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Law for Business

Knowhow - guidance - precedents

13 MAR 2014

The importance of seeking professional advice

By David Impey and Nick Montegue

No company can realistically expect to succeed without taking some sort of professional advice whenever this becomes necessary. In the majority of cases, the professional adviser should be able to perform a task or provide an answer in a fraction of the time in which it would take his client to produce that same result, if indeed the client possessed the knowledge and experience to attempt the task at all.

Accountants, solicitors and other professionals are sometimes regarded as being expensive for the service that they provide. If a client feels a particular charge is excessive, they should request a breakdown of the costs incurred in completion of the work involved. It is, of course, good practice for a client to agree either a fixed fee or a ceiling above which the costs cannot rise without prior agreement.

Professional fees are often easier to understand if viewed on an ‘opportunity cost' basis. If a director is able to produce income for his company of, say, £200 per hour, in doing whatever the company specialises in and the director needs advice on a legal matter, it is unlikely that it would be more cost effective for him to attempt to solve that legal problem himself in, say, 5 hours, when he could have earned £1,000 for the company during that same period of time.

If, instead, a solicitor were to be approached and asked for advice on the matter, he would normally be able to solve the problem for the company in a fraction of the time, and his advice would (hopefully) cost substantially less than £1,000.

There is also no guarantee, if the first course of action were to be followed, that the director would have reached the correct conclusion, whereas with a professional adviser this should be the case and the client will, almost certainly, have the right of recourse should poor advice be given and damage result.

There are many types of professional advisers - surveyors and valuers, architects, actuaries (who deal with pension funds and investments), patent and copyright experts, marketing and advertising specialists, independent financial advisers, computer consultants, and so on - but the three types of advisers that the new company will almost always require either immediately or in the first few months of trading will be an accountant, a solicitor and a bank manager.

Further details of what these professionals should do, how to choose the most suitable and how to deal with them can be found in the book Running a Limited Company. It has a really useful chapter titled "Using Professionals". Professional advisers can be of invaluable assistance to a company, its directors and future success. Selected with care and used effectively, they will become an integral part of the growing company.


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