Take a look at any major news outlet and you will undoubtedly see some type of legal action being taken against a company. It might be small, or might be huge, but you cannot escape the litigious nature of this country. Do you remember the multimillion dollar lawsuit about the lady who burned herself with the hot coffee?
Large or small, businesses of all sizes need legal support regardless of what they're doing. I have personal a seen many people lose it big time at the wrong end of a lawsuit. Some may consider it too expensive, but when you consider the ramifications of what could happen, the small expense becomes immediately justified.
The small business administration discovered that up to 53% of small businesses have had to deal with a lawsuit. In another study, 43% of businesses were threatened with a lawsuit at least once in the last two years. Even in a smaller litigation, the total cost to the business could be as high as $150,000! Do you have that much money lying around in your business?
Despite what you see on the television, very few court cases actually make it into the courtroom. This is due to the fact that the resources required to take a case to trial means that both parties are usually very eager to settle the case. Some reports even say that 95% of cases are settled outside of court, so having a great legal team available becomes paramount.
Dealing with legal risk is part of owning a business. So, how do the experts recommend that it be handled? Here are some key tips, based on the above statistics and conventional legal wisdom, that can help you reduce your risk, handle disputes outside of court and prepare for the cost of a suit should other options fail:
Retaining the services of a lawyer and seeking their counsel on how to minimize the risk of legal action.
Getting all contracts in writing and keeping detailed records of all transactions.
Carrying surety bonds such as employee theft fidelity bonds can protect your customers against acts of theft, larceny and/or fraud.
Taking the time to listen to customers’ complaints and being open to a mutually acceptable solution.
Considering ADR options such as arbitration, including adding arbitration clauses to contracts.
Carrying small business insurance policies to help you pay for the costs of common suits.
Part of the definition of entrepreneurship is assuming risk, and the risk of lawsuits is certainly a fact of life for small business owners. The only way to deal with those risks is by being aware of the facts and taking the necessary steps to control and mitigate them. By being creative and open-minded in resolving disputes, and by taking the necessary preparations such as carrying the right insurance, small business owners can rest a little easier–even if the threat of a lawsuit will never totally go away.