The Top Three Legal Issues Affecting Small Business
Unlike large businesses, who are likely to have individuals or teams within the organisation attending to specialist aspects, small business owners are generally responsible for getting the foundations right for long-term success.
In my experience as a small business lawyer, small business owners are usually juggling a more modest budget against all of the areas that need taking care of.
But this can leave us vulnerable to issues that come up as a result of skipping important details.
The top three issues that I see affecting small businesses in Australia are:
Risk Mitigation
Legal Documents
Systems and Processes
To avoid the wheels coming off later, all three of these need to be attended to and water-tight. There’s no room for shortcuts here: we’ve all heard the saying “the road to hell is paved with good intentions”—well, when it comes to small business, the road to failure is paved with good intentions too.
So let’s talk about the bare essentials for getting your business set up in a way that prevents disaster down the line, and helps ensure smooth sailing going forward.
Risk mitigation for Small Business
Much like building a house, your risk mitigation strategy provides the foundations for long term stability.
You wouldn’t ask your builder to take it easy on the foundations, use the cheapest materials, or cut corners—because you know you’ll end up with a house that doesn’t last and would cost you in the long term.
A small business’ risk mitigation strategy is comprised of 3 things:
Business Structure
Insurances
Legal Documents
Business owners need to pay attention to their risk mitigation strategy to ensure peace of mind. Without setting this up properly, you’re leaving yourself, and your business, exposed to risk, and that is not consistent with peace of mind (which is what we’re all about).
Legal Documents for Small Businesses
Your legal documents are a vital part of the foundation of the business. Without them, it’s like you’re sailing out to sea on a raft with no clear destination, in an inadequate vessel, and you’re in for a painful and ultimately unsuccessful journey.
You’ve heard me say it before, but I’ll say it again: your legal documents are performing 3 tasks in your business:
Complying with your legal obligations (like consumer law, fair work legislation, and so on).
Protecting your business (from things like being sued, providing unjust refunds, allegations of negligence and failure to deliver services).
Setting up your business for long term, sustainable success and good relationships with your clients (by managing expectations, service delivery, actually getting paid, and so on).
Legal Documents Tip: Beyond what you see above, if it’s in your interest to save money here, stay away from templates when developing your legal documents. Just remember, “buy cheap, buy twice”.
Read more: 5 steps to creating a watertight professional legal document
Systems and Processes for Small Businesses
Nothing falls through the gaps when you have solid systems and processes in place.
Your business needs to have systems and processes that lend themselves to how you do business (or how you WANT to do business), that is consistent with your style and the way you interact with your clients—not something that is admin heavy, unsustainable and lacks clarity.
It’s one thing to have your legal documents properly tailored to your business, but it’s quite another to know how to use them. That’s why it’s important to work with a small business lawyer (like me!) who will take the time to get to know you, and develop documents for your business that will integrate into your existing processes and systems, or who will work with you to develop new ones if necessary.
If your processes and systems are set up right, then your legal documents will work like a charm: doing exactly what they need to do (and have been designed to do) every time, without the fuss.
Avoiding Legal Issues Down the Line
So much can go wrong when these 3 areas are left to chance. A business can end up in a position where refunds need to be provided, invoices need to be written off, staff need to be let go, or the business can’t afford to bring on new staff or team members to help.
The business can also face legal claims for damages for things like loss of profit or loss of opportunity, based on allegations that the services (coaching services, a course or program) didn’t do what it was supposed to do.
This is a disaster, and can happen to anyone. If you’re thinking “that won’t happen to me”, don’t be fooled, it’s so much more common than you think).
But you CAN avoid these issues by prioritising those 3 areas, getting the advice you need from a business lawyer who is interested in working with you and supporting your business journey (again: like me!), and work collaboratively with your business lawyer to set your business up right, from the start.
The longer you leave it, the harder and more costly it will be. That’s in terms of the loss of revenue (lack of work coming in and going out, for example), the cost to the business of having the owner’s attention diverted to fixing the issue, and yes—you guessed it—the cost in legal fees.
It’s far more expensive for me to help dig you out of a hole than it is for me to develop your documents and support you with your processes and systems to avoid the hole in the first place.
If any of this makes you nervous, just know that it’s all preventable: you can avoid the pit of despair by booking a free 1:1 chat with me.
And for a broader understanding of how to use the law to your advantage as a small business, check out Legal Advice for Small Business | Ultimate Guide.
