What does it mean to describe a business as a small to medium enterprise (SME) ?
The vast majority of UK businesses fall into this category and there is no hard and fast definition, although Company law does offer a definition as follows :-
Under Section 248 of the Companies Act of 1985 a company is “small” if it satisfies at least two of the following criteria:
- a turnover of not more than £2.8 million;
- a balance sheet total of not more than £1.4 million;
- not more than 50 employees
A medium sized company must satisfy at least two of the following criteria:
- a turnover of not more than £11.2 million;
- a balance sheet total of not more than £5.6 million;
- not more than 250 employees
Like for like ?
When looking for advice or services it is often helpful to deal with a corresponding business, client or supplier, who is of a similar size to your business. There are a number of reasons for this. Businesses of similar size will often have a similar culture, outlook and similar issues and problems. Dealing with a business which is much smaller often has inherent considerations such as whether that business can properly service your requirements. If it is very small and if things go wrong, is that business financially secure to meet it’s liabilities to you and/or put the problem or deficiency right ?
In the same way, a relatively small business ought to think twice before dealing with a business leviathan – your small business may have a great opportunity to be a supplier to a multinational, for example. Sounds fantastic – but what happens if they don’t pay you on time or demand to be your only or main customer ? Whilst there is supposed to be a level playing field when using the courts, size and economic power will always be a worry for you. In short, there is the risk of being bullied economically.
SME law firms for SME businesses
There are approximately 10,000 law firms in England & Wales, of which some 4,000 are sole practitioner firms (1 partner only, although some do have a number of non-partner solicitors) and some 500 firms with over a hundred lawyers. In broad terms, according to research on behalf of the Law Society, around 15-20% of law firms have around 10 solicitors, which would equate to between 1,500-2,000 firms of that size.
It’s surprising therefore that if you search online for “sme solicitors” there are very few results.
I’m not saying that a sole practitioner firm or a very big firm aren’t necessarily right if you have an sme business, but there are advantages and potential risks of the type described above for business generally, in instructing a very big or very small firm, if you are a typical sme with say 10-50 employees.
A law firm with 10 solicitors, except if that firm specialises in criminal or other niche work such as personal injury,would generally be the type of “full service” firm which has specialist solicitors in key areas for a small business, such as employment law, property law, commercial law and litigation. Such a firm is perhaps more likely to deal with businesses of a similar size and type as yours, which means you get the vital benefit of experience of your type of matter. That firm should also understand your approach to paying legal fees – fees must be proportionate in a way which isn’t always the case with big business or very high value commercial transactions. Don’t overlook either that an sme law firm is a business just like yours, and will have many of the same issues and considerations as your sme business.
In my experience, clients still, far too often, tend to think of lawyers and law firms as being all the same. The legal market is changing rapidly and sme clients would be well advised to think carefully about not only finding the right law firm, perhaps of a similar size to their business, but also the right lawyer or team of lawyers in the firm. Many more clients are now, rightly so, fully prepared to ask about specific experience rather than general experience. In other words, if you are a small manufacturing company or retailer and need business contracts for a customer or supplier, does the lawyer you are considering instructing have good and recent experience of dealing with a similar contract for a similar client ? Just being a general commercial lawyer isn’t necessarily enough now.
Finally, as you may have guessed, Darlingtons would be classified as an sme size law firm, and would be delighted to discuss with you your legal requirements if you are an sme !
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