How to Handle a Small Business Lawsuit

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StrategyDriven Risk Management Article |Small Business Lawsuit| How to Handle a Small Business LawsuitThere are advantages to owning a small business and endless opportunities for success and growth. Becoming a small business owner is something to be proud of, but there are some risks associated with owning any business. While ideally, it will never happen, a small business lawsuit can be an extremely stressful situation. It’s good practice to be prepared for the worst just in case you find yourself facing a legal situation.

Stats show that each year, 35-56% of small businesses may become involved in litigation. You may not have experience handling lawsuits, specifically business ones, but that’s no reason to fret. Here are a few key things know so you can handle a small business lawsuit.

A claim is not a lawsuit

The first important thing to note is the difference between a lawsuit and a claim. If someone makes a claim against your business, it will only involve your insurance company and does not necessitate you to go to court. If the insurance companies settle the dispute between each other than it doesn’t escalate further. If they cannot reach a mutual agreement, it could lead to a lawsuit. It is also possible for a lawsuit not to make it to court if both sides agree to an appropriate settlement. If it does go to court, make sure always to have a court reporter present to transcribe everything, to ensure that nothing is misinterpreted.

Protect yourself with comprehensive insurance

Your business may never face a lawsuit in all your years of operation. Still, you must prepare yourself should the scenario arise. Proper insurance is critical to make sure that your business is covered as much as possible. The most essential type of coverage you can have is general liability insurance. It will cover you from the most common situations that could arise, such as employee injuries or any other injuries on your business property. Depending on your business operations, you may want to look into more specialized packages based on risks your employees or clients may face.

Make sure your business insurance covers courtroom costs, attorney fees, and settlement fees as well.

Obtain a quality business lawyer

As a small business owner, it is a good idea to have a lawyer on retainer. That way, you know you will have a good quality lawyer you can trust on hand if you end up facing a lawsuit. The last thing that you want to do is scramble to find a good lawyer last minute and not have time to do your research.

The best course of action will usually be a settlement because it won’t require you to go to court. That said, always speak to your lawyer first before saying anything as they will be able to advise you on the best action to take and guide you through the whole process. Even once you speak to your lawyer, you should still avoid any direct contact with the plaintiff. Always make sure that any conversations you have with the person suing you go directly through your lawyer.

Lastly, the best thing you can do after a lawsuit is to learn from it. Use the experience to ensure it doesn’t happen again by making the necessary adjustments in your business.

Risk Management Tips for Business

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StrategyDriven Risk Management Article | Risk Management Tips for BusinessA certain amount of risk comes with the territory when you own a business. It is unavoidable, but that does not mean that the risk cannot be managed or effectively minimized. Here are some great risk management tips for business owners that will remain relevant regardless of how big or small your business may become.

Figure Out How to Weigh Business Risk

The mark of a successful entrepreneur is the ability to weigh risk and make tough decisions relating to that analysis. This is especially true when it comes to weighing risk in relation to potentially profitable opportunities. If a business owner is too cautious or fearful, there is a good chance that their company will stagnate and the level of growth that can be achieved over time will be drastically limited.

The reality is that learning how to weigh business risk is a skill. First, you need to create a frame of reference. The best way to do this is to categorize risks based on how severe you believe them to be. Once a decision is put into practice, weigh up the consequences based on your initial assessments and you will slowly start to develop a knack for calculating risk from there.

Embrace Powerful Technology

There is no reason why you should approach the process of managing and mitigating business risk on your own. There are so many options available to you in terms of technology that can assist in making better decisions and preventing risk from increasing.

A great example of this type of technology is KYC, or ‘Know Your Customer’. If you have yet to do so, it is important to start learning what KYC means now. Essentially, it refers to the process used by some organizations to verify the identity of an individual who wishes to make use of their services or purchase their products online. By accurately confirming identity, there is a much lower chance that anything untoward will take place in relation to your company’s dealings with a customer, such as credit card fraud or money laundering.

While predominantly used by banks and insurance agencies, KYC is a possible solution for risk mitigation for any type of business.

Formulate an Approach to Making Decisions

By approaching those difficult business decisions in the same way each time, you are likely to learn how to make better choices. Many business experts recommend formulating a list of important questions that enable you to adequately assess risk. Ask yourself the following:

  • What is likely to be the costliest consequence – the income loss associated with failure or the profit loss associated with neglecting to embrace the opportunity?
  • What is the worst possible outcome and am I adequately equipped to deal with it?
  • What is the most likely outcome?
  • What are my biggest concerns?
  • Is now the right time to proceed with this opportunity despite the risk? Or should I wait until a later time?
  • What does my gut tell me?

Keep the aforementioned tips in mind and you are sure to navigate your way around risk mitigation more successfully than in the past. Rest assured that it gets endlessly better and easier with practice!

COVID-19 Brings An Entirely New Dimension To Risk Management

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StrategyDriven Risk Management Article |Risk Management Strategy|COVID-19 Brings An Entirely New Dimension To Risk ManagementRisk management has always been an essential pillar of managing a successful company. But the current global pandemic is bringing it into sharp relief and showing many firms that their existing strategies simply aren’t up to the task.

In the past, executives planned for a range of common disaster scenarios: data loss, power outages, flooding, and financial collapse. For many, though, the current pandemic came out of left field. The majority of bosses didn’t see it coming. It wasn’t even on their radar.

COVID-19 is a “white swan” event, not a black swan, according to Nicholas Taleb, the man who came up with the definition. He points out that the world knew about the risk of a global pandemic but instead chose it to ignore it. In his view, the coronavirus that started in China is something that was a known risk (like an asteroid impact). Therefore, it was something that people could plan for.

He contrasts it with the experience during the financial crisis where nobody could see how events might play out (because of the complexity of the financial system).

Risk management, therefore, needs to change fundamentally. Companies can no longer go about their business, assuming that everything will continue as usual. We’re now living in a world where every executive knows that things can come to a screeching halt overnight with practically no warning. The challenge is to ensure that companies survive.

So, what changes are we likely to see?

StrategyDriven Risk Management Article |Risk Management Strategy|COVID-19 Brings An Entirely New Dimension To Risk ManagementCompanies Will Insure Against More Known Risks

Now that executives have had a taste of real risk, we’re going to see them increase their demand for business interruption insurance. More companies will want to know that they have a safety net, should something similar happen in the future. Furlough schemes protect workers, but they don’t provide comprehensive cover to allow companies to escape tricky market conditions following a disaster. Even with government support, a lot of companies we know and love today won’t be here in the future.

Companies Will Save More

Over the last decade, companies have borrowed a tremendous amount of money. Part of it has to do with their desire to boost their stock price, but a large part of it has to do with the fact that borrowing is now so much cheaper. Capital was once scarce, but today, we live with an abundance of the stuff. This fact pushed interest rates down to the point today where the average firm can borrow at a couple of percent, perhaps less.

The current crisis, however, has revealed to executives how dependent they are on lines of credit. If the money dries up in the future because of some catastrophic event, they will need to fall back on their reserves. And, currently, they don’t have much of those. Most firms are living on a knife-edge, unnecessarily.

Risk management practices are likely to change substantially, moving forward. Companies have had a taste of what an economic catastrophe looks like, and they’ll be planning so that they aren’t wrong-footed by the next one.

Preparing Your Small Business For A Disaster

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StrategyDriven Risk Management Article |Disaster Recovery Plan|Preparing Your Small Business For A DisasterSmall business owners wear many hats. They are marketers, IT specialists, inventors, accountants, security experts, website designers, human resources, and much more. There are so many different things to think about every single day, so it is little wonder that occasionally, something gets overlooked. For many businesses, that is a plan for what you would do to get your business back up and running after a disaster strikes. Almost three-quarters of small business owners do not have a written disaster recovery plan. While it is something that you hope you never have to use, having one in place is imperative.

Depending on where your business is based, hurricanes, tornadoes, flooding, and fires are just some of the things that pose a risk to your company and your livelihood. Here, we look at some of the things that you can do to mitigate the risk, and if the worst should happen, what you can do to get back on your feet as soon as safely possible.

Before a disaster strikes

Identify responsibilities

Every person within your company has a role to play and responsibilities to handle, but often these can become blurred. It is important to note down in your disaster plan and make sure every person is aware of their responsibilities, and should there be a disaster, they know what they need to do.

Back up documents

The last thing that you want to do when your premises have been damaged or destroyed, or if conditions have made it unsafe to travel is to have to worry about finding out important documents. It is essential that you have at least one copy of all your relevant documents – insurance details, inventories, employee details, etc. Store these somewhere secure, and that is easily accessible.

Install security cameras

These might be damaged in the event of a disaster, but they are still worth having in to see what happened. They may be useful if you have to claim on your insurance as well.

Have secondary power sources available

Sometimes, the whole premises might not be damaged or destroyed, but the electrics blow or a storm knocks out your power. Give yourself a chance of trading, or at least make sure anything that relies on electricity such as fridges, freezers, tanks for animals etc. are kept running and protect your stock by having a secondary source of power available, such as industrial engines and generators.

Inventory

For both stick purposes and insurance purposes, an inventory is essential. Where possible, keep receipts and invoices as you may be asked to hand these to insurance companies as proof of costs, but having an up to date inventory of stock, machinery, and equipment is useful.

When a disaster strikes

Inform your employees

One of the first things that you need to do is inform any employees who might be due to work that day so that they know exactly what to expect. It is important to have a contact list accessible at all times. You also need to have a contingency plan fr paying your staff – it is vital that you try to keep paying staff as normally as possible, as you may find that you do not have a workforce when you are back up and running.

Work remotely

You may need to work remotely for a while, as may your staff. Ensure that you have access to the technology and tools you need – this is where cloud services are a good idea, as you and your team can access any documents required to continue working from anywhere in the world. Ensure that any confidential information is encrypted to prevent any hacks in the transfer of information – the last thing you want to be dealing with at this point is a huge data breach!

Let your customers know

Your customers keep your business going, so it is imperative to let them know what is going on as soon as possible. Pop a note on the door if it is safe or appropriate to do so, informing them of the situation and when you expect to be open again, as well as any contact details. Put a note on your website and a post out on your social media platforms.

Talk to lenders

If you have any loans or finance on anything, talk to your lenders and creditors. In a situation such as this, many will be willing to work with you to give you a payment holiday and catch up when things are back to normal, but if you don’t ask, you won’t get!

You can’t stop a disaster from happening, but the steps you take to prepare for one and how you deal with it afterwards can make the situation a little less stressful and get you back up and running as soon as possible.

How to Protect Your Organization From the Amazon of Your Industry

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StrategyDriven Risk Management Article | How to Protect Your Organization From the Amazon of Your IndustryThe trend towards consolidation in industry has become a threat to any business whose leadership has a desire to maintain its own identity and strategic path. If you think you, your company, or your industry is immune, I urge you to look at the telltale signs.

If you are one of those business owners or leaders who have invested many years of your life building a brand, then you most likely have a vision for that brand for the future that exists beyond your involvement. Sure, you could decide to sell the business or have it acquired by another organization, but the control of the decision should be yours.

So what do you do if you’d like the company to stand alone moving forward?

The Hidden Threat That Many Do Not See

Many signs of corporate consolidation are apparent; we read about them in journals and online every single day. XYZ corporation announces the acquisition of ABC LLC, etc. Mergers and acquisitions have been around forever, but there is a new legal form of conquest that is allowing organizations to steal market share from well-established businesses. Does it exist (yet) in your niche?

The menace of which I speak is the digital marketing organizations that are springing up in most industries, offering services on a pay-per-lead basis. If you are an established business, you likely have encountered one or more (or your marketing department has), and perhaps you have even paid for their services. These organizations spend their resources online, gaining a marketing edge, and then sell you (or your competition) the data on the leads. It seems like a win-win relationship at first.

But consider this. Isn’t this type of behavior, by you and your competition, outsourced marketing? No big deal, right? They spend money to generate consumer information, and then you buy it. Outsourcing frees you up to focus on things other than creating new business opportunities. It’s a true parasite-host relationship, where your organization serves as the host, and the digital marketing organization serves as a benevolent parasite.

Over time, the parasite will get large and robust. It will more than likely service many companies, not just your own. When they hit a point of market saturation, who do you think will be the most prominent brand known to the consumer? You? A competitor? No! It will be the digital marketing company that has been growing its reach across digital channels.

I believe that at this point, the digital marketing organization will have the leverage, and it is then that the parasite begins to consume the host. They raise the price on your cost per lead. If you refuse to pay, they merely sell the information to a competitor. Or worse, they quit selling information exclusively; instead, they sell the same information to multiple organizations. Once they are large enough in the eyes of consumers, they have the leverage to do this.

Would you like some real-world examples of this? Look no further than Zillow in real estate or Homeadvisor in the home services sector. These marketing-only organizations started simply with a website, but now each is the biggest name in its field. Zillow is now buying homes and working directly with home sellers. Can it be much longer before they have a buyer service available?

How To Avoid The Digital Marketing Parasite

If you own, lead, or manage an organization, acknowledge that the primary task of any business is the generation of new customers. You cannot outsource marketing, or it will put your company in a position to finance the organization that will one day put you out of business.

Take care of the parasite when it is a pest. Ensure that you run a learning organization that evolves its marketing strategy to utilize the same channels and processes that the parasite would use to unhinge you.

The parasite exists in every location and every field. Do not make the mistake of outsourcing business generation responsibilities. Instead grow your digital marketing solutions so that your company can thrive and grow into the future.

About the Author

StrategyDriven Expert Contributor | Joe ManausaJoe Manausa is CEO of Joe Manausa Real Estate in Tallahassee, Florida and author of The Business of Getting Business: The Digital Marketing Guide for Small Businesses.  After observing industry giants move to a digital-first marketing approach, Joe made the transition within his own company, which resulted in over $10 million of revenue from the business’s website.  For more information, please visit lidpublishing.com or https://www.digitalmarketingforbusinessbook.com/.