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Small and medium enterprises are invaluable to the Australian economy; they employ 63% of all Australia’s workers, constitute 96% of all businesses, and contribute 33% of the nation’s GDP.
A small enterprise is defined by the CSIRO’s SME Engagement Centre as a business with 5-19 employees, and a medium enterprise as a business with 20-200 employees.
In terms of revenue the ATO considers any business turning over between $2 million and $250 million as a SME.
With SMEs forming such a large part of the Australian business landscape it is important for them to constantly be considering how to minimise costs and maximise profit and growth. An area of perennially high expenditure is legal costs. The way many large and global enterprises have sought to reduce their legal costs is in much the same way as all their other costs, by outsourcing. CPA Global, a world leader in legal process outsourcing, is predicted save Rio Tinto 20% on legal fees annually.
There is no reason why the same model cannot work for SMEs on a smaller scale. Whether you are starting up a SME or have an established business, outsourcing your legal work can cut your costs and add other benefits you may not have considered.
Outsourcing the Heart of the Matter
When you engage a law firm to draft a contract the most expensive component of your bill will be the time spent actually writing the document’s terms. The idea behind legal outsourcing is to cut out this component and send it somewhere cheaper without compromising quality of work. The legal outsourcing model allows you to retain your usual solicitor if that would make you feel more comfortable, and outsource the most expensive component of the work. It is then possible to have your business contract or other document reviewed by your usual solicitor; however this will be far cheaper than having them undertake the entire process.
Think of lawyers as just another business service provider and shop around.
Fixed fees
Most traditional law firms charge an hourly rate for the work they do which won’t necessarily reflect the value of the finished product you receive. Legal outsourcing firms often charge a fixed fee for your completed document, the fee also sometimes includes a round of revision during the drafting process. A fixed fee will give you the benefit of certainty as well as in most cases a far better price.
Accessibility
Being able to outsource and pay a fixed fee means you can afford to do what you might once not have bothered with. By drafting your contracts right the first time and knowing what your rights and obligations are, you are more likely to avoid the cost of litigation in the future.
Problems with legal outsourcing
Legal outsourcing has not had the same take up rate in Australia as in the US and UK. Large companies and large law firms seem reluctant to change the way they operate and apparently see legal outsourcing as plagued by issues of quality, a lack of professional accountability, and issues with confidentiality and privacy (Scott, ALB Legal News, May 2010).
While these are legitimate concerns the context in which SMEs are likely to be outsourcing their legal work is different to that of multi-national companies and top tier law firms. The trend with large companies is to send their work to offshore ‘superfirms’ (usually in India) which specialise in large scale work, a SME is unlikely to do the same. Rather they will look for firms specialising in drafting in research for start-up and established SMEs. If these smaller SME specialist firms are run by lawyers, rather than simply being template providers, then the problems of accountability and confidentiality will be alleviated as lawyers are held to professional standards by the law and industry monitoring.
This is the new frontier, combining the efficiency and cost saving of outsourcing with the expertise of qualified and experienced Australian lawyers to provide affordable legal services to SMEs. The benefits received by engaging lawyers are as follows:
High End Services
By going to a firm of lawyers you will be getting a document specifically drafted for your individual needs and circumstances, not simply a template into which you insert your details. The importance of a properly drafted document, or properly executed research, is that you know you are getting something valid and enforceable. While there are many template providers out there, the one size fits all approach on which they base their business may lead to problems later such as not being able to enforce a business contract or license. Spending the money to have the work done correctly in the first place means the avoidance of problems in the future, and importantly piece of mind. It also follows that a firm specialising in the drafting of sub-contracts or licensing agreements, or any other business contracts will be staffed by specialists in these areas and thus the quality of the finished product you receive will be extremely high.
Professional Guarantees
All practising Australian lawyers must be qualified and have been admitted by their respective state’s or territory’s Supreme Court. This means they are bound to act ethically and within the statutory rules governing the profession, for example the Legal Profession Act 2004 (NSW). If your lawyer has not acted properly in any way, you are able to complain to the Office of the Legal Services Commissioner in NSW. Lawyers are also members of their state Law Society further ensuring that practitioners will be up to date in terms of professional development.
By making sure you outsource your drafting or research work to lawyers you are getting a guarantee of professional service.
Privacy and Confidentiality
Lawyers are also bound by the Revised Professional Conduct and Practice Rules 1995 (Solicitor’s Rules) rule 2 not to disclose any confidential information of a client even after termination of their services. The relationship between lawyer and client is also fiduciary, meaning that a lawyer is bound to act in the best interests of their client which will include keeping all sensitive information privileged and confidential. This is extremely important to consider to protect your business and its information assets.
Finally keep in mind that with technology such as email and Skype becoming commonplace in business you are no longer bound by jurisdiction, there is enormous scope to engage professionals in other countries and receive the same efficient and quality service you would get in your own county.
The next time you are thinking about going to see your lawyer, think instead about becoming a pioneer and consider legal outsourcing to cut the costs of legal work for your SME.
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Although we have made every effort to ensure the information has been obtained from reliable sources, Inveiss Legal Pty Ltd is not responsible for any errors or omissions. In no event will Inveiss Legal Pty Ltd, or its directors, agents or employees, be liable for any decision made, or withheld, in reliance of the information contained herein.
