Industry Research
Risk on the Rise
How legal liability may be jeopardizing small businesses across Canada.
7 out of 10 of the small business owners we surveyed said that they had dealt with at least one legal dispute in the last three years.
For context, we surveyed the same number of Canadian small business owners and asked them the exact same question back in 2015. At the time, only 3 out of 10 had said they had dealt with legal disputes.
Increasing legal liability and legal costs rank 3rd in the top of mind risks that small business owners worry about.
While broad economic uncertainty continues to be a leading concern for small businesses across the country, small business owners' perception of legal risk has changed.
Running a small business is a permanent juggling act.
It's important to talk about legal risk, not only because of its clear prevalence within the Canadian small business landscape, but also because the financial, mental and time impacts it has on small businesses are alarmingly significant.
53% of small business owners said that legal disputes had a strong or moderate financial impact on their businesses. 70% also said that they spent a lot of or a moderate amount of time dealing with legal issues, while 73% said that they experienced a lot of or a moderate amount of mental stress on a personal level while dealing with legal issues.
3 out of 10 business owners said they personally knew another business owner who had been significantly impacted by or lost their business following a legal dispute.
How Can We Help?
LEI mitigates the risk, and supports small business owners in their legal journey from start to finish.
There's interest, but is there awareness?
The majority of small business owners are spending, on average, anywhere between $5,000 to $50,000 in legal fees and other legal expenditures. We asked them how likely they would be to purchase an insurance policy that covers legal expenses if it cost their business approximately $2,000 per year (an overstated cost as the average cost of a commercial LEI policy in Canada is $275 per year*). 56% said they would be very or somewhat likely to purchase such a policy.
* Our study showed that the revenue bands of 75% of the small businesses we surveyed, both self-employed and those who have between 1 to 50 employees was anywhere up to $2,000,000. The average mandatory rating of an LEI policy (including contract disputes) for revenue bands up to $2,000,000 is $275.
