SMEs rarely have an in-house legal department. They only call in legal counsel when a specific need arises, such as signing a contract quickly, resolving a dispute or meeting a looming deadline. This reactive approach brings with it three concrete problems: unnecessary risks, higher costs than would have been incurred if matters had been dealt with promptly, and complications in managing business relationships, often at the most critical moments. There is a fourth, less visible but equally costly problem: only calling in a lawyer when necessary is like ‘opening an umbrella when it rains’ and prevents the company from building the basic knowledge that should be shared by all those who deal with third parties, such as sales, purchasing and production. Without this foundation, every negotiation starts from scratch and every risk remains invisible until it manifests itself.
The underlying problem is that the law is seen as an obstacle.
SMEs often view regulatory compliance as an external constraint that diverts resources away from what they perceive as more important activities, such as production, sales, and customer service. While this approach is understandable, it is costly: whenever compliance is treated as a minor add-on to business management, applied only to avoid fines, the final bill is higher. The good news is that there is a practical alternative: a streamlined in-house legal service tailored to the real needs of small and medium-sized businesses. This approach brings tangible benefits without requiring a complex structure.
The first rule is to know your processes.
Everything starts here. A thorough understanding of a company’s operational processes is key to identifying the legal implications of its daily activities — not in theory, but in the practicalities of how it produces, purchases and sells. When a company invests time in this reconnaissance, it creates something that goes beyond mere formal compliance: a legal shield that protects it from many unexpected events, because risks are identified before they become problems.
A concrete example is the standard operational contract.
Let’s consider the people who deal with external parties on a daily basis — suppliers, customers and consultants. If these people have access to a standard ‘operational’ contract, written in clear and understandable language, which simply requires the variable details to be filled in, and which addresses the truly important points of the negotiation right from the beginning, the benefits are threefold:
- It allows for a good start, because the critical issues have already been defined upfront.
- It avoids the riskiest situation of all: accepting the other party’s requests without considering the real implications for the company, or knowing what to ask for in return.
- It prevents important points from being forgotten — points that tend to emerge when the negotiation is already at an advanced stage, where any change costs time, credibility and, often, money too.
It is a piece, not an isolated chapter.
This topic is part of the Legal Service face of the Rubik’s Cube, one of the six major areas that make up effective SME management.
As with every piece, the principle is not to accumulate obligations, but to develop a method that mitigates risk using simple, practical tools that can be managed without a complex internal legal structure. In the next article, we will delve into the specifics of how to build this agile, streamlined legal service step by step, without hiring an in-house lawyer.
Have you already adopted standard contracts for your business relationships, or does every negotiation start from scratch? Leave us your comments and follow us on LinkedIn @Pietro Cavalli so you don’t miss the next piece of the journey.