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You just finished your 2023 budget for your small business…

Nice. Don’t forget to budget up to $50K for legal expenses.

Excuse me, but what?


Sound familiar? It should, and you’re not alone.

Of the 1.22M businesses in Canada, 98% of them are small businesses and in the same boat as you. And it’s a big boat with about 10.3M of Canadians employed by small businesses with less than 50 employees. However, the large number of small business owners doesn’t make the day-to-day any easier for each owner.

The list of risks that a small business owner deals with can be overwhelming, and often owners learn on the job, try their best to figure it out as they go and lean on family and friends for help. The challenges of running the day-to-day business operations are where the real difficulty lies as owners find themselves having to do tasks that are outside their experience and skill sets. A carpenter may be an excellent craftsperson, but they certainly didn’t count on also having to be an accountant and IT technician when they set up their contracting business.

There’s an abundance of software that helps business owners navigate running the day-to-day operations, such as financials and bookkeeping, HR and staff management, inventory control and sales software. However, the software that helps owners deal with legal matters and assistance isn’t as easy to come by. In most cases, Chief Counsel isn’t one of the positions at most small businesses and when something happens, the owner must front the fees for getting legal counsel and settling disputes. This can cause serious cash flow issues for a small business, and at the very least create an expense that was unplanned for, on average anywhere from $5K to $50K per year.

Chances are a small business owner will deal with at least one legal dispute in the next three years and even COVID isn’t an excuse: only 38% of legal disputes were pandemic related over the past few years, the other 62% were due to simply running the day-to-day operations. And this isn’t an isolated incident; 70% of small businesses have dealt with at least one legal dispute in the last there years. That’s up 230% compared to 2015! Legal risk is on the rise and it’s no longer an ‘if’ something happens, it’s ‘when’.

The majority of time spent resolving legal issues sees the average small business owner spend 61% of their time resolving contract disputes and collecting money owed. Not a very sunny picture and it’s not surprising that 73% of owners feel that legal disputes are a source of mental stress.

Talk to your broker about legal expense insurance. With the average rate for an experienced lawyer in Canada ringing in at about $400 per hour, the average $275 per year for a legal expense policy is just good math.

ARAG is a family-owned business, and we understand the challenges and how hard it can be to plan for every possibility. Because you can plan for and be prepared for legal expenses. Talk to your broker and check that risk off your list.

By the Numbers

Small businesses represent the vast majority of all businesses across the country:
  1. There are about 1.22M businesses in Canada
  2. Over 98% of those are considered small businesses and have less than 50 employees,
  3. They employ 10.3 million Canadians, about 2/3 or 63.8% of the total workforce
Note: reported by Statistics Canada in 2022

And family-owned businesses make up a significant chunk of these small businesses:
  1. About 6.9M Canadians are employed by family-owned businesses
  2. Nearly 2/3 of all private sector owned businesses are family owned
  3. Family firms generate 1/2 of Canada’s GDP in the private sector
Note: according to the Conference Board of Canada in 2019