regular progress reports as their second highest priority, while lawyers in small firms only rate it tenth.  There is clearly a mismatch here and it should be quite easy to plug the gap.



How to improve communications when billing

If there is one document from a lawyer a client decision maker is bound to read, especially in a cost sensitive small business, it will be the legal services bill.

Some legal industry commentators have at various times suggested formats for legal bills which go beyond the traditional format of ‘for services rendered – please see accompanying time sheet’.

A few years ago Matt Homann suggested a format for an interim bill which was more project focused.  Matt’s mock-up bill summarises, in plain English, who the lawyers working on the case are, what tasks they have been working on, what they plan to work on next and, equally importantly, what further input is expected from the client.

Whether this kind of thing is done as part of a separate matter update report or as part of an interim bill matters less than the fact that it could, and should, be done in any event.



As a former practising solicitor it frustrates me to see so many lawyers provide an excellent service regards technical aspects of the law, but then do a poor job of demonstrating the value of their legal services to clients.

Clients will not necessarily understand and appreciate the value of good technical legal work alone.

This sounds obvious, but its easily missed, forgotten, or not understood in the first place by lawyers who spend far more time working on technical legal advice rather than putting that advice in context and demonstrating the true value of that advice to clients.

I’m sure if lawyers, especially those servicing small businesses, did some simple things regularly such as providing status updates (without waiting for clients to ask) which remind clients of value delivered rather than simply cost incurred, the results of surveys like that conducted by Kingston University for the LSB would look very different.

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