Take Steps to Solve Problems Before Your Business Ends Up in Court

Preventing lawsuits is good medicine for any business owner.

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by William Murphy

As a small business owner, one of the biggest threats to your business is a potential lawsuit. There are steps you can take after you become aware of a problem, but before it ends up in court.

First of all, you need to have a problem-solver's attitude: Keep your eyes and ears open for any potential problems and address them as soon as possible. Hoping that a problem will just go away or will turn out to be no big deal is not the way to deal with it.

Initially, you should evaluate what the maximum potential cost of the problem could be. Some potential problems will be more alarming than others. For example, a sexual harassment lawsuit by an employee may be more disastrous to your business than a customer who says you billed 20 hours for a job that couldn't have taken more than 10. For problems where the potential liability is large, involve your business' lawyer early on.

Evaluate the other party's willingness to negotiate. Talk to the other party and ask them what they think the problem is. Find out what they think you should do to resolve it. If the solution they request is reasonable, do it.

Don't say things like, "this problem is all our fault" or "I take full responsibility" to the other party. You can listen to their side of the story and take steps to satisfy them without admitting fault. You may not be at fault at all, but it simply makes good business sense for you to appease the complaining party. For example, with the customer who complains that you billed 20 hours for a job that couldn't have taken more than 10, you can offer to send an itemized bill that shows how all of the time was spent. Explain why their job was more complicated than they thought. Consider how much time and expense you might go to responding to any complaints they may file, as well as the time and expense of going to court to get your fee. You may decide that it is in your business' best interest to cut the bill even though you feel it was fully justified.

Try to resolve problems as quickly as possible. This will make the other person feel that you are truly concerned and are working to resolve the problem. Also, you don't want to give a small problem any time to grow into a big problem. The longer you spend resolving an issue the more it is likely to cost you.

Learn from your mistakes. Whether or not you think your business was at fault, you could learn valuable lessons from dealing with problems. You might find out you need to implement a plan to eliminate sexual harassment in your work place or a method of addressing discrimination complaints. Or you might decide to perform more detailed estimates or to give your customers itemized bills. You might find out you wish you'd had a certain clause in your contracts and decide to put one in going forward. Even if the problem was not your fault, there is probably something that you can do to minimize the chance that it will happen again.

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