How small businesses can protect themselves from legal disputes with customers

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If you currently run a small business, then you may or may not have had the unfortunate experience of dealing with a tedious lawsuit brought on by a customer. Originally reported by this week, three out of ten small business owners have dealt with the unnecessary stress and hassle of lawsuits in the past three years.

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It should come as no great surprise that in order to officially resolve these various disputes, both parties involved had to hire lawyers and pay large legal fees—in some case, up to $400 an hour. The main reasons behind these quarrels? Three popular reasons have been provided, including collecting money owed by customers; contract disputes with customers; and finally, contracting disputes with suppliers.

You can undoubtedly imagine all of the time and energy that was wasted on these battles, time and energy that could have been put into running the business. So what can you do and how can owners avoid future situations and headaches?

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First and foremost, it’s imperative to set aside a budget that will allow you to protect your small business and pay for any legal fees that may abruptly arise. Sure, you may never have to touch this stash—if you’re lucky. However, in order to run and keep running a successful business, you need to be prepared. Therefore, be ready for anything—even the worst case scenarios.

You need to have insurance—it’s available for a reason. You may feel like this is a waste, specifically if you don’t use it. However, having sufficient insurance to cover any type of unforeseen expenses due to disputes with customers will only protect you in the long run. Think of it this way: it’s better to have it and never use it versus not having it and needing it.

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A study conducted by Ipsos, Canada’s market intelligence leader, showed that one out of ten small business owners actually know at least one other owner who has lost their business due to a legal dispute. That being said, it’s important to learn from other people’s mistakes. You’re small business is most likely you’re livelihood—be smart and pay attention to the success and failure of others who are like you or in a similar position as you.

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